Exhibit 10.9
PHARMACEUTICAL RESOURCES, INC.
1997 DIRECTORS STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings hereinafter set forth
unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean Pharmaceutical Resources, Inc.
(c) "Date of Grant" shall mean, with respect to any Eligible Director: (a)
the Effective Date with respect to those Options granted on the Effective Date,
(b) the date such Eligible Director is initially elected to the Board of
Directors if such Eligible Director was first elected after the Effective Date,
and (c) for each respective fiscal year of the Company thereafter, the date on
which the shareholders of the Company shall elect directors at an annual meeting
of shareholders or any adjournment thereof.
(d) "Effective Date" shall mean October 28, 1997, the date of adoption by
the Board.
(e) "Eligible Director" shall mean any Director of the Company who is not
an employee of the Company or its subsidiaries.
(f) "Fair Market Value" on any day shall mean (a) if the principal market
for the Stock is The New York Stock Exchange, any other national securities
exchange or The NASDAQ Stock Market, the closing sales price regular way of the
Stock on such day as reported by such exchange or market, or on a consolidated
tape reflecting transactions on such exchange or market, or (b) if the principal
market for the Stock is not a national securities exchange and if there are no
closing prices reported on The NASDAQ Stock Market, the mean between the closing
bid and the closing asked prices for the Stock on such day as quoted on such
market, or (c) if there are no such prices quoted on The NASDAQ Stock Market,
the price furnished by any New York Stock Exchange member selected by the
Company from time to time for such purpose; provided that if clauses (a), (b)
and (c) of this paragraph are all inapplicable, or if no trades have been made
or no quotes are available for such day, the Fair Market Value of the Stock
shall be determined by the Board by any method which it deems, in good faith, to
be appropriate. The determination of the Board shall be conclusive as to the
Fair Market Value of the Stock.
(g) "Option" shall mean an Eligible Director's stock option to purchase
Stock granted pursuant to the provisions of Article V hereof.
(h) "Optionee" shall mean an Eligible Director to whom an Option has been
granted hereunder.
(i) "Option Price" shall mean the price at which an Optionee may purchase a
share of Stock under a Stock Option Agreement.
(j) "Qualified Domestic Relations Order" shall have the meaning assigned to
such term under the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
(k) "1997 Plan" shall mean the Pharmaceutical Resources, Inc. 1997
Directors Stock Option Plan, the terms of which are set forth herein, as amended
from time to time.
(l) "1989 Plan" shall mean the Pharmaceutical Resources, Inc. 1989
Directors' Stock Option Plan.
(m) "Sale" shall mean any single transaction or series of related
transactions, upon the consummation of the following events: (i) a definitive
agreement for the merger or other business combination of the Company with or
into another corporation pursuant to which the shareholders of the Company do
not own, immediately after the transaction, more than 50% of the voting power of
the corporation that survives and is a publicly owned corporation and not a
subsidiary of another corporation, or (b) a definitive agreement for the sale,
exchange, or other disposition of all or substantially all of the assets of the
Company (other than to any wholly-owned subsidiary of the Company); provided,
that a Sale shall not be deemed to have occurred if there shall be an
affirmative vote of a majority of the Board to suspend the provisions of Section
4.3 of the 1997 Plan with respect to any such event.
(n) "Stock" shall mean the common stock, par value $.01 per share, of the
Company or, in the event that the outstanding shares of Stock are hereafter
changed into or exchanged for different stock or securities of the Company or
some other corporation, such other stock or securities.
(o) "Stock Option Agreement" shall mean an agreement between the Company
and the Optionee under which the Optionee may purchase Stock in accordance with
the 1997 Plan.
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ARTICLE II
THE 1997 PLAN
2.1 Name. This 1997 Plan shall be known as the "Pharmaceutical Resources,
Inc. 1997 Directors Stock Option Plan."
2.2 Purpose. The purpose of the 1997 Plan is to advance the interests of
the Company and its shareholders by affording Eligible Directors of the Company
an opportunity to acquire, maintain and increase their ownership interests in
the Company, and thereby to encourage their continued service as directors and
to provide them additional incentives to achieve the growth objectives of the
Company.
2.3 Effective Date. The Effective Date of the 1997 Plan is October 28,
1997. Any Options granted under the 1997 Plan shall only become effective if the
shareholders of the Company shall have, on or before October 27, 1998, approved
and adopted the 1997 Plan. If the 1997 Plan shall not be so approved and
adopted, all Options granted hereunder shall be of no effect.
2.4 Termination Date. The 1997 Plan shall terminate and no further Options
shall be granted hereunder upon the tenth anniversary of the Effective Date.
ARTICLE III
PARTICIPANTS
Each Eligible Director shall participate in the 1997 Plan, provided that he
is or was elected as a member of the Board at an annual meeting of shareholders,
or any adjournment thereof, or was elected by Eligible Directors who were
elected as members of the Board at an annual meeting of shareholders to fill a
vacancy on the Board.
ARTICLE IV
SHARES OF STOCK SUBJECT TO 1997 PLAN
4.1 Limitations. Subject to any antidilution adjustment pursuant to the
provisions of Section 4.2 hereof, the maximum number of shares of Stock which
may be issued and sold hereunder shall not exceed 500,000 shares of Stock.
Shares of Stock subject to an Option may be either authorized and unissued
shares or shares issued and later acquired by the Company; provided, however,
that the shares of Stock with respect to which an Option has been exercised
shall not again be available for the grant of an Option hereunder. If any
outstanding Options granted hereunder shall terminate or expire
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for any reason without being wholly exercised prior to the end of the period
during which Options may be granted hereunder, new Options may be granted
hereunder covering such unexercised shares.
4.2 Anti-dilution. In the event that the outstanding shares of Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of merger,
consolidation, reorganization, recapitalization, reclassification, combination
of shares, stock split, reverse stock split or stock dividend:
(a) The rights under outstanding Options granted hereunder,
both as to the number of subject shares and the Option Price, shall be
adjusted appropriately; and
(b) Where dissolution or liquidation of the Company or any
merger or combination in which the Company is not a surviving
corporation is involved, each outstanding Option granted hereunder
shall terminate, but the Optionee shall have the right, immediately
prior to such dissolution, liquidation, merger or combination, to
exercise his Option, in whole or in part, to the extent that it shall
not have been exercised, without regard to the date on which such
Option would otherwise have become exercisable pursuant to Sections 5.4
hereof.
The foregoing adjustments and the manner of application thereof shall be
determined solely by the Board, and any such adjustment may provide for the
elimination of fractional share interests. The adjustments required under this
Article shall apply to any successor or successors of the Company and shall be
made regardless of the number or type of successive events requiring adjustments
hereunder.
4.3 Sale of Company. Each Stock Option Agreement shall provide that, upon a
Sale, the Board may elect either (a) to continue the outstanding Options without
any payment or (b) to cause to be paid to the Optionee upon consummation of the
Sale, a payment equal to the excess, if any, of the sale consideration
receivable by the holders of shares of Common Stock in such a Sale (the "Sale
Consideration") over the purchase price for his Option for each share of Common
Stock the Optionee shall then be entitled to acquire under the 1997 Plan. If the
Board elects to continue the Option, then the Company shall cause effective
provisions to be made so that the Optionee shall have the right, by exercising
the Option prior to the respective Expiration Dates, to purchase the kind and
amount of shares of stock and other securities and property receivable upon such
a Sale by a holder of the number of shares of Common Stock which might have been
purchased upon exercise of the Option immediately prior to the Sale. The value
of the Sale Consideration receivable by the holder of a share of Common Stock,
if it shall be other than cash, shall be determined, in good faith, by the
Board. Upon payment to the Optionee of the Sale Consideration, the Optionee
shall have no further rights in connection with the Option granted, the Option
shall be terminated and surrendered for cancellation and the Option shall be
null and void.
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ARTICLE V
OPTIONS
5.1 Option Grant, Number of Shares and Agreement.
(a) Exchange of Existing Options. Subject to the provisions
hereof, each Eligible Director on the Effective Date shall be granted
an Option to purchase Ten Thousand (10,000) shares of Stock for each
year of such Eligible Director's tenure as a director of the Company.
Notwithstanding the preceding sentence, the grant of Options to an
Eligible Director pursuant to this Section 5.1(a) shall be expressly
conditioned upon such Eligible Director surrendering for cancellation
all stock options held by such Director which were granted to him
under the 1989 Plan, and the number of Options granted to an Eligible
Director under this Section 5.1(a) shall in no event exceed the number
of such stock options granted under the 1989 Plan surrendered by such
Director.
(b) Annual Grant of Options. Subject to the provisions hereof,
each Eligible Director shall be granted an Option to purchase Five
Thousand (5,000) shares of Stock on (i) the Effective Date and (ii)
each subsequent Date of Grant (the "Annual Grant"). Notwithstanding
anything herein to the contrary, no Eligible Director shall be
entitled to receive more than one Annual Grant in any calendar year.
(c) Additional Grant. Subject to the provisions hereof, on (i)
the Effective Date and (ii) each subsequent Date of Grant, each
Eligible Director shall be granted an Option to purchase up to an
additional Six Thousand (6,000) shares of Stock (the "Additional
Grant") if such Eligible Director owns on the respective Effective
Date or subsequent Date of Grant (as the case may be) an amount of
issued shares of Common Stock of the Company not less than the product
of 2,500 shares of Common Stock multiplied by the sum of one and the
number of years in which he was granted previously an Additional
Grant. Notwithstanding the foregoing, for purposes of determining each
Eligible Director's entitlement to an Additional Grant on the
Effective Date, the Eligible Director must own not less than 2,500
shares of Common Stock of the Company by April 1, 1998. An Eligible
Director who shall not be entitled to receive an Additional Grant on
any particular Date of Grant as a result of the failure to satisfy the
conditions set forth in this Section 5.1(c) shall be eligible to
receive an Additional Grant pursuant to this Section 5.1(c) on any
subsequent Date of Grant. Notwithstanding anything herein to the
contrary, no Eligible Director shall be entitled to receive more than
one Additional Grant in any calendar year.
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(d) Agreement. Each Option so granted shall be evidenced by a
written Stock Option Agreement, dated as of the Date of Grant and
executed by the Company and the Optionee, stating the Option's
duration, time of exercise, and exercise price. The terms and
conditions of the Option shall be consistent with the 1997 Plan.
5.2 Option Price. The Option Price of the Stock subject to each Option
shall be the Fair Market Value of the Stock on its Date of Grant.
5.3 Option Expiration. Each Option shall expire on the tenth anniversary of
such Option's Date of Grant (the "Expiration Date").
5.4 Option Exercise.
(a) Any Option granted under the 1997 Plan may not be exercised,
in whole or in part, until the first anniversary of the Date of Grant,
subject to any additional conditions imposed by the Board and set
forth in a Stock Option Agreement. If an Eligible Director shall be
removed "for cause" as a member of the Board of Directors on or prior
to the first anniversary of the Date of Grant of any Option, such
Option shall terminate and be forfeited. Subject to the provisions of
this Section 5.4(a), an Option shall remain exercisable at all times
until the Expiration Date, regardless of whether the Optionee
thereafter continues to serve as a member of the Board.
Notwithstanding the foregoing, an Additional Grant shall automatically
terminate and be forfeited in the event that the Eligible Director
holding such Additional Grant shall fail to continue to own the number
of shares of Common Stock which were equal to the number of shares
which were a condition of such Additional Grant. Any such termination
and forfeiture shall be done on a pro rata basis to the number of
shares sold or disposed of.
(b) An Option may be exercised at any time or from time to time
during the term of the Option as to any or all full shares which have
become exercisable in accordance with this Section, but not as to less
than one hundred shares of Stock unless the remaining shares of Stock
that are so exercisable are less than one hundred shares of Stock. The
Option Price is to be paid in full in cash upon the exercise of the
Option. The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the Option
until such shares of Stock have been issued or transferred to him upon
the exercise of his Option.
(c) An Option shall be exercised by written notice of exercise of
the Option, with respect to a specified number of shares of Stock,
delivered to the Company at its principal office, and by cash payment
to the Company at said office of the full amount of the Option Price
for such number of shares. In addition to, and prior to the issuance
of a certificate for shares pursuant to any Option exercise, the
Optionee shall pay to the Company in cash the full amount of any
Federal, state or local income or employment taxes required to be
withheld by the Company as a result of such exercise.
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(d) At the discretion of the Board, the Stock Option Agreement
may provide that an Option granted under the 1997 Plan may be
exercised with respect to a specified number of shares of Stock by
written notice of exercise to the Company stating that (i) the option
price for the shares and any withholding tax due thereon will be paid
to the Company directly by a broker-dealer designated by the Eligible
Director and irrevocable instructions to such effect have been
furnished by the Eligible Director to such broker-dealer, and (ii) an
advice from the broker-dealer confirming payment to the Company will
be promptly delivered to the Company. The exercise of any such option
shall be irrevocable at the time of notice to the Company; provided,
however, that the Company shall not be required to deliver
certificates for shares of Stock with respect to the exercise of the
option until the Company has confirmed the receipt of good and
sufficient funds in payment of the purchase price thereof.
5.5 Nontransferability of Option. Unless otherwise provided in the relevant
Stock Option Agreement, options may not be transferred by an Optionee otherwise
than by will or the laws of descent and distribution, or by a Qualified Domestic
Relations Order. Unless otherwise provided in the relevant Stock Option
Agreement, during the lifetime of an Optionee, his Option may be exercised only
by him (or by his guardian or legal representative, should one be appointed) or
by his spouse to whom the Option has been transferred pursuant to a Qualified
Domestic Relations Order. In the event of the death of an Optionee, any Option
held by him may be exercised by his legatee(s) or other distributee(s) or by his
personal representative(s).
ARTICLE VI
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof unless, in the opinion of counsel to the Company, there has
been compliance with all applicable legal requirements. An Option granted under
the 1997 Plan will provide that the Company's obligation to deliver shares of
Stock upon the exercise thereof may be conditioned upon the receipt by the
Company of a representation as to the investment intention of the holder thereof
in such form as the Company shall determine to be necessary or advisable solely
to comply with the provisions of the Securities Act of 1933, as amended, or any
other Federal, state or local securities laws. All certificates for shares of
Stock delivered under the 1997 Plan shall be subject to such stop transfer
orders and other restrictions as the Company may deem advisable under the rules,
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regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, any Federal, state or
local securities laws and applicable corporate law, and the Company may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
ARTICLE VII
TERMINATION, AMENDMENT AND MODIFICATION OF 1997 PLAN
The Board may at any time terminate the 1997 Plan, and may at any time and
from time to time and, in any respect amend or modify the 1997 Plan. The Board
may amend the terms of any award theretofore granted under the 1997 Plan;
provided, however, that subject to Section 4.1 hereof, no such amendment may be
made by the Board which in any material respect impairs the rights of the
participant without the participant's consent.
ARTICLE VIII
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the 1997 Plan shall neither affect any other stock option,
incentive or other compensation plans in effect for the Company or any of its
subsidiaries, nor shall the adoption of the 1997 Plan preclude the Company from
establishing any other forms of incentive or other compensation plan for
directors of the Company.
ARTICLE IX
MISCELLANEOUS
9.1 1997 Plan Binding on Successors. The 1997 Plan shall be binding upon
the successors and assigns of the Company.
9.2 Singular, Plural; Gender. Whenever used herein, nouns in the singular
shall include the plural, and the masculine pronoun shall include the feminine
gender.
9.3 Headings, etc., Not Part of 1997 Plan. Headings of articles and
Sections hereof are inserted for convenience and reference, and do not
constitute a part of the 1997 Plan.
As of May, 1998
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