A.L. PHARMA INC.
1983 INCENTIVE STOCK OPTION PLAN
As Amended through
June 7, 1995
As Amended thru: 6/7/95
A.L. PHARMA INC.
1983 INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan
This 1983 Stock Option Plan (the "Plan") of A.L. Pharma Inc.
(the "Company"), is designed to provide incentive to present and
future executive, managerial, marketing, technical and other key
employees of the Company and of its subsidiaries (hereinafter
referred to as "Employees") by affording such Employees an
opportunity to acquire or increase their proprietary interest in
the Company through the acquisition of shares of its Class A
Common Stock. By encouraging stock ownership by such Employees,
the Company seeks to attract and retain in its and its
subsidiaries' employ persons of exceptional competence and seeks
to furnish an added incentive for them to increase their efforts
on behalf of the Company.
2. Administration
This Plan shall be administered by a committee of the Board
of Directors of the Company consisting of one or more directors
(the "Options Committee") appointed for such purpose. All
questions of interpretation and application of this Plan, of
options granted hereunder (the "Options"), of any related
agreements and instruments, and of the value of shares of Class A
Common Stock subject to Options, shall be subject to the good
faith determination of the Options Committee, which shall be
final and binding. If for any reason an Options Committee shall
not have been appointed, all authority and duties of the Options
Committee under this Plan shall be vested in and exercised by the
Board of Directors of the Company.
3. Option Shares
The stock subject to the Options and other provisions of
this Plan shall be shares of the Company's Class A Common Stock,
with $.20 par value (hereinafter referred to as the "Common
Stock"). The total amount of the Common Stock with respect to
which Options may be granted shall not exceed in the aggregate
2,500,000* shares; provided, however, that the type and aggregate
number of shares which may be subject to Options granted
hereunder shall be subject to adjustment in accordance with the
provisions of paragraph 16 hereof, and further provided that if
Incentive Stock Options are granted, the aggregate fair market
value (determined as of the time the option is granted) of the
Stock with respect to which Options are exercisable for the first
time by any single employee during any calendar year shall not
exceed $100,000. Such shares may be treasury shares or
authorized but unissued shares.
If, for any reason the full number of shares covered by any
Option are not issued before the Option expires or terminates,
shares not issued under such Option shall again be available for
the grant of Options under this Plan.
4. Authority to Grant Options
The Options Committee may grant Options from time to time to
such eligible Employees as it shall determine; provided, however,
that no Options may be granted to any person who is a member of
the Options Committee at the time of such grant. Subject only to
any applicable limitations set forth in this Plan, the number of
shares of Common Stock which may be purchased pursuant to any
Option shall be as determined by the Options Committee, but in no
event may the number of Options granted to any person under the
Plan exceed 100,000 in any taxable period.
In the discretion of the Options Committee, Options granted
under this Plan may be "incentive stock options" as such term is
defined in Section 422A of the Internal Revenue Code of 1986
("Incentive Stock Options"), or Options which do not meet such
definition. The option agreement with respect to any Option
intended to qualify as an Incentive Stock Option shall so
identify such Option.
5. Limitation on Value of Shares Covered by Incentive Stock
Options Granted to Any Employee
The aggregate fair market value (determined as of the time
the Option is granted) of the Common Stock with respect to which
any employee may be granted Incentive Stock Options under this
Plan and any other plans of the Company or any parent or
subsidiary of the Company shall not exceed the amount permitted
by Section 422A of the Internal Revenue Code of 1986.
6. Eligibility
The individuals who shall be eligible to participate in the
Plan shall be such Employees from the class of executive,
managerial, marketing, technical and other key employees as the
Options Committee shall determine from time to time.
7. Option Price
The price at which shares may be purchased pursuant to any
Option shall be specified by the Options Committee at the time
the Option is granted, and shall be equal to or greater than the
fair market value, as determined by the Options Committee, of the
shares of Common Stock on the date the Option is granted.
8. Terms of Options; Vesting
The Options Committee shall determine the term of each
Option which shall in no event exceed ten years and one month
from the date of grant. Unless the Committee shall otherwise
determine at the time of grant, Options shall vest at the rate of
25% per year that the Employee holds such Option so that Options
shall not become fully exercisable until four years from the date
of grant. Accordingly, unless the Committee shall otherwise
determine at the time of grant, Options cannot be exercised until
one year after the Option has been granted and then 25% of the
Option Shares may be purchased during the second year, 50% during
the third year, 75% during the fourth year, and 100% after four
years. Subject to the limitations contained in paragraph 12
hereof, the Options Committee may, in its discretion: (a)
accelerate the time at which any outstanding Option or part
thereof shall become exercisable and (b) extend the time during
which any outstanding Option may be exercised, provided that no
Option may be exercised more than ten years and one month after
the date of grant. There shall be deemed to be part of the
conditions and terms of every Option granted hereunder as an
Incentive Stock Option each condition, term, limitation or
restriction which is required under Section 422A of the Internal
Revenue Code and the applicable regulations for such Option to
qualify as an Incentive Stock Option.
9. Amount Exercisable
Each Option may be exercised, so long as it has vested and
is valid and outstanding, from time to time, in part or in whole,
subject to any limitations with respect to the number of shares
for which the Option may be exercised at a particular time and to
such other conditions as the Options Committee in its discretion,
may specify.
10. Exercise of Options
Options shall be exercised by the delivery of written notice
to the Company (Attention: Treasurer) setting forth the number of
shares with respect to which the Option is to be exercised and
the address to which the certificates for such shares are to be
mailed, together with (i) cash (including checks, bank drafts or
postal or express money orders payable to the order of the
Company) or (ii), if permitted by the Option Committee and in
accordance with Section 10C, shares of Common Stock previously
acquired, in an aggregate amount equal to the option price of
such shares. As promptly as practicable after receipt of such
written notification and payment and subject to Section 10B, the
Company shall deliver to the optionee certificates for the number
of shares with respect to which such Option has been so
exercised, issued in the optionee's name: provide, that such
delivery shall be deemed effected for all purposes when such
certificates shall have been deposited in the United States mail,
addressed to the optionee, at the address specified pursuant to
this paragraph. For all purposes, an optionee shall be deemed to
have exercised an Option and to have purchased and become the
holder of the Option Shares as of the date the Company receives
written notification of exercise and payment as provided herein
and in Section 10B.
10A. Alternative Cash Settlement Method
The Option Committee, in its discretion, may confer upon the
grantee of any Option granted pursuant to this Plan the right to
exercise, with respect to shares of Common Stock which could be
purchased under an Option otherwise exercisable hereunder, an
alternative cash settlement right as set forth below in lieu of
purchasing shares under such Option. Such right may be conferred
at the time the Options are granted or with respect to
outstanding Options.
The alternative cash settlement right shall mean the right,
in lieu of purchasing shares under an Option which is otherwise
exercisable under this Plan, to receive a payment in cash equal
to the excess of the value of one share of Common Stock over the
option price set forth in the Option times the number of shares
as to which the alternative cash settlement right is exercised.
Notwithstanding the other provisions of this Plan, exercise of an
alternative cash settlement right (i) shall be subject to the
approval of the Committee at the time of such exercise and (ii)
may only be exercised in connection with and at the same time
that an Option is being exercised under Section 10 of this Plan
and may not be exercised with respect to more shares of Common
Stock than are then being purchased upon such exercise under
Section 10. For purposes of determining an alternative cash
settlement, the value per share of Common Stock shall be the
closing price on the principal stock exchange on which the Common
Stock is listed for trading on the date of the exercise of the
Option (or, if no such closing price is available, the value
shall be determined in such other manner as the Committee may
deem appropriate).
Exercise of alternative cash settlement rights shall be made
by notice delivered to the Company as provided in Section 10 of
this Plan. Exercise of an Option through exercise of an
alternative cash settlement right shall for purposes of this Plan
have the same effect as if the shares of Common Stock as to which
such right was exercised were issued under this Plan;
accordingly, there shall be a decrease in the number of shares of
Common Stock which thereafter may be available for purposes of
granting Options under this Plan by the number of shares of
Common Stock as to which an alternative cash settlement right is
exercised.
10B Withholding Tax Requirements
It shall be a condition of exercise of any Option (including
any exercise of an alternative cash settlement right) that the
Employee exercising the Option make appropriate payment or other
provision acceptable to the Company with respect to any
withholding tax requirement arising from such exercise. The
amount of withholding tax required, if any, with respect to any
Option exercise (the "Withholding Amount") shall be determined by
the Treasurer or other appropriate officer of the Company, and
the Employee shall furnish such information and make such
representations as such officer requires to make such
determination. In the event of an exercise involving an
alternative cash settlement right, the Company shall withhold the
Withholding Amount from the amount otherwise payable to the
Employee. If the Company determined that withholding tax is
required with respect to any Option exercise not involving an
alternative cash settlement right, the Company shall notify the
Employee of the Withholding Amount, and the Employee shall pay to
the Company, by check or other means acceptable to the Company,
an amount not less than the Withholding Amount. In lieu of
making such payment, the Employee may elect to pay the
Withholding Amount by either (i) delivering to the Company a
number of shares of Common Stock having an aggregate value
(determined as set forth in Section 10A) as of the "measurement
date" (as hereinafter defined) not less than the Withholding
Amount or (ii) directing the Company to withhold (and not to
deliver or issue to Employee) a number of shares of Common Stock
otherwise issuable upon the Option exercise having an aggregate
value (determined as set forth in Section 10A) as of the
measurement date not less than the Withholding Amount; provided
that if the Employee is an officer or director subject to Section
16(b) of the Securities Exchange Act of 1934, as amended, the
election to meet withholding tax requirements by the delivery or
direction to withhold shares of Common Stock may only be
exercised (i) during a ten day "window" period specified in Rule
16b-3 or (ii) at least six months prior to the measurement date
or (iii) at such other time as will not, in the opinion of
counsel for the Company, result in any liability of such Employee
under said Section 16(b). If the Company approves, an Employee
may elect pursuant to the prior sentence to deliver or direct
the withholding of shares of Common Stock having an aggregate
value in excess of the minimum Withholding Amount but not in
excess of the Employee's applicable highest marginal combined
federal income and state income tax rate, as estimated in good
faith by the Employee. Any fractional share interests resulting
from the delivery or withholding of shares of Common Stock to
meet withholding tax requirements shall be settled in cash. All
amounts paid to or withheld by the Company and the value of all
shares of Common Stock delivered to or withheld by the Company
pursuant to this Section 10B shall be deposited in accordance
with applicable law by the Company as withholding tax for the
Employee's account. If the Treasurer or other appropriate
officer of the Company determines that no withholding tax is
required with respect to the exercise of any Option (because such
Option is an Incentive Stock Option or otherwise), but
subsequently it is determined that the exercise resulted in
taxable income as to which withholding is required (as a result
of a disposition of shares or otherwise), the Employee shall
promptly, upon being notified of the withholding requirement, pay
to the Company by means acceptable to the Company the amount
required to be withheld; and at its election the Company may
condition any transfer of shares issued upon exercise of an
Incentive Stock Option upon receipt of such payment. The term
"measurement date" as used in this Section 10B shall mean the
date on which any taxable income resulting from the exercise of
an Option is determined under applicable federal income tax
provisions.
10C. Exchange of Previously Acquired Stock
The Option Committee, in its discretion, may (subject to the
provisos to this sentence) permit the option price for the shares
being acquired upon the exercise of an Option to be paid, in full
or in part, by the delivery to the Company of a number of shares
of Common Stock having an aggregate value (determined as set
forth in Section 10A) as of the "exercise measurement date" (as
hereinafter defined) equal to the exercise price for the shares
being acquired; provided that if the Employee exercising the
Option is an officer or director subject to Section 16(b) of the
Securities and Exchange Act of 1934, as amended, and such
Employee is permitted by the Option Committee to pay the exercise
price under an Option by delivery of previously acquired Common
Stock, the election to deliver such Common Stock may only be made
(i) during a ten day "window" period specified in Rule 16b-3 or
(ii) at least six months prior to the exercise measurement date
or (iii) as such other time as will not, in the opinion of
counsel for the Company, result in any liability of such Employee
under said Section 16(b); provided further that if the shares of
Common Stock being delivered as payment for all or part of the
exercise price under an Option were acquired pursuant to the
exercise of another Option, such Common Stock must have been
owned by the Employee for at least six months preceding the
exercise measurement date; and provided further that this Section
10C shall only be available for, and applicable to, Options
granted subsequent to September 30, 1986. The term "exercise
measurement date" as used in this Section 10C shall mean the date
on which the Option is exercised in accordance with Section 10.
11. Transferability of Options
Options shall not be transferable otherwise than by will or
the laws of descent and distribution and shall be exercisable
during the optionee's lifetime only by him or by his guardian or
legal representative.
12. Termination of Employment or Death of Optionee
Except as expressly provided herein, Options shall terminate
on the earlier of:
a. the date of expiration thereof, specified pursuant
to paragraph 8 of this Plan,
b. immediately upon termination of the employment
relationship between the Company and the optionee
for cause, or
c. thirty (30) days or, if the written option
agreement (as specified pursuant to paragraph 18
hereof) specifically provides, for a longer period
not to exceed one year after termination of the
employment relationship between the Company and
the optionee without cause, other than death or
retirement in good standing from the employ of the
Company for reasons of age or disability under
then established rules of the Company or the
subsidiary employing the optionee.
Whether authorized leave of absence, or absence on military or
government service, shall constitute termination of the
employment relationship, shall be determined by the Options
Committee.
In the event of the death of the holder of an Option while
in the employ of the Company and before the date of expiration of
such Option, such Option shall terminate on the earlier of such
date of expiration or one year following the date of such death.
After the death of the optionee, his executors, administrators,
or any person or persons to whom his Option may be transferred by
will or by the laws of descent and distribution, shall have the
right, at any time prior to such termination to exercise such
Option which shall have vested immediately prior to his death.
If, before the date of expiration of an Option, the optionee
shall be retired in good standing from the employee of the
Company for reasons of age or disability under the then
established rules of the Company, such Option shall terminate on
the earlier of such date of expiration or 90 days after the date
of such retirement unless the written option agreement
specifically provides for a longer period not to exceed one year
after the date of such retirement unless the written option
agreement specifically provides for a longer period not to exceed
one year after the date of such retirement. In the event of
such retirement, the optionee shall have the right prior to the
termination of such Option to exercise the Option to the extent
to which he was entitled to exercise such Option immediately
prior to such retirement.
For all purposes of this Plan, an employment relationship
between the Company and the optionee shall be deemed to exist
during any period in which the optionee is employed by the
Company or by any subsidiary of the Company.
13. Requirements Imposed by Law
The Company shall not be required to sell or issue any
shares under any Option if the issuance of such shares shall
constitute a violation by the optionee or by the Company of any
provisions of any law or regulation of any governmental
authority. Any determination in this connection by the Options
Committee shall be final, binding and conclusive.
The Company shall not be required to issue any shares upon
exercise of any option unless the Company has received the
optionee's representation or other evidence satisfactory to it to
the effect that the holder of such Option will not transfer such
Shares in any manner which could constitute a violation of any
securities or other law, or which would not be in compliance with
such other conditions as the Options Committee may deem
appropriate.
14. No Rights as Stockholder
No optionee shall have rights as a stockholder with respect
to shares covered by his Option until the date of exercise of
such Option; and, except as otherwise provided in paragraph 16
hereof, no adjustment for dividends, or otherwise, shall be made
if the record date therefore is prior to the date of exercise of
such option.
15. No Employment Obligation
The granting of any option shall not impose upon the Company
any obligation to employ or continue to employ any optionee; and
the right of the Company to terminate the employment of any
officer or other employee shall not be diminished or affected by
reason of the fact that an Option has been granted to him.
16. Changes in the Firm's Capital Structure
The existence of outstanding Options shall not affect in any
way the right of power of the Company or its stockholders to make
or authorize any or all adjustment, recapitalizations,
reorganization, or other changes in the Company's capital
structure or its business, or any merger or consolidation of the
Company, or any issue of bonds, debentures or preferred or prior
preference stock senior to or otherwise affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation
of shares or other capital readjustment, or pay a dividend in
shares of its Class A or Class B Common Stock, then (a) the
number, type, and per share price of shares of stock subject to
outstanding Options hereunder shall be appropriately adjusted in
such a manner as to entitle each optionee to receive upon
exercise of his Option, for the same aggregate consideration, the
same total number and type of shares as he would have received as
a result of the event requiring the adjustment had he exercised
his Option in full immediately prior to such event; provided,
however, that, if any such adjustment would result in the right
to purchase a fractional share, the number of shares subject to
the Option will be decreased to the next lower whole number; and
(b) the number and type of shares then reserved for issuance
under the Plan shall be adjusted by substituting for the total
number of shares of Common Stock then reserved that number and
type of shares of stock that would have been received by the
owner of an equal number of outstanding shares of Common Stock as
the result of the event requiring the adjustment.
If the Company shall be a party to any merger or
consolidation or effect any recapitalization which causes a
change in the Common Stock which does not effect an adjustment
under the prior paragraph, the Options Committee, in its
discretion, may, if it considers it to be appropriate to carry
out the intent and purpose of the Plan, make such adjustments in
the nature or amount of securities subject to the Options or the
Option price as it considers appropriate, and such adjustments
shall be binding and conclusive on all holders of Options.
Except as expressly provided herein, the issue by the
Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or
property, or for labor or services either upon direct sale, or
upon the exercise of rights or warrants to subscribe therefore,
or upon conversion of other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock then subject to
outstanding Options.
17. Amendment or Termination of Plan
The Board of the Directors of the Company may modify, revise
or terminate this Plan at any time and from time to time, except
that neither the aggregate number of shares issuable pursuant to
this Plan nor the minimum option price specified in paragraph 7
of this Plan shall, other than by operation of paragraph 16
hereof, be adjusted without the consent of the holders of Class A
and Class B Common Stock having a majority of the voting power.
18. Written Agreement
Each Option granted hereunder shall be embodied in a written
option agreement which shall be subject to the terms and
conditions prescribed above and shall be signed by the optionee
and by the President or Vice-President of the Company for and in
the name and on behalf of the Company. Such an option agreement
shall contain such other provisions as the Options Committee in
its discretion shall deem advisable.
19. Director and Stockholder Approval: Duration of Plan
This Plan has been duly adopted by the Board of Directors on
September 26, 1983 and approved by the stockholders of the
Company on January 25, 1984. Options may not be granted under
this Plan after September 26, 2003. This Plan shall terminate
(a) when the total amount of Common Stock with respect to which
Options may be granted shall have been issued upon the exercise
of Options, or (b) by action of the Board of Directors pursuant
to paragraph 17 hereof, whichever shall first occur.
_______________________________
* Reflects 1985, 1986 and 1991 stock splits, additional
shares approved at the 1986, 1988, 1989, 1991, 1993 and 1995
stockholders' meetings.