Exhibit 4
ELITE PHARMACEUTICALS, INC.
2004 STOCK OPTION PLAN
(Effective as of June 22, 2004)
1. PURPOSE.
The purposes of this 2004 Stock Option Plan (the "PLAN") are to induce
certain individuals to remain in the employ or service of Elite Pharmaceuticals,
Inc. (the "COMPANY") and its present and future subsidiary corporations (each a
"SUBSIDIARY"), as defined in Section 425(f) of the Internal Revenue Code of
1986, as amended (the "CODE"), to attract new individuals to enter into such
employment and service and to encourage such individuals to secure or increase
on reasonable terms their stock ownership in the Company. The Board of Directors
of the Company (the "BOARD") believes that the granting of stock options (the
"OPTIONS") under the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company and aid in
securing its continued growth and financial success. Options will be either (a)
"incentive stock options" (which term, when used herein, shall have the meaning
ascribed thereto by the provisions of Section 422 (b) of the Code) or (b)
options which are not incentive stock options ("non-incentive stock options"),
as determined at the time of the grant thereof by the Administrator referred to
in Section 3(A) hereof.
2. SHARES SUBJECT TO PLAN.
Options may be granted to purchase up to One Million Five Hundred Thousand
(1,500,000) shares of the common stock, par value $0.01 per share (the "COMMON
STOCK") of the Company. Of the Options to purchase up to One Million Five
Hundred Thousand (1,500,000) then shall be shares of Common Stock, Options to
purchase up to Four Hundred Three Thousand Fifty (403,050) shares shall be
initially reserved for grant of options to holders of options outstanding on the
effectiveness of this Plan of a like amount at the discretion of the Board or
Committee subject to such holder's surrender of his/her outstanding options.
3. ADMINISTRATION.
(A) The Plan shall be administered by either the Board or, at the
option of the Board, a stock option committee (the "COMMITTEE"), which, if
appointed, shall consist of two or more members of the Board, both or all of
whom shall be "disinterested persons" within the meaning of Rule 16b-3(c)(2)(i)
promulgated under Section 16(b) of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT"). The Committee, if appointed, shall be appointed annually by the
Board, which may at any time and from time to time remove any member or members
of the Committee, with or without cause, appoint additional members to the
Committee and fill vacancies, however caused, in the Committee. A majority of
the members of the Committee shall constitute a quorum. All determinations of
the Committee shall be made by a majority of its members present at a meeting
duly called and held. Any decision or determination of the Committee reduced to
writing and signed by all of the members of the Committee shall be fully as
effective as if it had been made at a meeting duly called and held. The
Committee, or if a Committee has not been appointed, the Board, in its capacity
as administrator of the Plan, is hereinafter referred to as the "ADMINISTRATOR".
(B) Subject to the express provisions of the Plan, the Administrator
shall have complete authority, in its discretion, to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the terms and provisions of the respective option agreements or certificates
(which need not be identical), to determine the individuals (each a
"PARTICIPANT") to whom and the times and the prices at which Options shall be
granted, the periods during which each Option shall be exercisable, the number
of shares of the Common Stock to be subject to each Option and whether such
Option shall be an incentive stock option or a non-incentive stock option and to
make all other determinations necessary or advisable for the administration of
the Plan. In making such determinations, the Administrator may take into account
the nature of the services rendered by the respective Participants, their
present and potential contributions to the success of the Company and the
Subsidiaries and such other factors as the Administrator in its discretion shall
deem relevant. The Administrator's determination on the matters referred to in
this Section 3(B) shall be conclusive. Any dispute or disagreement which may
arise under or as a result of or with respect to any Option shall be determined
by the Administrator, in its sole discretion, and any interpretations by the
Administrator of the terms of any Option shall be final, binding and conclusive.
4. ELIGIBILITY.
An Option may be granted to (1) employees and consultants of the
Company or a Subsidiary, (2) directors of the Company or a Subsidiary who are
not employees of the Company or a Subsidiary ("OUTSIDE DIRECTORS"), and (3)
employees and consultants of a corporation which has been acquired by the
Company or a Subsidiary as provided in Section 17.
5. OPTION PRICES.
(A) Except as otherwise provided in Section 17 hereof, the initial per
share option price of any Option which is an incentive stock option shall not be
less than the fair market value of a share of the Common Stock on the date of
grant; provided, however, that, in the case of a Participant who owns more than
10% of the total combined voting power of the Common Stock at the time an Option
which is an incentive stock option is granted to him, the initial per share
option price shall not be less than 110% of the fair market value of a share of
the Common Stock on the date of grant.
(B) Except as otherwise provided in Section 17 hereof, the initial per
share option price of any Option which is a non-incentive stock option shall not
be less than 85% of the fair market value of a share of the Common Stock on the
date of grant.
(C) For all purposes of this Plan, the fair market value of a share of
the Common Stock on any date shall be equal to, if the Common Stock is listed on
a national securities exchange or traded on the NASDAQ National Market System,
the closing sale price of a share of the Common Stock on such date or, if there
is no sale of the Common Stock on such date, the average of the bid and asked
prices on such exchange or system at the close of trading on such date or, if
the shares of the Common Stock are not listed on a national securities exchange
or such system on such date, the last per share sales price of Common Stock on
the market or system of the NASD on which the Common Stock is then traded or
listed (the "RELEVANT MARKET SYSTEM") during the three business days ending on
the date of grant or exercise as reported in the market report for the Relevant
Market System or if no sale has been reported for such period, the higher of the
(i) closing bid price on the Relevant Market System on the date of grant or
exercise or (ii) the average of the closing bid prices on the Relevant Market
System for the three business days immediately preceding the date of grant or
exercise, in each case as reported in the Market Report for the Relevant Market
System or, if the shares of the Common Stock are not traded or listed on a
market or system of the NASD, as shall be determined in good faith by the
Administrator.
6. OPTION TERM.
Options shall be granted for such term as the Administrator shall
determine, not in excess of ten years from the date of the granting thereof;
provided, however, that, except as otherwise provided in Section 17 hereof, in
the case of a Participant who owns more than 10% of the total combined voting
power of the Common Stock at the time an Option which is an incentive stock
option is granted to him, the term with respect to such Option shall not be in
excess of five years from the date of the granting thereof; and provided,
further, however, that the term of an Option granted to an Outside Director
shall be ten years form the date of the granting thereof.
7. LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTIONS GRANTED.
Except as otherwise provided in Section 17 hereof, the aggregate fair
market value of the shares of the Common Stock for which any Participant may be
granted incentive stock options which are exercisable for the first time in any
calendar year (whether under the terms of the Plan or any other stock option
plan of the Company) shall not exceed $100,000.
8. EXERCISE OF OPTIONS.
(A) Except as otherwise provided in Section 17 hereof and except as
otherwise determined by the Administrator at the time of the grant thereof, a
Participant may (i) during the period commencing on the first anniversary of the
date of the granting of an Option to him and ending on the day preceding the
second anniversary of such date, exercise such Option with respect to one-third
of the shares granted thereby, (ii) during the period commencing on such second
anniversary and ending on the day preceding the third anniversary of the date of
the granting of such Option, exercise such Option with respect to such number of
shares as when added to the number of
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shares previously purchased under the Option does not exceed two-thirds of the
shares granted thereby, and (iii) during the period commencing on such third
anniversary, exercise such Option with respect to all of the shares granted
thereby.
(B) To the extent exercisable, an Option may be exercised either in
whole at any time or in part form time to time.
(C) An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of Common Stock
and payment of the option price to the Company for the number of shares of
Common Stock specified in any one or a combination of the following: in cash, by
cashless exercise, or in kind by the delivery of shares of the Common Stock
having a fair market value on the date of delivery equal to the portion of the
option price so paid; provided, further, however, that, subject to the
requirements of Regulation T promulgated under the Exchange Act, the
Administrator may implement procedures to allow a broker chosen by a Participant
to make payment of all or any portion of the option price payable upon the
exercise of an Option and receive, on behalf of such Participant, all or any
portion of the shares of the Common Stock issuable upon such exercise.
(D) The Administrator may, in its discretion, permit any Option to be
exercised, in whole or in part, prior to the time when it would otherwise be
exercisable.
9. TRANSFERABILITY.
No Option shall be assignable or transferable except by will and/or by
the laws of descent and distribution and, during the life of any Participant,
each Option granted to him may be exercised only by him.
10. TERMINATION OF SERVICE.
(A) Except as otherwise provided by the Administrator, in the event
that, other than by reason of death or disability (as such term is defined in
Section 22(e)(3) of the Code), a Participant leaves the employ or service of the
Company and the Subsidiaries or, in the case of an Outside Director, does not
stand for re-election or is not reelected, whether voluntarily or otherwise,
each Option theretofore granted to him shall be exercisable to the extent
exercisable immediately prior to the date of termination of employment or
service (or the date the Director does not stand for reelection or is not
reelected) within the period ending the earlier to occur of (i) the expiration
of the period of three months after the date of such termination of services or
failure to stand for or be reelected a Director and (ii) the date specified in
such Option.
(B) In the event a Participant's employment or service (including the
service of an Outside Director) with the Company and the Subsidiaries terminates
by reason of his death, each Option theretofore granted to him shall become
immediately exercisable in full and shall terminate upon the earlier to occur of
(i) the expiration of the period of one year after the date of such
Participant's death and (ii) the date specified in such Option.
(C) Except as otherwise provided by the Administrator, in the event that a
Participant leaves the employ or service of the Company and the Subsidiaries by
reason of his or her disability (as such term is defined in Section 22(e)(3) of
the Code), each Option theretofore granted to him shall become immediately
exercisable in full and shall terminate upon the earlier to occur of (i) the
expiration of the period of three months after the date of such termination,
resignation or failure to stand for election or to be reelected and (ii) the
date specified in such Option.
11. ADJUSTMENT OF NUMBER OF SHARES.
(A) In the event that a dividend shall be declared upon the Common
Stock payable in shares of the Common Stock, the number of shares of the Common
Stock then subject to any Option and the number of shares of the Common Stock
which may be purchased upon the exercise of Options granted under the Plan but
not yet covered by an Option shall be adjusted by adding to each share the
number of shares which would be distributable thereon if such shares had been
outstanding on the date fixed for determining the stockholders entitled to
receive such stock dividend. In the event that the outstanding shares of the
Common Stock shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, sale of assets, merger or consolidation in which the Company is the
surviving corporation, then, there shall be substituted for each share of the
Common Stock then subject to any Option and for each share of the Common Stock
which may be
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purchased upon the exercise of Options granted under the Plan but not yet
covered by an Option, the number and kind of shares of stock or other securities
into which each outstanding share of the Common Stock shall be so changed or for
which each such share shall be exchanged.
(B) In the event that there shall be any change, other than as
specified in Section 11(A) hereof, in the number or kind of outstanding shares
of the Common Stock, or of any stock or other securities into which the Common
Stock, shall have been changed, or for which it shall have been exchanged, then,
if the Administrator shall, in its sole discretion, determine that such change
equitably requires an adjustment in the number or kind of shares then subject to
any Option and the number or kind of shares available for issuance in accordance
with the provisions of the Plan but not yet covered by an Option, such
adjustment shall be made by the Administrator and shall be effective and binding
for all purposes of the Plan and of each Option.
(C) In the case or any substitution or adjustment in accordance with
the provisions of this Section 11, the option price in each Option for each
share covered thereby prior to such substitution or adjustment shall be the
option price for all shares of stock or other securities which shall have been
substituted for such share or to which such share shall have been adjusted in
accordance with the provisions of this Section 11.
(D) No adjustment or substitution provided for in this Section 11 shall
require the Company to sell a fractional share under any Option.
(E) In the event of the dissolution or liquidation of the Company, the
Board, in its discretion, may accelerate the exercisability of each Option
and/or terminate the same within a reasonable time thereafter.
12. PURCHASE FOR INVESTMENT, WITHHOLDING AND WAIVERS.
(A) Unless the delivery of the shares upon the exercise of an Option by
a Participant shall be registered under the Securities Act of 1933, as amended,
such Participant shall, as a condition of the Company's obligation to deliver
such shares, be required to give a representation in writing that he is
acquiring such shares for his own account as an investment and not with a view
to, or for sale in connection with, the distribution of any thereof.
(B) In the event of the death of a Participant, an additional condition
of exercising any Option shall be the delivery to the Company of such tax
waivers and other documents as the Administrator shall determine.
(C) An additional condition of exercising any non-incentive stock
option shall be the entry by the Participant into such arrangements with the
Company with respect to withholding as the Administrator shall determine;
provided, however, that such Participant may direct the Company to satisfy all
or a portion of such withholding obligation by withholding from the shares of
the Common Stock issuable to him on such exercise shares of the Common Stock
having a fair market value equal to the portion of the withholding obligation so
satisfied.
13. DECLINING MARKET PRICE.
In the event the fair market value of the Common Stock declines below
the option price set forth in any Option, the Administrator may, subject to the
approval of the Board, at any time, adjust, reduce, cancel and re-grant any
unexercised Option or take any similar action it deems to be for the benefit of
the Participant in light of the declining fair market value of the Common Stock.
14. NO STOCKHOLDER STATUS; NO RESTRICTIONS ON CORPORATE ACTS; NO EMPLOYMENT
RIGHT.
(A) Neither any Participant nor his legal representatives, legatees or
distributees shall be or be deemed to be the holder of any share of the Common
Stock covered by an Option unless and until a certificate for such share has
been issued. Upon payment of the purchase price therefore, a share issued upon
exercise of an Option shall be fully paid and non-assessable.
(B) Neither the existence of the Plan nor any Option shall in any way
affect the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any
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issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or 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.
(C) Neither the existence of the Plan nor the grant of any Option shall
require the Company or any Subsidiary to continue any Participant in the employ
or service of the Company or such Subsidiary
15. TERMINATION AND AMENDMENT OF THE PLAN.
The Board may at any time terminate the Plan or make such modifications
of the Plan as it shall deem advisable; provided, however, that the Board may
not, without further approval of the holders of the shares of the Common Stock,
increase the number of shares of the Common Stock as to which Options may be
granted under the Plan (as adjusted in accordance with the provisions of Section
11 hereof), or change the class of persons eligible to participate in the Plan,
or change the manner of determining the Option prices, or extend the period
during which an Option may be granted or exercised. Except as otherwise provided
in Section 16 hereof, no termination or amendment of the Plan may, without the
consent of the Participant to whom any Option shall theretofore have been
granted, adversely affect the rights of such Participant under such Option.
16. EXPIRATION AND TERMINATION OF THE PLAN.
The Plan shall terminate on March 1, 2014 or at such earlier time as
the Board may determine. Options may be granted under the Plan at any time and
from time to time prior to its termination. Any Option outstanding under the
Plan at the time of termination of the Plan shall remain in effect until such
Option shall have been exercised or shall have expired in accordance with its
terms.
17. OPTIONS GRANTED IN CONNECTION WITH ACQUISITIONS.
The Administrator may determine, in connection with the acquisition by the
Company or a Subsidiary by way of exchange or purchase of stock, purchase of
assets, merger or reverse merger or otherwise of another corporation which will
become a Subsidiary or division of the Company (such corporation being hereafter
referred to as an "ACQUIRED SUBSIDIARY"), that Options may be granted hereunder
to employees or consultants and other personnel of an Acquired Subsidiary in
exchange for then outstanding options to purchase securities of the Acquired
Subsidiary. The Administrator, at its discretion shall determine as to such
Options, the option prices, whether they may be exercisable immediately or at
any time or times either in whole or in part, and such other provisions not
inconsistent with the Plan, or the requirements set forth in Section 15 hereof
that certain amendments to the Plan be approved by the stockholders of the
Company.
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