1994 Stock Option Plan - ICN Pharmaceuticals Inc.
ICN PHARMACEUTICALS, INC.
1994 STOCK OPTION PLAN
1. Purpose.
The purpose of the Plan is to grant to certain key employees,
officers, directors, scientific advisors and consultants of ICN
Pharmaceuticals, Inc., a Delaware corporation (hereinafter called the
"Company"), or any Parent or Subsidiary of the Company, an opportunity
to acquire the Shares in order to increase their proprietary interest
in the Company and as an added incentive to remain in and advance in
its employment. It is also the purpose of the Plan to advance the
interests of the Company and its stockholders by strengthening the
Company's ability to attract and retain those persons with training,
experience and ability by encouraging such persons to become owners of
its stock.
2. Definitions.
For purposes of the Plan, unless otherwise specified, capitalized
terms shall have the following meanings:
2.1 "Adjusted Fair Market Value" means, in the event of a Change
in Control, the greater of (i) the highest price per Share paid to
holders of the Shares in any transaction (or series of transactions)
constituting or resulting in a Change in Control or (ii) the highest
Fair Market Value of a Share during the ninety (90) day period ending
on the date of a Change in Control.
2.2 "Agreement" means the written agreement between the Company
and an Optionee evidencing the grant of an Option and setting forth
the terms and conditions thereof.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Cause" means the commission of an act of fraud or
intentional misrepresentation or an act of embezzlement,
misappropriation or conversion of assets of the Company, Parent or any
Subsidiary.
2.5 "Change in Capitalization" means any increase or reduction in
the number of Shares, or any change (including, but not limited to, a
change in value) in the Shares, or exchange of Shares for a different
number or kind of shares or other securities of the Company, by reason
of a reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or rights or
debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, combination or exchange of shares,
repurchase of shares, change in corporate structure or otherwise.
2.6 A "Change in Control" shall mean the occurrence during the
term of the Plan of:
(i) The "acquisition" by any
"Person" (as the term person is used for
purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of any securities of
the Company which generally entitles the holder
thereof the vote for the election of directors
of the Company (the "Voting Securities") which,
when added to the Voting Securities then
"Beneficially Owned" by such person, would
result in such Person "Beneficially Owning"
forty percent (40%) or more of the combined
voting power of the Company's then outstanding
Voting Securities; provided, however, that for
purposes of this paragraph (i), a Person shall
not be deemed to have made an acquisition of
Voting Securities if such Person: (a) acquires
Voting Securities as a result of a stock split,
stock dividend or other corporate restructuring
in which all stockholders of the class of such
Voting Securities are treated on a pro rata
basis; (b) acquires the Voting Securities
directly from the Company; (c) becomes the
Beneficial Owner of more than the permitted
percentage of Voting Securities solely as a
result of the acquisition of Voting Securities
by the Company which, by reducing the number of
Voting Securities outstanding, increases the
proportional number of shares Beneficially
Owned by such Person; (d) is the Company or any
corporation or other Person of which a majority
of its voting power or its equity securities or
equity interest is owned directly or indirectly
by the Company (a "Controlled Entity") or
(e) acquires Voting Securities in connection
with a "Non-Control Transaction" (as defined in
paragraph (iii) below); or
(ii) The individuals who, as of
November 10, 1994, are members of the Board of
Directors of the Company (the "Incumbent
Board"), cease for any reason to constitute at
least two-thirds of the Board of Directors of
the Company; provided, however, that if either
the election of any new director or the
nomination for election of any new director by
the Company's stockholders was approved by a
vote of at least two-thirds of the Incumbent
Board, such new director shall be considered as
a member of the Incumbent Board; provided
further, however, that no individual shall be
considered a member of the Incumbent Board if
such individual initially assumed office as a
result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than
the Board of Directors (a "Proxy Contest")
including by reason of any agreement intended
to avoid or settle any Election Contest or
Proxy Contest; or
(iii) Shareholder approval of:
(a) A merger, consolidation or
reorganization involving the Company (a
"Business Combination"), unless
(1) the stockholders of the
Company, immediately before the Business
Combination, own, directly or indirectly
immediately following the Business Combination,
at least fifty-one percent (51%) of the
combined voting power of the outstanding voting
securities of the corporation resulting from
the Business Combination (the "Surviving
Corporation") in substantially the same
proportion as their ownership of the Voting
Securities immediately before the Business
Combination, and
(2) the individuals who were
members of the Incumbent Board immediately
prior to the execution of the agreement
providing for the Business Combination
constitute at least a majority of the members
of the Board of Directors of the Surviving
Corporation, and
(3) no Person (other than the
Company or any Controlled Entity, a trustee or
other fiduciary holding securities under one or
more employee benefit plans or arrangements (or
any trust forming a part thereof) maintained by
the Company, the Surviving Corporation or any
Controlled Entity, or any Person who,
immediately prior to the Business Combination,
had Beneficial Ownership of forty percent (40%)
or more of the then outstanding Voting
Securities) has Beneficial Ownership of forty
percent (40%) or more of the combined voting
power of the Surviving Corporation's then
outstanding voting securities (a transaction
described in this subparagraph (a) shall be
referred to as a "Non-Control Transaction");
(b) A complete liquidation or
dissolution of the Company; or
(c) The sale or other disposition of
all or substantially all of the assets of the
Company to any Person (other than a transfer to
a Controlled Entity).
Notwithstanding the foregoing, (x) a Change in
Control shall not be deemed to occur solely
because forty percent (40%) or more of the then
outstanding Voting Securities is Beneficially
Owned by (A) a trustee or other fiduciary
holding securities under one or more employee
benefit plans or arrangements (or any trust
forming a part thereof) maintained by the
Company or any Controlled Entity or (B) any
corporation which, immediately prior to its
acquisition of such interest, is owned directly
or indirectly by the stockholders of the
Company in the same proportion as their
ownership of stock in the Company immediately
prior to such acquisition; and (y) if an
Eligible Employee's employment is terminated
and the Eligible Employee reasonably
demonstrates that such termination (A) was at
the request of a third party who has indicated
an intention or taken steps reasonably
calculated to effect a Change in Control and
who effectuates a Change in Control or
(B) otherwise occurred in connection with, or
in anticipation of, a Change in Control which
actually occurs, then for all purposes hereof,
the date of a Change in Control with respect to
the Eligible Employee shall mean the date
immediately prior to the date of such
termination of employment.
2.7 "Code" means the Internal Revenue Code of 1986, as
amended.
2.8 "Committee" means a committee consisting of solely at
least two (2) directors each of whom are Disinterested Directors and
Outside Directors who are appointed by the Board to administer the Plan
and to perform the functions set forth herein.
2.9 "Company" means ICN Pharmaceuticals, Inc. or any
successor thereto.
2.10 "Director Option" means an Option granted pursuant to
Section 5.
2.11 "Disability" means a physical or mental infirmity which
impairs the Optionee's ability to perform substantially his or her
duties for a period of one hundred eighty (180) days during any three
hundred and sixty (360) day period.
2.12 "Disinterested Director" means a director of the Company
who is "disinterested" within the meaning of Rule 16b-3 under the
Exchange Act.
2.13 "Division" means any of the operating units or divisions
of the Company designated as a division by the Committee.
2.14 "Eligible Employee" means any officer or other key
employee or consultant or scientific advisor of the Company or a Parent
or Subsidiary designated by the Committee as eligible to receive
Options subject to the conditions set forth herein.
2.15 "Employee Option" means an Option granted pursuant to
Section 6.
2.16 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
2.17 "Fair Market Value" on any date means (i) the
closing price per share of the Company's stock on the principal
exchange on which the stock is listed, on such date (or if no such
price is reported on such date, such price as reported on the nearest
preceding date on which such price is reported), (ii) if the stock is
not listed on an exchange, the bid price per share of stock at the
close of trading on such date or, (iii) if the stock is not listed on
an exchange or otherwise publicly traded on such date, the fair market
value of the Company's stock as of such date as determined in good
faith by the Board.
2.18 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee
as an Incentive Stock Option.
2.19 "Nonemployee Director" means a director of the Company
who is not an employee of the Company or any Subsidiary.
2.20 "Nonqualified Stock Option" means an Option which is not
an Incentive Stock Option.
2.21 "Option" means a Employee Option, a Director Option, or
either or both of them.
2.22 "Optionee" means a person to whom an Option has been
granted under the Plan.
2.23 "Outside Director" means a director of the Company who is
an "outside director" within the meaning of Section 162(m) of the Code
and the regulations promulgated thereunder.
2.24 "Parent" means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with
respect to the Company.
2.25 "Plan" means the ICN Pharmaceuticals, Inc. 1994 Stock
Option Plan, as it may be amended from time to time.
2.26 "Pooling Period" means, with respect to a Pooling
Transaction, the period ending on the day after the first date on which
the combined entity resulting from the Pooling Transaction publishes
thirty days of combined operating results or, if the Board makes a
determination, such other period following the Pooling Transaction
which the Board reasonably determines is appropriate in connection with
the Pooling Transaction as a means of qualifying for and preserving
"pooling of interests" accounting treatment.
2.27 "Pooling Transaction" means an acquisition of or by
the Company in a transaction which is intended to be treated as a
"pooling of interests" under generally accepted accounting principles.
2.28 "Shares" means the common stock, par value $.01 per
share, of the Company.
2.29 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with
respect to the Company.
2.30 "Successor Corporation" means a corporation, or a parent
or subsidiary thereof within the meaning of Section 424(a) of the Code,
which issues or assumes a stock option in a transaction to which
Section 424(a) of the Code applies.
2.31 "Ten-Percent Stockholder" means an Eligible Employee,
who, at the time an Incentive Stock Option is to be granted to him or
her, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, or of a Parent or a
Subsidiary.
3. Administration.
3.1 The Plan shall be administered by the Committee which shall
hold meetings at such times as may be necessary for the proper
administration of the Plan. The Committee shall keep minutes of its
meetings. A quorum shall consist of not less than two members of the
Committee and a majority of a quorum may authorize any action. Any
decision or determination reduced to writing and signed by a majority
of all of the members of the Committee shall be as fully effective as
if made by a majority vote at a meeting duly called and held. Each
member of the Committee shall be a Disinterested Director and an
Outside Director. No member of the Committee shall be liable for any
action, failure to act, determination or interpretation made in good
faith with respect to this Plan or any transaction hereunder, except
for liability arising from his or her own willful misfeasance, gross
negligence or reckless disregard of his or her duties. The Company
hereby agrees to indemnify each member of the Committee for all costs
and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiation for the settlement of or otherwise dealing with any claim,
cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying
authorization to any transaction hereunder.
3.2 Subject to the express terms and conditions set forth herein,
the Committee shall have the power from time to time to:
(a) determine those individuals to whom Employee Options
shall be granted under the Plan and the number of Incentive Stock
Options and/or Nonqualified Stock Options to be granted to each
Eligible Employee and to prescribe the terms and conditions (which need
not be identical) of each Employee Option, including the purchase price
per Share subject to each Employee Option, and make any amendment or
modification to any Agreement consistent with the terms of the Plan;
(b) to construe and interpret the Plan and the Options
granted thereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not
limited to, correcting any defect or supplying any omission, or
reconciling any inconsistency in the Plan or in any Agreement, in the
manner and to the extent it shall deem necessary or advisable to make
the Plan fully effective, and all decisions and determinations by the
Committee in the exercise of this power shall be final, binding and
conclusive upon the Company, the Parent, its Subsidiaries, the
Optionees and all other persons having any interest therein;
(c) to determine the duration and purposes for leaves of
absence which may be granted to an Optionee on an individual basis
without constituting a termination of employment or service for
purposes of the Plan;
(d) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(e) generally, to exercise such powers and to perform such
acts as are deemed necessary or advisable to promote the best interests
of the Company with respect to the Plan.
4. Stock Subject to the Plan.
4.1 The maximum number of Shares that may be made the subject of
Options granted under the Plan is 3,000,000; provided, however, that
the maximum number of Shares that any Eligible Employee may receive
pursuant to the Plan in respect of Options may not exceed 1,000,000
Shares. Upon a Change in Capitalization, the maximum number of Shares
shall be adjusted in number and kind pursuant to Section 9. The
Company shall reserve for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's
treasury, or partly out of each, such number of Shares as shall be
determined by the Board.
4.2 Whenever any outstanding Option or portion thereof expires, is
canceled or is otherwise terminated for any reason, the Shares
allocable to the canceled or otherwise terminated portion of the Option
may again be the subject of Options granted hereunder.
5. Option Grants for Nonemployee Directors.
5.1 Grant. Subject to the availability of an adequate number of
Shares designated under the Plan, each Nonemployee Director shall be
granted Director Options under the Plan automatically on a non-
discretionary basis according to the following provisions of this
Section 5 and in accordance with the other provisions of the Plan.
Nonemployee Directors shall not be granted options under the Plan
except pursuant to this Section 5. Director Options shall be granted
automatically to Nonemployee Directors as follows: (i) each person who
is a Nonemployee Director on the date of adoption of the Plan shall be
granted an option to purchase 15,000 shares; (ii) each person who is a
Nonemployee Director on the first business day following the 1995
annual meeting of stockholders of the Company shall be granted on such
date an option to purchase 15,000 Shares; and (iii) thereafter, each
person who is a Nonemployee Director on the first business day
following the day of a subsequent annual meeting of stockholders shall
be granted on such first business day an option to purchase 15,000
Shares.
5.2 Purchase Price. The purchase price for Shares under each
Director Option granted on the adoption date of the Plan shall be the
Fair Market Value of such Shares on November 11, 1994, and under each
Director Option granted thereafter, 100% of the Fair Market Value of
such Shares on the date of grant.
5.3 Vesting. Subject to Sections 5.4 and 7.4, each Director
Option shall become exercisable with respect to 25% of the Shares
subject thereto on each of the first four anniversaries of the grant
date; provided, that the Optionee is a director as of the relevant
anniversary. If an Optionee ceases to serve as a director for any
reason, the Optionee shall have no rights with respect to that portion
of a Director Option which has not then vested pursuant to the
preceding sentence and the Optionee shall automatically forfeit that
portion of the Director Option which remains unvested.
5.4 Duration. Each Director Option shall terminate on the date
which is the tenth anniversary of the grant date, unless terminated
earlier as follows:
(a) If an Optionee's service as a director terminates for any
reason other than Disability, death or Cause, the Optionee may for a
period of three (3) months after such termination exercise his or her
Option to the extent, and only to the extent, that such Option or
portion thereof was vested and exercisable as of the date the
Optionee's service as a director terminated, after which time the
Option shall automatically terminate in full.
(b) If an Optionee's service as a director terminates by
reason of Disability, the Optionee may, for a period of one (1) year
after such termination, exercise his or her Option to the extent, and
only to the extent, that such Option or portion thereof was vested and
exercisable as of the date the Optionee's service as director
terminated, after which one year period the Option shall automatically
terminate in full.
(c) If an Optionee's service as a director terminates for
Cause, the Option granted to the Optionee hereunder shall immediately
terminate in full and no rights thereunder may be exercised.
(d) If an Optionee dies while a director or within three (3)
months after termination of service as a director as described in
clause (a) or (b) of this Section 5.4, the Option granted to the
Optionee may be exercised at any time within twelve (12) months after
the Optionee's death by the person or persons to whom such rights under
the Option shall pass by will, or by the laws of descent or
distribution, after which time the Option shall terminate in full;
provided, however, that an Option may be exercised to the extent, and
only to the extent, that the Option or portion thereof was exercisable
on the date of termination of the Optionee's services as a director.
6. Option Grants for Eligible Employees.
6.1 Authority of Committee. Subject to the provisions of the Plan
and to Section 4.1 above, the Committee shall have full and final
authority to select those Eligible Employees who will receive Options
(each, an "Employee Option"), which may be Incentive Stock Options or
Nonqualified Stock Options, the terms and conditions of which shall be
set forth in an Agreement; provided, however, that no person shall
receive any Incentive Stock Option unless he or she is an employee of
the Company, a Parent or a Subsidiary at the time the Incentive Stock
Option is granted.
6.2 Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Employee
Option shall be determined by the Committee and set forth in the
Agreement, provided that the purchase price per Share under each
Employee Option shall not be less than 100% of the Fair Market Value of
a Share on the date the Employee Option is granted (110% in the case of
an Incentive Stock Option granted to a Ten-Percent Stockholder).
6.3 Maximum Duration. Employee Options granted hereunder shall be
for such term as the Committee shall determine, provided that an
Incentive Stock Option shall not be exercisable after the expiration of
ten (10) years from the date it is granted (five (5) years in the case
of an Incentive Stock Option granted to a Ten-Percent Stockholder) and
a Nonqualified Stock Option shall not be exercisable after the
expiration of ten (10) years from the date it is granted. The
Committee may, subsequent to the granting of any Employee Option,
extend the term thereof but in no event shall the term as so extended
exceed the maximum term provided for in the preceding sentence.
6.4 Vesting. Subject to Section 7.4 hereof, each Employee Option
shall become exercisable in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth
in the Agreement. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the date the Employee Option
expires. The Committee may accelerate the exercisability of any
Employee Option or portion thereof at any time.
6.5 Modification or Substitution. The Committee may, in its
discretion, modify outstanding Employee Options or accept the surrender
of outstanding Employee Options (to the extent not exercised) and grant
new Options in substitution for them. Notwithstanding the foregoing,
no modification of an Employee Option shall adversely alter or impair
any rights or obligations under the Employee Option without the
Optionee's consent.
7. Terms and Conditions Applicable to All Options.
7.1 Non-transferability. No Option granted hereunder shall be
transferable by the Optionee to whom granted otherwise than by will or
the laws of descent and distribution, or as otherwise permitted
pursuant to Rule 16b-3, and an Option may be exercised during the
lifetime of such Optionee only by the Optionee or his or her guardian
or legal representative. The terms of such Option shall be final,
binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Optionee.
7.2 Method of Exercise. The exercise of an Option shall be made
only by a written notice delivered in person or by mail to the
Secretary of the Company at the Company's principal executive office,
specifying the number of Shares to be purchased and accompanied by
payment therefor and Withholding Taxes and otherwise in accordance with
the Agreement pursuant to which the Option was granted. The purchase
price for any Shares purchased pursuant to the exercise of an Option
shall be paid in full upon such exercise by any one or a combination of
the following: (i) cash or (ii) pursuant to such rules as may be
determined by the Committee, transferring Shares to the Company, or
(iii) any combination of the foregoing as may be determined by the
Committee. Until such person has been issued the Shares subject to
such exercise, he or she shall possess no rights as a stockholder with
respect to such Shares. Notwithstanding the foregoing, the Committee
shall have discretion to determine at the time of grant of each
Employee Option or at any later date (up to and including the date of
exercise) the form of payment acceptable in respect of the exercise of
such Employee Option and may establish cashless exercise procedures
which provide for the exercise of the Option and sale of the underlying
Share by a designated broker or dealer. In that connection, the
written notice pursuant to this Section 7.2 may also provide
instructions from the Optionee to the Company that upon receipt of
appropriate instructions from the Optionee's broker or dealer,
designated as such on the written notice, the Company shall issue such
Shares directly to the designated broker or dealer. Any Shares
transferred to the Company as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding
the date of exercise of such Option. If requested by the Committee,
the Optionee shall deliver the Agreement evidencing the Option to the
Secretary of the Company who shall endorse thereon a notation of such
exercise and return such Agreement to the Optionee. No fractional
Shares (or cash in lieu thereof) shall be issued upon exercise of an
Option and the number of Shares that may be purchased upon exercise
shall be rounded to the nearest number of whole Shares.
7.3 Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and
until (i) the Option shall have been exercised pursuant to the terms
thereof, (ii) the Company shall have issued and delivered the Shares to
the Optionee and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights
with respect to such Shares.
7.4 Effect of Change in Control. Notwithstanding
anything contained in the Plan or an Agreement to the contrary (other
than the last sentence of this Section 7.4), in the event of a Change
in Control, (i) all Options outstanding on the date of such Change in
Control shall become immediately and fully exercisable, (ii) upon
termination of an Optionee's employment following a Change in Control,
Options held by the Optionee shall remain exercisable until the later
of (x) one year after termination and (y) sixty (60) days following the
expiration of the Pooling Period (in the event the Change in Control
constitutes a Pooling Transaction), but in no event beyond the stated
term of the Option, and (iii) an Optionee will be permitted to
surrender for cancellation within sixty (60) days after such Change in
Control any Option or portion of an Option to the extent not yet
exercised and the Optionee will be entitled to receive a cash payment
in an amount equal to the excess, if any, of (x) (A) in the case of a
Nonqualified Stock Option, the greater of (1) the Fair Market Value, on
the date preceding the date of surrender, of the Shares subject to the
Option or portion thereof surrendered or (2) the Adjusted Fair Market
Value of the Shares subject to the Option or portion thereof
surrendered or (B) in the case of an Incentive Stock Option, the Fair
Market Value, on the date preceding the date of surrender, of the
Shares subject to the Option or portion thereof surrendered, over
(y) the aggregate purchase price for such Shares under the Option or
portion thereof surrendered; provided, however, that in the case of an
Option granted within six (6) months prior to the Change in Control to
any Optionee who may be subject to liability under Section 16(b) of the
Exchange Act, such Optionee shall be entitled to surrender for
cancellation his or her Option only during the sixty (60) day period
commencing upon the expiration of six (6) months from the date of grant
of any such Option. In the case of a Change in Control which also
constitutes a Pooling Transaction and notwithstanding anything
contained in the Plan or an Agreement to the contrary, the Committee
may, and with respect to Director Options shall, take such actions
which are specifically recommended by an independent accounting firm
retained by the Company, to the extent reasonably necessary in order to
assure that the Pooling Transaction will qualify as such, including,
but not limited to, providing that (i) all Options or, in the
alternative, such Options held by Optionees specifically identified by
the Committee, shall not become immediately and fully exercisable on
the date of the Change in Control but rather shall become immediately
and fully exercisable on the date following the day on which the
Pooling Period expires (whether or not the Optionee is then an employee
or director of the Company) and (ii) the holders of such Options shall
only have the right to surrender for cancellation Options or portions
thereof for the cash payment specified in clause (iii) of the first
sentence of this Section 7.4 after the day following the expiration of
the Pooling Period and for a period of sixty (60) days thereafter (in
which case, whether or not the Optionee holding any such Options
remains an employee or director of the Company, any such Option shall
not terminate and shall remain exercisable for the greater of sixty
(60) days after the expiration of the Pooling Period and the date such
Option would otherwise terminate in accordance with the Plan and the
relevant Agreement), and/or (iii) the payment specified in this
Section 7.4 shall be paid in the form of cash, Shares or securities of
a successor or acquirer of the Company, or a combination of the
foregoing, as designated by the Committee.
8. Effect of a Termination of Employment.
The Agreement evidencing the grant of each Employee Option shall
set forth the terms and conditions applicable to such Employee Option
upon a termination or change in the status of the employment of the
Optionee by the Company, Parent, a Subsidiary or a Division (including
a termination or change by reason of the sale of a Subsidiary or a
Division), as the Committee may, in its discretion, determine at the
time the Employee Option is granted or thereafter.
9. Adjustment Upon Changes in Capitalization.
(a) In the event of a Change in Capitalization, the Committee
shall conclusively determine the appropriate adjustments, if any, to
(i) the maximum number and class of Shares or other stock or securities
with respect to which Options may be granted under the Plan, (ii) the
maximum number of Shares with respect to which Options may be granted
to any Eligible Employee during the term of the Plan, (iii) the number
and class of Shares or other stock or securities which are subject to
Director Options issuable under Section 5, and (iv) the number and
class of Shares or other stock or securities which are subject to
outstanding Options granted under the Plan, and the purchase price
therefor, if applicable.
(b) Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not
to constitute a modification as defined by Section 424(h)(3) of the
Code and only to the extent otherwise permitted by Sections 422 and 424
of the Code.
(c) Any such adjustment in the Shares or other stock or securities
subject to outstanding Director Options (including any adjustments in
the purchase price) shall be made only to the extent necessary to
maintain the proportionate interest of the Optionee and preserve,
without exceeding, the value of such Director Options.
(d) If, by reason of a Change in Capitalization, an Optionee shall
be entitled to exercise an Option with respect to new, additional or
different shares of stock or securities, such new, additional or
different shares shall thereupon be subject to all of the conditions
and restrictions which were applicable to the Shares subject to the
Option prior to such Change in Capitalization.
10. Effect of Certain Transactions.
Subject to Section 7.4, in the event of (i) the liquidation or
dissolution of the Company or (ii) a merger or consolidation of the
Company (a "Transaction"), the Plan and the Options issued hereunder
shall continue in effect in accordance with their respective terms and
each Optionee shall be entitled to receive in respect of each Share
subject to any outstanding Options, upon exercise of such Options, the
same number and kind of stock, securities, cash, property, or other
consideration that each holder of a Share was entitled to receive in
the Transaction in respect of a Share.
11. Termination and Amendment of the Plan.
The Plan shall terminate on the day preceding the tenth
anniversary of the date of its adoption by the Board and no Options may
be granted thereafter. The Board may sooner terminate the Plan and the
Board may at any time and from time to time amend, modify or suspend
the Plan; provided, however, that:
(a) No such amendment, modification, suspension or termination
shall impair or adversely alter any Options theretofore granted under
the Plan, except with the consent of the Optionee, nor shall any
amendment, modification, suspension or termination deprive any Optionee
of any Shares which he or she may have acquired through or as a result
of the Plan;
(b) To the extent necessary under Section 16(b) of the Exchange
Act and the rules and regulations promulgated thereunder or other
applicable law, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and
regulations; and
(c) The provisions of Section 5 shall not be amended more often
than once every six (6) months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations promulgated thereunder.
12. Non-Exclusivity of the Plan.
The adoption of the Plan by the Committee and the Board shall not be
construed as amending, modifying or rescinding any previously approved
incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
13. Limitation of Liability.
As illustrative of the limitations of liability of the Company, but
not intended to be exhaustive thereof, nothing in the Plan shall be
construed to:
(i) give any person any right to be granted an Option other than
at the sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to
Shares except as specifically provided in the Plan;
(iii) limit in any way the right of the Company to terminate
the employment of any person at any time; or
(iv) be evidence of any agreement or understanding, expressed
or implied, that the Company will employ any person at any particular
rate of compensation or for any particular period of time.
14. Regulations and Other Approvals; Governing Law.
14.1 Except as to matters of federal law, this Plan and the
rights of all persons claiming hereunder shall be construed and
determined in accordance with the laws of the State of Delaware without
giving effect to conflicts of law principles.
14.2 The obligation of the Company to sell or deliver Shares
with respect to Options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or
appropriate by the Committee.
14.3 The Plan is intended to comply with Rule 16b-3
promulgated under the Exchange Act and the Committee shall interpret
and administer the provisions of the Plan or any Agreement in a manner
consistent therewith. Any provisions inconsistent with such Rule shall
be inoperative and shall not affect the validity of the Plan.
14.4 The Committee may make such changes as may be necessary
or appropriate to comply with the rules and regulations of any
government authority, or to obtain for Eligible Employees granted
Incentive Stock Options the tax benefits under the applicable
provisions of the Code and regulations promulgated thereunder.
14.5 Each Option is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan
is required by any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the
grant of an Option or the issuance of Shares, no Options shall be
granted or payment made or Shares issued, in whole or in part, unless
listing, registration, qualification, consent or approval has been
effected or obtained free of any conditions as acceptable to the
Committee.
14.6 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares
acquired pursuant to the Plan is not covered by a then current
registration statement under the Securities Act of 1933, as amended,
and is not otherwise exempt from such registration, such Shares shall
be restricted against transfer to the extent required by the Securities
Act of 1933, as amended, and Rule 144 or other regulations thereunder.
The Committee may require any individual receiving Shares pursuant to
an Option granted under the Plan, as a condition precedent to receipt
of such Shares, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to
any distribution thereof and will not be sold or transferred other than
pursuant to an effective registration thereof under said Act or
pursuant to an exemption applicable under the Securities Act of 1933,
as amended, or the rules and regulations promulgated thereunder. The
certificates evidencing any of such Shares shall be appropriately
legended to reflect their status as restricted securities as aforesaid.
15. Miscellaneous.
15.1 Multiple Agreements. The terms of each Option may differ
from other Options granted under the Plan at the same time, or at some
other time. The Committee may also grant more than one Option to a
given Eligible Employee during the term of the Plan, either in addition
to, or in substitution for, one or more Options previously granted to
that Eligible Employee.
15.2 Withholding of Taxes. (a) The Company shall have the
right to deduct from any distribution or payment of cash to any
Optionee an amount equal to the federal, state and local income taxes
and other amounts as may be required by law to be withheld (the
"Withholding Taxes") with respect to any Option. If an Optionee
realizes a taxable event in connection with the receipt of Shares
pursuant to an Option exercise (a "Taxable Event"), the Optionee shall
pay the Withholding Taxes to the Company prior to the issuance of such
Shares. In satisfaction of the obligation to pay Withholding Taxes to
the Company, the Optionee may make a written election (the "Tax
Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the Shares then issuable to
him or her having an aggregate Fair Market Value, on the date preceding
the date of such issuance, equal to the Withholding Taxes, provided
that in respect of an Optionee who may be subject to liability under
Section 16(b) of the Exchange Act either: (i) (A) the Tax Election is
made at least six (6) months prior to the date of the Taxable Event and
(B) the Tax Election is irrevocable with respect to all Taxable Events
of a similar nature occurring prior to the expiration of six (6) months
following a revocation of the Tax Election; or (ii) (A) the Optionee
makes the Tax Election at least six (6) months after the date the
Option was granted, (B) the Option is exercised during the ten (10) day
period beginning on the third business day and ending on the twelfth
business day following the release for publication of the Company's
quarterly or annual statement of sales and earnings (a "Window Period")
and (C) the Tax Election is made during the Window Period in which the
related Option is exercised or prior to such Window Period and
subsequent to the immediately preceding Window Period. Notwithstanding
the foregoing, the Committee may, by the adoption of rules or
otherwise, (i) modify the provisions of this Section 15.2 (other than
as regards Director Options) or impose such other restrictions or
limitations on Tax Elections as may be necessary to ensure that the Tax
Elections will be exempt transactions under Section 16(b) of the
Exchange Act, and (ii) permit Tax Elections to be made at such other
times and subject to such other conditions as the Committee determines
will constitute exempt transactions under Section 16(b) of the Exchange
Act.
(b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of
any Share or Shares issued to such Optionee pursuant to the exercise of
an Incentive Stock Option within the two-year period commencing on the
day after the date of the grant or within the one-year period
commencing on the day after the date of transfer of such Share or
Shares to the Optionee pursuant to such exercise, the Optionee shall,
within ten (10) days of such disposition, notify the Company thereof,
by delivery of written notice to the Company at its principal executive
office.
(c) The Committee shall have the authority, at the time of
grant of an Employee Option under the Plan or at any time thereafter,
to award tax bonuses to designated Optionees, to be paid upon their
exercise of Employee Options granted hereunder. The amount of any such
payments shall be determined by the Committee. The Committee shall
have full authority in its absolute discretion to determine the amount
of any such tax bonus and the terms and conditions affecting the
vesting and payment thereof.
15.3. Interpretation. Unless otherwise expressly stated in the
relevant Agreement, any grant of Options is intended to be performance-
based compensation within the meaning of Section 162(m)(4)(C) of the
Code. The Committee shall not be entitled to exercise any discretion
otherwise authorized hereunder with respect to such Options if the
ability to exercise such discretion or the exercise of such discretion
itself would cause the compensation attributable to such Options to
fail to qualify as performance-based compensation.
16. Effective Date/Shareholder Approval. The effective date of
the Plan shall be the date of its adoption by the Board, subject only
to the approval by the affirmative vote of the holders of a majority of
the securities of the Company present, or represented, and entitled to
vote at the first meeting of stockholders duly held in accordance with
the applicable laws of the State of Delaware after such date of
adoption.