EXHIBIT 10.5
NUTRACEUTICAL INTERNATIONAL CORPORATION
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
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1. Name and Purpose. This plan shall be called the Nutraceutical
International Corporation Non-Employee Director Stock Option Plan (the "Plan").
The Plan is intended to encourage stock ownership by Non-Employee Directors (as
defined below) of Nutraceutical International Corporation, a Delaware
corporation (the "Company"), to provide such directors with an additional
incentive to manage the Company effectively and to contribute to its success,
and to provide a form of compensation which will attract and retain highly
qualified individuals as members of the Board of Directors of the Company.
2. Effective Date and Term of the Plan. The Plan shall become effective
on the date of the consummation of the initial public offering of the Company's
Common Stock, par value $.01 per share (the "Effective Date"). Options may not
be granted under the Plan after the tenth (10th) anniversary of the Effective
Date (the "Term"); provided, however, that all options outstanding as of that
date shall remain or become exercisable pursuant to their terms and the terms of
the Plan.
3. Administration. The Plan shall initially be administered by the Board
of Directors of the Company (the "Board"). The Board shall delegate the
administration of the Plan to a committee of the Board (the "Committee") in the
event such a committee is established by the Board for such purpose and that
committee is composed solely of two or more "Non-Employee Directors" (as such
term is defined under Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")). Each member of the Committee shall be eligible
to participate in the Plan; however, grants made to a member of the Committee
must be approved by the full Board with such member abstaining. References
herein to the Committee shall be deemed to refer to the Board in the event that
the administration of the Plan has not been delegated to the Committee.
The Committee may, from time to time, establish such regulations,
provisions and procedures, within the terms of the Plan, as in the opinion of
its members may be advisable in the administration of the Plan. A majority of
the Committee shall constitute a quorum, and the acts of a majority of a quorum
at any meeting, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted pursuant to the Plan shall be final and
binding upon the Company and any optionee. No member of the Board of Directors
of the Company or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any option granted pursuant
thereto.
4. Stock Available for Options. Subject to the adjustments as provided in
Subsection 7(f), the aggregate number of shares of Common Stock, par value $.01
per share, of the Company (the "Common Stock") reserved for purposes of the Plan
shall be 150,000 shares of authorized and unissued shares or issued shares
reacquired by the Company (the "Shares").
Determinations as to the number of Shares that remain available for issuance
under the Plan shall be made in accordance with such rules and procedures as the
Committee shall determine from time to time. If any outstanding option under
the Plan expires or is terminated for any reason before the end of the Term of
the Plan, the shares allocable to the unexercised portion of such option shall
become available for the grant of other options under the Plan. No shares
delivered to the Company in full or partial payment upon exercise of an option
pursuant to Subsection 7(c) or in full or partial payment of any withholding tax
liability permitted under Section 10 shall become available for the grant of
other options under the Plan.
5. Participation. Subject to the limitations contained in this Section 5,
any director of the Company who is not a contractual nor common law employee of
the Company or any of its subsidiaries (a "Non-Employee Director") will be
eligible to be granted options to purchase shares of the issued or issuable
Common Stock in accordance and consistent with the terms and conditions of the
Plan. An optionee may hold more than one option, but only on the terms and
subject to the restrictions hereafter set forth. Except as provided herein,
terms and conditions of options granted to a director at any given time need not
be the same for any other grant of options.
6. Option Grants.
(a) Discretionary Grants. The Committee shall be authorized to
determine from time to time the directors (among the Non-Employee
Directors) to be granted options, the number of shares of Common Stock
subject to such options, and the terms and conditions of the options to be
granted. All options granted under this Subsection (a) must be approved by
either the Board or the Committee prior to such grant.
(b) Non-Statutory Stock Options. All options granted under the Plan
shall be non-statutory options not intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). Each option
granted under the Plan shall provide that such option will not be treated
as an "incentive stock option," as that term is defined in Section 422(b)
of the Code.
7. Terms and Conditions of Options of the Plan. Options granted under
this Plan shall be evidenced by agreements in such form as the Committee shall
from time to time approve, which agreements shall comply with and be subject to
the following conditions:
(a) Term of Options. The term of each option shall be for a period of
not greater than ten (10) years from the date of grant of the option.
(b) Option Price. The exercise price of each option shall be equal to
one hundred percent (100%) of the Fair Market Value of the shares of Common
Stock on the date of the grant of the option. If the shares are traded in
the over-the-counter market, the Fair Market Value per share shall be the
closing price on the national market list as quoted in the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") on
the day the option is granted or if no sale of shares is reflected in
Nasdaq on that day, on the next
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preceding day on which there was a sale of shares reflected in Nasdaq. If
the shares are not traded in the over-the-counter market but are listed
upon an established stock exchange or exchanges, such Fair Market Value
shall be deemed to be the closing price of the shares on such stock
exchange or exchanges on the day the option is granted or if no sale of the
shares shall have been made on any stock exchange on that day, on the next
preceding day on which there was a sale of the shares.
(c) Medium of Payment. The option price shall be payable to the
Company either (i) in United States dollars in cash or by check, bank
draft, or money order payable to the order of the Company or (ii) if
permitted by the Board, through the delivery of shares of the Common Stock
with a Fair Market Value on the date of the exercise equal to the option
price, provided such shares are utilized as payment to acquire at least 100
shares of Common Stock, or (iii) by a combination of (i) and (ii) above.
Fair Market Value will be determined in the manner specified in Subsection
7(b) except as to the date of determination.
(d) Exercise of Options. Except as provided herein, the Committee
shall have the authority to determine, at the time of grant of each option
pursuant to Subsection 6(a), the times at which an option may be exercised
and any conditions precedent to the exercise of an option. An option shall
be exercisable upon written notice to the Chief Financial Officer of the
Company, as to any or all shares covered by the option, until its
termination or expiration in accordance with its terms or the provisions of
the Plan. Notwithstanding the foregoing, an option shall not at any time
be exercisable with respect to less than 100 shares unless the remaining
shares covered by an option are less than 100 shares. The purchase price
of the shares purchased pursuant to an option shall be paid in full upon
delivery to the optionee of certificates for such shares. Exercise by an
optionee's heir, personal representative or permitted transferee shall be
accompanied by evidence of his or her authority to act, in a form
reasonably satisfactory to the Company.
(e) Termination of Service as Director.
(i) Termination of Service for any Reason Other than Death or
Permanent Disability. In the event an optionee shall cease to serve
the Company as a director for any reason other than such optionee's
death or Permanent Disability, each option held by such optionee
shall, to the extent rights to purchase shares under the option have
become vested at the time such optionee ceases to serve as a director,
remain exercisable, in whole or in part, by the optionee, subject to
prior expiration according to its terms and other limitations imposed
by the Plan, for a period of one (1) year following the optionee's
cessation of service as a director of the Company. If the optionee
dies after such cessation of service, the optionee's options shall be
exercisable in accordance with Subsection 7(e)(ii) hereof.
(ii) Termination of Service for Death or Permanent Disability.
If an optionee ceases to be a director by reason of death or Permanent
Disability, each option held by such optionee shall immediately become
exercisable and shall remain
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exercisable, in whole or in part, by (in the case of Permanent
Disability) the optionee or the optionee's guardian or attorney-in-
fact or (in the case of death) the personal representative of the
optionee's estate or by any person or persons who have acquired the
option directly from the optionee during the shorter of the following
periods: (i) the term of the option, or (ii) a period of two (2) years
from the death or Permanent Disability of such optionee. If an
optionee dies or a Permanent Disability occurs during the extended
exercise period following cessation of service specified in Subsection
7(e)(i) above, such option may be exercised any time within the longer
of such extended period or one (1) year after death or Permanent
Disability, subject to the prior expiration of the term of the option.
For purposes of this Subsection 7(e)(ii), "Permanent Disability" shall
mean a determination by the Social Security Administration or any
similar successor agency that an optionee is "permanently disabled,"
and the date on which a Permanent Disability is deemed to have
occurred shall be the date on which such determination by such agency
shall have been made.
(f) Adjustment in Shares Covered by Option. The number of shares
covered by each outstanding option, and the purchase price per share
thereof, shall be proportionately adjusted for any increase or decrease in
the number of issued and outstanding shares resulting from a split in or
combination of shares or the payment of a stock dividend on the shares or
any other increase or decrease in the number of such shares effected
without receipt of consideration by the Company.
If the Company shall be the surviving corporation in any merger or
consolidation or if the Company is merged into a wholly-owned subsidiary
solely for purposes of changing the Company's state of incorporation, each
outstanding option shall pertain to and apply to the securities to which a
holder of the number of shares subject to the option would have been
entitled to receive in such transaction.
In the event of a Change in Control, only if provided in the option
agreement, any option awarded under this Plan to the extent not previously
exercisable shall immediately become fully exercisable. The Committee in
its sole discretion may direct the Company to cash out all outstanding
options on the basis of the Change in Control Price as of the date a Change
in Control occurs or such other date as the Committee may determine prior
to the Change in Control. For purposes of this Plan, a "Change in Control"
means the occurrence of any of the following: (i) when any "person" as
defined in Section 3(a)(9) of the Exchange Act and as used in Sections
13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of
the Exchange Act but excluding the Company and any subsidiary, any of the
Company's existing stockholders prior to the Effective Date and any
employee benefit plan sponsored or maintained by the Company or any
subsidiary (including any trustee of such plan acting as trustee), directly
or indirectly, becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act, as amended from time to time), after
the Effective Date, of securities of the Company representing 20 percent or
more of the combined voting power of the Company's then outstanding
securities; (ii) when, during any period of 24 consecutive months during
the existence of the Plan, the individuals who, at the beginning
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of such period, constitute the Board of Directors of the Company (the
"Incumbent Directors") cease for any reason other than death to constitute
at least a majority thereof; provided, however, that a director who was not
a director at the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified as Incumbent
Directors either actually (because they were directors at the beginning of
such 24 month period) or by prior operation of this provision; or (iii) the
approval by the stockholders of the Company of a transaction involving the
acquisition of the Company by an entity other than the Company or a
subsidiary through purchase of assets, by merger, or otherwise. For
purposes of this Plan, "Change in Control Price" means the highest price
per share of Common Stock paid in any transaction reported on the Nasdaq
National Market or paid or offered in any bona fide transaction related to
a Change in Control at any time during the 60-day period immediately
preceding the occurrence of the Change in Control, in each case as
determined by the Committee.
In the event of a change in the shares as presently constituted, which
is limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par value,
the shares resulting from any such change shall be deemed to be the shares
within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Any such adjustment may provide for the elimination of any fractional share
which might otherwise become subject to an option.
Except as expressly provided in this Subsection 7(f), the optionee
shall have no rights by reason of any split or combination of shares of
stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class
or by reason of any dissolution, liquidation, merger, or consolidation or
spinoff of assets or stock of another corporation, and any issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or assets.
(g) Rights of a Stockholder. An optionee shall have no rights as a
stockholder with respect to any shares covered by his or her option until
the date on which the optionee becomes the holder of record of such shares.
No adjustment shall be made for dividends, distributions, or other rights
for which the record date is prior to the date on which he or she shall
have become the holder of record thereof, except as provided in Subsection
7(f).
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(h) Postponement of Delivery of Shares and Representations. The
Company, in its discretion, may postpone the issuance and/or delivery of
shares upon any exercise of an option until completion of the registration
or other qualification of such shares under any state and/or federal law,
rule or regulation as the Company may consider appropriate, and may require
any person exercising an option to make such representations, including a
representation that it is the optionee's intention to acquire shares for
investment and not with a view to distribution thereof, and furnish such
information as it may consider appropriate in connection with the issuance
or delivery of the shares in compliance with applicable laws, rules, and
regulations. In such event no shares shall be issued to such holder unless
and until the Company is satisfied with the accuracy of any such
representations.
(i) Transferability. If provided in the option agreement, the options
granted pursuant to the Plan may be transferable by a Non-Employee
Director. The Committee shall have the sole discretion to determine to
what extent, if any, the options granted pursuant to the Plan are
transferable by a Non-Employee Director.
(j) Other Provisions. The option agreements authorized under the Plan
shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the option, as the Committee shall deem
advisable.
8. Adjustments in Shares Available for Options. The adjustments in
number and kind of shares and the substitution of shares, affecting outstanding
options in accordance with Subsection 7(f) hereof, shall also apply to the
number and kind of shares issuable upon the exercise of options to be granted
pursuant to Section 6 and the number and kind of shares reserved for issuance
pursuant to the Plan, but not yet covered by options.
9. Amendment of the Plan. The Board, insofar as permitted by law, shall
have the right from time to time, with respect to any shares at the time not
subject to options, to suspend or discontinue the Plan or revise or amend it in
any respect whatsoever. So long as the Common Stock is eligible for trading on
the Nasdaq National Market, the Board shall obtain stockholder approval for
those revisions or amendments of the Plan required to be so approved pursuant to
the By-laws of the National Association of Securities Dealers. If the Plan is
amended so that the exemption provided by Rule 16b-3 as a result of the Plan
being approved by the stockholders of the Company is no longer available for
options granted under Subsections 6(b) or 6(c) hereof, all options subsequently
granted thereunder must be approved by either the Board or the Committee prior
to such grant.
10. Withholding of Taxes. The Company shall have the right to deduct from
any payment to be made pursuant to this Plan, or to otherwise require, prior to
the issuance or delivery of any shares of Common Stock, payment by the optionee
of any federal, state, or local taxes required by law to be withheld. Unless
otherwise prohibited by the Committee, an optionee may satisfy any such
withholding tax obligation by any of the following means or by a combination of
such means:
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(a) tendering a cash payment;
(b) authorizing the Company to withhold from the shares otherwise
issuable to the optionee a number of shares having a Fair Market Value as
of the "Tax Date," less than or equal to the amount of withholding tax
obligation; or
(c) delivering to the Company unencumbered shares owned by the
optionee having a Fair Market Value, as of the Tax Date, less than or equal
to the amount of the withholding tax obligation.
The "Tax Date" shall be the date that the amount of tax to be withheld is
determined. Fair Market Value shall be determined in the manner specified in
Subsection 7(b), except as to the date of determination. An optionee's election
to pay the withholding tax obligation by either of (b) or (c) above shall be
irrevocable, may be disapproved by the Committee, and must be made either six
(6) months prior to the Tax Date or during the period beginning on the third
business day following the date of release of the Company's quarterly or annual
summary statement of sales and earnings and ending on the twelfth business day
following such date.
11. Right of Board of Directors or Stockholders to Terminate Director's
Service. Nothing in this Plan or in the grant of any option hereunder shall in
any way limit or affect the right of the Board of Directors or the stockholders
of the Company to remove any director or otherwise terminate his or her service
as a director, pursuant to the law, the Restated Certificate of Incorporation,
or Amended and Restated By-laws of the Company.
12. Application of Funds. The proceeds received by the Company from the
sale of stock pursuant to options will be used for general corporate purposes.
13. No Obligation to Exercise Option. The granting of an option shall
impose no obligation on the optionee to exercise such option.
14. Construction. This Plan shall be construed under the laws of the
State of Delaware.
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