Suburban Ostomy Supply Co., Inc.
Stock Option Plan
1. Purpose of the Plan.
This stock option plan (the "Plan") is intended to encourage ownership
of the stock of Suburban Ostomy Supply Co., Inc., (the "Company") by employees
of the Company and its subsidiaries, to induce qualified personnel to enter and
remain in the employ of the Company or its subsidiaries and otherwise to provide
additional incentive for optionees to promote the success of its business.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued
or Treasury shares of the common stock, no par value, of the Company ("Common
Stock") for which options may be granted under the Plan shall not exceed 44.44
shares (or 4,444 shares after giving effect to a 100 for 1 stock split to be
effected by the Company on or about July 3, 1995), subject to adjustment as
provided in Section 11 hereof.
(b) If an option granted hereunder shall expire or terminate
for any reason without having vested fully or having been exercised in full, the
unvested and/or unpurchased shares subject thereto shall again be available for
subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under
the Plan may be subject to such restrictions on transfer, repurchase rights or
other restrictions as shall be determined by the Committee.
3. Administration of the Plan. The Plan shall be administered by a
committee (the "Committee") consisting of two or more members of the Company's
Board of Directors (the "Board"), each of whom shall be, at any time during
which the Company has a class of equity securities registered under the
Securities Exchange Act of 1934, as amended (the "Act") a "disinterested person"
as defined from time to time in Rule 16b-3 promulgated under the Act. The
"Committee" may be the Compensation Committee of the Board. At any time during
which the Company has a class of equity securities registered under the Act, as
to all persons who are members of the Board or officers of the Company within
the meaning of Section 16(b) of the Act, the Committee shall from time to time
determine to whom options or other rights shall be granted under the Plan,
whether options granted shall be incentive stock options or non-qualified stock
options, the terms of the options or other rights, and the number of shares
which may be granted under options. The Committee shall report to the Board the
names of individuals to whom stock
or options or other rights are to be granted, the number of shares covered and
the terms and conditions of each grant. During any time that the Company does
not have a class of equity securities registered under the Act as to all
persons, and at any time during which the Company has a class of equity
securities registered under the Act as to persons other than members of the
Board or officers, the determinations described in this paragraph may be made by
the Committee or by the Board, as the Board shall direct in its discretion, and
references in the Plan to the Committee shall be understood to refer to the
Board in any such case.
The grant of options and other rights shall be made by action of the
Board at a meeting at which a quorum of its members is present, or by unanimous
written consent of all its members.
The Board of Directors may from time to time appoint a member or
members of the Committee in substitution for or in addition to the member or
members then in office and may fill vacancies on the Committee however caused.
The Committee shall choose one of its members as Chairman and shall hold
meetings at such times and places as it shall deem advisable. A majority of the
members of the Committee shall constitute a quorum and any action may be taken
by a majority of those present and voting at any meeting. Any action may also be
taken without the necessity of a meeting by a written instrument signed by a
majority of the Committee. The decision of the Committee as to all questions of
interpretation and application of the Plan shall be final, binding and
conclusive on all persons. The Committee shall have the authority to adopt,
amend and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option agreement granted hereunder in the manner and to the extent it shall
deem expedient to carry the Plan into effect and shall be the sole and final
judge of such expediency. No Committee member shall be liable for any action or
determination made in good faith.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of
the Committee and may be designated as either incentive stock options meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Committee. The Plan shall be administered by the Committee in
such manner to permit options to qualify as incentive stock options under the
Code.
The optionee must notify the Company promptly in the event that he
sells, transfers, exchanges or otherwise disposes of any shares of Common Stock
issued upon exercise of an incentive stock option before the later of (i) the
second anniversary of the date of grant of the incentive stock option, and (ii)
the first anniversary of the date the shares were issued upon his exercise of
the incentive stock option.
5. Eligibility.
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called "subsidiary" or "subsidiaries"), as defined in Section 424 of the
Code and the Treasury Regulations promulgated thereunder (the "Regulations").
Options designated as non-qualified options may be granted to directors,
consultants, officers or key employees of the Company or of any of its
subsidiaries.
In determining the eligibility of an individual to be granted an
option, as well as in determining the number of shares to be optioned to any
individual, the Committee shall take into account the position and
responsibilities of the individual being considered, the nature and value to the
Company or its subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the Company or its
subsidiaries, and such other factors as the Committee may deem relevant.
No option designated as an incentive stock option shall be granted to
any employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than ten (10%) of the
voting power or more than ten (10%) of the value of all classes of stock of the
Company or a parent or a subsidiary, unless the purchase price for the stock
under such option shall be at least 110% of its fair market value at the time
such option is granted and the option, by its terms, shall not be exercisable
more than five years from the date it is granted. In determining the stock
ownership under this paragraph, the provisions of Section 424(d) of the Code
shall be controlling. In determining the fair market value under this paragraph,
the provisions of Section 7 hereof shall apply.
6. Option Agreement.
Each option shall be evidenced by an option agreement (the "Agreement")
in such form as the Committee shall approve from time to time, specifying the
number of shares of Common Stock that may be purchased pursuant to the option,
the time or times at which the option shall become exercisable, the term of the
option and whether such option is intended to be an incentive stock option or a
non-qualified stock option, which Agreement shall be duly executed on behalf of
the Company and by the optionee to whom such option is granted. Such Agreement
shall comply with and be subject to the terms and conditions of the Plan. The
Agreement may contain such other terms, provisions and conditions which are not
inconsistent with the Plan as may be determined by the Committee, provided that
options designated as incentive stock options shall meet all of the conditions
for incentive stock options as defined in Section 422 of the Code. The date of
grant of an option shall be as determined by the Committee. More than one option
may be granted to an individual.
7. Option Price.
The option price or prices of shares of the Company's Common Stock for
options designated as non-qualified stock options shall be the fair market value
of such Common Stock as determined by the Committee. The option price or prices
of shares of the Company's Common
Stock for incentive stock options shall be at least 100% of the fair market
value of such Common Stock at the time the option is granted as determined by
the Committee in accordance with the Regulations promulgated under Section 422
of the Code. If such shares are then listed on any national securities exchange,
the fair market value shall be the mean between the high and low sales prices,
if any, on the largest such exchange on the business day immediately preceding
the date of the grant of the option or, if none, shall be determined by taking a
weighted average of the means between the highest and lowest sales prices on the
nearest date before and the nearest date after the date of grant in accordance
with Treasury Regulations Section 25.2512-2. If the shares are not then listed
on any such exchange, the fair market value of such shares shall be the mean
between the high and low sales prices, if any, as reported in the Nasdaq
National Market ("Nasdaq") for the business day immediately preceding the date
of the grant of the option, or, if none, shall be determined by taking a
weighted average of the means between the highest and lowest sales on the
nearest date before and the nearest date after the date of grant in accordance
with Treasury Regulations Section 25.2512-2. If the shares are not then either
listed on any such exchange or quoted in Nasdaq, the fair market value shall be
the mean between the average of the "Bid" and the average of the "Ask" prices,
if any, as reported in the National Daily Quotation Service for the business day
immediately preceding the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant in accordance with Treasury Regulations Section 25.2512-2. If the
fair market value cannot be determined under the preceding three sentences, it
shall be determined in good faith by the Committee.
8. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may be exercised by notice
to the Company as specified in sub-paragraph (b) below, and payment therefor may
be made by (i) delivery of cash or a check payable to the order of the Company
in an amount equal to the exercise price of such options, (ii) delivery of
certificates registered in the name of the optionee or his personal
representative for shares of Common Stock legally and beneficially owned by the
optionee, fully vested and free of all liens, claims and encumbrances of every
kind and having a fair market value on the date of delivery equal in amount to
the exercise price of the options being exercised, such certificates to be duly
endorsed, or accompanied by stock powers duly endorsed, by the record holder of
the shares represented by such certificates, or (iii) any combination of (i) and
(ii), provided, however, that (x) payment of the exercise price pursuant to (ii)
above may be made only to the extent such payment does not result in a charge to
earnings for financial accounting purposes as determined by the Committee and
(y) the optionee may not make payment in shares of Common Stock that he acquired
upon the exercise of any incentive stock option, unless he has held the shares
until at least two (2) years after the date the incentive stock option was
granted and at least one (1) year after the date the incentive stock option was
exercised. The fair market value of any shares of the Company's Common Stock
which may be delivered upon exercise of an option shall be determined by the
Committee in accordance with Section 7 hereof. After the Company has a class of
equity securities registered under the Act, payment may also be made by delivery
of a properly executed exercise notice to the Company, together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
(b) To the extent that the right to purchase shares under an
option has accrued and is in effect, options may be exercised in full at one
time or in part from time to time, by giving written notice, signed by the
person or persons exercising the option, to the Clerk or Treasurer of the
Company, stating the number of shares with respect to which the option is being
exercised, accompanied by payment in full for such shares as provided in
subparagraph (a) above. Upon such exercise, delivery of a certificate for
paid-up non-assessable shares shall be made at the principal office of the
Company to the person or persons exercising the option at such time, during
ordinary business hours, as soon as possible and in no event more than ten (10)
business days from the date of receipt of the notice by the Company, or at such
time, place and manner as may be agreed upon by the Company and the person or
persons exercising the option.
9. Term of Options; Exercisability.
(a) Term.
(1) Each option shall expire not more than ten
(10) years from the date of the granting thereof, but shall be subject to
earlier termination as herein provided.
(2) Except as otherwise provided in the
Agreement, an option granted to any employee optionee who ceases to be an
employee of the Company or one of its subsidiaries shall terminate immediately
on the date such optionee ceases to be an employee of the Company or one of
its subsidiaries, or on the date on which the option expires by its terms,
whichever occurs first.
(3) The Committee shall have the authority to
extend the expiration date of any outstanding option in circumstances in
which it deems such action to be appropriate, provided that no such extension
shall extend the term of an option beyond the date on which the option would
have expired if no termination of the optionee's employment had occurred.
(b) Exercisability.
(1) Each option granted under the Plan shall be
exercisable at such time or times and during such period as shall be set forth
in the Agreement, subject to Section 11 hereof.
(2) Except as provided in the Agreement, an
option granted to an employee optionee who ceases to be an employee of the
Company or one of its
subsidiaries shall be exercisable only to the extent that the right to purchase
shares under such option has accrued
and is in effect on the date such optionee ceases to be an employee of the
Company or one of its subsidiaries.
(3) Subject to the provisions of Section 11,
the Committee shall have the authority to extend, accelerate or change,
but not in a manner adverse to the optionee, the vesting of any outstanding
option in circumstances in which it deems such action to be appropriate.
10. Transferability.
The right of any optionee to exercise any option granted to him or her
shall be assignable or transferable by such optionee to the extent permitted by
the Agreement evidencing such option.
11. Recapitalizations, Reorganizations and the Like.
(a) In the event that the outstanding shares of the Common
Stock of the Company 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 any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, or dividends payable in
capital stock, appropriate adjustment shall be made in the number and kind of
shares as to which options may be granted under the Plan and as to which
outstanding options or portions thereof then unexercised shall be exercisable,
to the end that the proportionate interest of the optionee shall be maintained
as before the occurrence of such event; such adjustment in outstanding options
shall be made without change in the total price applicable to the unexercised
portion of such options and with a corresponding adjustment in the option price
per share.
(b) In addition, in the case of any (i) sale or conveyance to
another entity of all or substantially all of the property and assets of the
Company, including without limitation by way of merger or consolidation, or (ii)
Change in Control (as hereinafter defined) of the Company, the purchaser(s) of
the Company's assets or stock may, in his, her or its discretion, deliver to the
optionee the same kind of consideration that is delivered to the shareholders of
the Company as a result of such sale, conveyance or Change in Control, or the
Committee may cancel all outstanding options in exchange for consideration in
cash or in kind which consideration in both cases shall be equal in value to the
value of those shares of stock or other securities the optionee would have
received had the option been exercised (to the extent then exercisable) and no
disposition of the shares acquired upon such exercise been made prior to such
sale, conveyance or Change in Control, less the option price therefor. Upon
receipt of such consideration by the optionee, his or her option shall
immediately terminate and be of no further force and effect. The value of the
stock or other securities the optionee would have received if the option had
been exercised shall be determined in good faith by the Committee of the
Company, and in the case of shares of the Common Stock of the Company, in
accordance with the provisions of Section 7 hereof. In addition, the
exercisability of all options shall accelerate upon such a sale, conveyance or
Change in Control. Upon such acceleration, any options or portion thereof
originally
designated as incentive stock options that no longer qualify as incentive stock
options under Section 422 of the Code as a result of such acceleration shall be
redesignated as non-qualified stock options. A "Change in Control" shall have
the same meaning as "Reorganization" in the Articles of Organization of the
Company, as in effect on July 3, 1995, provided that in no event shall a public
offering of the Company's Common Stock constitute a Change in Control.
(c) Upon dissolution or liquidation of the Company, all
options granted under this Plan shall terminate, but each optionee (if at such
time in the employ of or otherwise associated with the Company or any of its
subsidiaries) shall have the right, immediately prior to such dissolution or
liquidation, to exercise his or her option to the extent then exercisable.
(d) No fraction of a share shall be purchasable or deliverable
upon the exercise of any option, but in the event any adjustment hereunder of
the number of shares covered by the option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the nearest whole number
of shares.
12. No Special Employment Rights.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any subsidiary) or interfere in any
way with the right of the Company (or any subsidiary), subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. An authorized leave
of absence, or absence in military or government service, shall not constitute
termination of employment for purposes of the Plan.
13. Stock Appreciation Rights.
The Committee may grant stock appreciation rights ("SARs") in respect
of such number of shares of Common Stock as it shall determine, in its
discretion, and may grant SARs either separately or in connection with options,
as described in the following sentence. An SAR granted in connection with an
option may be exercised only to the extent of the surrender of the related
option, and to the extent of the exercise of the related option the SAR shall
terminate. Shares of Common Stock covered by an option that terminates upon the
exercise of a related SAR shall cease to be available under the Plan. The terms
and conditions of an SAR related to an option shall be contained in the
Agreement, and the terms of an SAR not related to any option shall be contained
in an SAR Agreement.
14. Withholding.
The Company's obligation to deliver shares upon the exercise of any
option granted under the Plan shall be subject to the option holder's
satisfaction of all applicable Federal, state and local income, excise,
employment and any other tax withholding requirements.
15. Special Bonus Grants.
In its discretion, the Committee may grant in connection with any
non-qualified stock option a special bonus in an amount not to exceed the lesser
of (i) the combined federal, state and local income tax liability incurred by
the optionee as a consequence of his acquisition of stock pursuant to the
exercise of the non-qualified stock option, or (ii) thirty percent (30%) of the
imputed income realized by the optionee on account of such exercise. Any such
special bonus shall be payable solely to federal, state and local taxing
authorities for the benefit of the optionee at such time or times as withholding
payments of income tax may be required. In the event that a non-qualified stock
option with respect to which a special bonus has been granted becomes
exercisable by the personal representative of the estate of the optionee, the
bonus shall be payable to or for the benefit of the estate in the same manner
and to the same extent as it would have been payable for the benefit of the
optionee had he survived to the date of exercise. A special bonus may be granted
simultaneously with a related non-qualified stock option or separately with
respect to an outstanding non-qualified stock option granted at an earlier date.
16. Tax Withholding.
To the extent required by law, the Company shall withhold or cause to
be withheld income and other taxes with respect to any income recognized by an
optionee by reason of the exercise or vesting of an option, and as a condition
to the receipt of any option the optionee shall agree that if the amount payable
to him by the Company in the ordinary course is insufficient to pay such taxes,
then he shall upon the request of the Company pay to the Company an amount
sufficient to satisfy its tax withholding obligations.
Without limiting the foregoing, the Committee may in its discretion
permit any optionee's withholding from the shares to be issued under the option
or by accepting delivery from the optionee of shares already owned by him. The
fair market value of the shares for such purposes shall be determined as set
forth in Section 7. An optionee may not make any such payment in the form of
shares of Common Stock acquired upon the exercise of an incentive stock option
until the shares have been held by him for at least two (2) years after the date
the incentive stock option was granted and at least one (1) year after the date
the incentive stock option was exercised. If payment of withholding taxes is
made in whole or in part in shares of Common Stock, the optionee shall deliver
to the Company certificates registered in his name representing shares of Common
Stock legally and beneficially owned by him, fully vested and free of all liens,
claims and encumbrances of every kind, duly endorsed or accompanied by stock
powers duly endorsed by the record holder of the shares represented by such
certificates.
17. Restrictions on Issue of Shares.
(a) Notwithstanding the provisions of Section 8, the Company
may delay the issuance of shares covered by the exercise of an option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such option
has been exercised are at the time of the issue of such shares effectively
registered or qualified as required under applicable Federal and state
securities acts now in force or as hereafter amended; or
(ii) Counsel for the Company shall have given an
opinion, which opinion shall not be unreasonably delayed, conditioned or
withheld, that such shares are exempt from registration and qualification
under applicable Federal and state securities acts now in force or as hereafter
amended.
(b) It is intended that all exercises of options shall be
effective, and the Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the Company
shall be under no obligation to qualify shares or to cause a registration
statement or a post-effective amendment to any registration statement to be
prepared for the purpose of covering the issue of shares in respect of which any
option may be exercised, except as otherwise agreed to by the Company in
writing.
18. Purchase for Investment; Rights of Holder on Subsequent
Registration.
Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933 (as
now in force or hereafter amended, the "Securities Act") the Company shall be
under no obligation to issue any shares covered by any option unless the person
who exercises such option, in whole or in part, shall give a written
representation and undertaking to the Company which is reasonably satisfactory
in form and scope to counsel for the Company and upon which, in the opinion of
such counsel, the Company may reasonably rely, that he or she is acquiring the
shares issued pursuant to such exercise of the option for his or her own account
as an investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the Securities Act, or any other applicable law, and that if
shares are issued without such registration, a legend to this effect may be
endorsed upon the securities so issued. In the event that the Company shall,
nevertheless, deem it necessary or desirable to register under the Securities
Act or other applicable statutes any shares with respect to which an option
shall have been exercised, or to qualify any such shares for exemption from the
Securities Act or other applicable statutes, then the Company may take such
action and may require from each optionee such information in writing for use in
any registration statement, supplementary registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for such
purpose and may require reasonable indemnity to the Company and its officers and
directors and controlling persons from such holder against all losses, claims,
damages and liabilities arising from such use of the information so furnished
and caused by any untrue statement of any material
fact therein or caused by the omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made.
19. Modification of Outstanding Options.
The Committee may authorize the amendment of any outstanding option
with the consent of the optionee when and subject to such conditions as are
deemed to be in the best interests of the Company and in accordance with the
purposes of this Plan.
20. Approval of Stockholders.
The Plan shall be subject to approval by the vote of stockholders
holding at least a majority of the voting stock of the Company present, or
represented, and entitled to vote at a duly held stockholders' meeting, or by
written consent of the stockholders as provided for under applicable state law,
within twelve (12) months after the adoption of the Plan by the Board of
Directors and shall take effect as of the date of adoption by the Board of
Directors upon such approval.
21. Prior Grant of Options.
The Committee may grant options under the Plan prior to such approval,
but any such option shall become effective as of the date of grant only upon
such approval and, accordingly, no such option may be exercisable prior to such
approval.
22. Termination and Amendment.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board.
The Board may at any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that except as
provided in this Section 22, the Board may not, without the approval of the
stockholders of the Company obtained in the manner stated in Section 20,
increase the maximum number of shares for which options may be granted or change
the designation of the class of persons eligible to receive options under the
Plan, or make any other change in the Plan which requires stockholder approval
under applicable law or regulations, including any approval requirement which is
a prerequisite for exemptive relief under Section 20 of the Act. The Committee
may grant options to persons subject to Section 16(b) of the Act after an
amendment to the Plan by the Board of Directors requiring stockholder approval
under Section 20, but any such option shall become effective as of the date of
grant only upon such approval and, accordingly, no such option may be
exerciseable prior to such approval.
23. Compliance with Rule 16b-3.
It is intended that the provisions of the Plan and any option granted
thereunder to a person subject to the reporting requirements of Section 16(a) of
the Act shall comply in all respects with the terms and conditions of Rule 16b-3
under the Act or any successor provisions. Any agreement granting options to a
person so subject shall contain such provisions as are necessary or appropriate
to assure such compliance. To the extent that any provision hereof is found not
to be in compliance with such Rule, such provision shall be deemed to be
modified so as to be in compliance with such Rule, or if such modification is
not possible, shall be deemed to be null and void, as it relates to a recipient
subject to Section 16(a) of the Act.
24. Reservation of Stock.
The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
25. Limitation of Rights in the Option Shares.
An optionee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the options except to the extent that the
option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
26. Notices.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.