THE ALGOS PHARMACEUTICAL CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Algos Pharmaceutical Corporation, a Delaware corporation, has
adopted the Algos Pharmaceutical Corporation 1996 Non-Employee Director Stock
Option Plan (the "Plan"), effective ___________ ___, 1996, for the benefit of
its eligible non-employee directors.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for non-employee directors
to further the growth, development and financial success of the Company by
personally benefiting through the ownership of options with respect to Company
stock which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
non-employee directors considered essential to the long range success of the
Company by offering them an opportunity to own options with respect to stock in
the Company which will reflect the growth, development and financial success of
the Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used in this Plan
they shall have the meaning specified below, unless the context clearly
indicates otherwise.
1.2 Board. "Board" shall mean the Board of Directors of the
Company.
1.3 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.4 Common Stock. "Common Stock" shall mean the common stock of
the Company, par value $0.01 per share.
1.5 Company. "Company" shall mean Algos Pharmaceutical
Corporation, Delaware corporation.
1.6 Corporate Transaction. "Corporate Transaction" shall mean any
of the following stockholder-approved transactions to which the Company is a
party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Company is incorporated, form a
holding company or effect a similar reorganization as to form whereupon
this Plan and all Options are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation
or dissolution of the Company in a transaction not covered by the
exceptions to clause (a), above; or
(c) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%)
of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from those
who held such securities immediately prior to such merger.
1.7 Director. "Director" shall mean a member of the Board.
1.8 Employee. "Employee" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company or of
any corporation which is a Subsidiary.
1.9 Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, ------------ as amended.
1.10 Fair Market Value. "Fair Market Value" of a share of Common
Stock as of a given date shall be (a) the average on that date of the high and
low prices of a share of Common Stock on the principal national securities
exchange on which shares of Common Stock are then trading, or, if shares were
not traded on such date, then on the next preceding date on which a trade
occurred, or (b) if Common Stock is not traded on a national securities exchange
but is quoted on NASDAQ or a successor quotation system, the last reported sale
price on such date as reported by NASDAQ or such successor quotation system; or
(c) if Common Stock is not traded on a national securities exchange and is not
reported on NASDAQ or a successor quotation system, the closing bid price (or
average of bid prices) last quoted on such date by an established quotation
service for over-the-counter securities; or (d) if Common Stock is not traded on
a national securities exchange, is not reported on NASDAQ or a successor
quotation system and is not otherwise publicly traded on such date, the fair
market value of a share of Common Stock as established by the Board acting in
good faith and taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale offer prices for the Common Stock in
private arm's-length transactions.
1.11 Independent Director. "Independent Director" shall mean a
member of the Board who is not an Employee of the Company.
1.12 Option. "Option" shall mean a stock option granted under
Article III of this Plan, which is not intended to qualify as an "incentive
stock option" under Section 422 of the Code.
1.13 Option Agreement. "Option Agreement" shall mean an agreement
between the Company and an Optionee that sets forth the terms, conditions and
limitations applicable to an Option.
1.14 Optionee. "Optionee" shall mean an Independent Director
granted an Option under this Plan.
1.15 Plan. "Plan" shall mean this Algos Pharmaceutical
Corporation 1996 Non- Employee Director Stock Option Plan.
1.16 QDRO. "QDRO" shall mean a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
1.17 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.
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1.18 Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended.
1.19 Subsidiary. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
1.20 Termination of Directorship. "Termination of Directorship"
shall mean the time when an Optionee ceases to be a Director for any reason,
including, but not by way of limitation, a termination by resignation, failure
to be elected, removal or death. The Board, in its sole discretion, shall
determine the effect of all matters and questions relating to Termination of
Directorship.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan. The shares of stock subject to
Options shall be Common Stock. The aggregate number of such shares which may be
issued upon exercise of such Options under the Plan shall not exceed 10,000
thousand (10,000). The shares of Common Stock issuable upon exercise of such
options may be either previously authorized but unissued shares or treasury
shares.
2.2 Add-back of Options. If any Option under this Plan expires or
is cancelled without having been fully exercised, or is exercised in whole or in
part for cash as permitted by this Plan, the number of shares subject to such
Option but as to which such Option was not exercised prior to its expiration,
cancellation or exercise may again be optioned hereunder, subject to the
limitations of Section 2.1. Furthermore, any shares subject to Options which are
adjusted pursuant to Section 7.3 and become exercisable with respect to shares
of stock of another corporation shall be considered cancelled and may again be
optioned hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Optionee or withheld by the Company upon the
exercise of any Option under this Plan, in payment of the exercise price thereof
or withholding taxes thereon, may again be optioned hereunder, subject to the
limitations of Section 2.1.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility. Each Independent Director of the Company shall
be eligible to be granted Options at the times and in the manner set forth in
Section 3.2.
3.2 Granting of Options
(a) During the term of the Plan, each person who is initially
elected or appointed to the Board, and who is an Independent Director at the
time of such initial election or appointment automatically shall be granted an
Option to purchase one hundred twenty (120) shares of Common Stock (subject to
adjustment as provided in Section 7.3) on the date of such initial election or
appointment. Members of the Board who are employees of the Company who
subsequently incur a Termination of Employment and remain on the Board will not
receive an initial Option grant pursuant to this subsection (a), but to the
extent that they are otherwise eligible, will receive, after such Termination of
Employment, Options as described in subsection (b) below.
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(b) During the term of the Plan, each Independent Director
automatically shall be granted an Option to purchase sixty (60) shares of Common
Stock (subject to adjustment as provided in Section 7.3) on the date of each
annual meeting of stockholders at which Directors are elected and at the close
of which the Independent Director is then serving as a Director, provided that
the Independent Director has served as a Director during the entire six month
period preceding the date of such annual meeting.
(c) All the foregoing Option grants authorized by this Section
3.2 are subject to stockholder approval of the Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by a written
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Board shall determine, consistent with this Plan.
4.2 Exercise Price. The price per share of the shares subject to
each Option shall be 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted.
4.3 Option Term. The term of an Option shall be ten (10) years
from the date the Option is granted, except as provided in Section 7.3(b).
4.4 Option Vesting
(a) Options granted pursuant to Section 3.2(a) shall become
exercisable in cumulative annual installments of one-third each on each of the
first, second and third annual meetings of stockholders of the Company at which
Directors are elected following the date of grant, without variation or
acceleration hereunder except as provided in Section 7.3(b).
(b) Options granted pursuant to Section 3.2(b) shall become
exercisable in full on the date of the first annual meeting of stockholders of
the Company at which Directors are elected following the date of grant, without
variation or acceleration hereunder except as provided in Section 7.3(b).
(c) No portion of an Option which is unexercisable at Termination
of Directorship shall thereafter become exercisable.
4.5 Consideration. In consideration of the granting of an Option,
the Optionee shall agree, in the written Option Agreement, to render faithful
and efficient services as Director of the Company. Nothing in this Plan or in
any Option Agreement shall confer upon any Optionee any right to continue as a
Director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.
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ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Board may require that, by the terms of the Option
Agreement, a partial exercise be with respect to a minimum number of shares.
5.2 Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his or her office:
(a) A written notice complying with the applicable rules
established by the Board stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) Such representations and documents as the Board, in its sole
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act, as amended, and any other federal
or state securities laws or regulations. The Board may, in its sole discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share certificates
and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 7.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Board, may in its sole discretion (i) allow a delay in payment up
to thirty (30) days from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of shares of
Common Stock owned by the Optionee, duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Board or (vi) allow payment, in whole or in part,
through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Board may also
prescribe the form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension of credit is
prohibited by law.
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5.3 Conditions to Issuance of Stock Certificates. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Board shall, in its sole discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Board shall, in its sole
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Board may establish from time to time for reasons
of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4 Rights as Stockholders. The holders of Options shall not be,
nor have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares have been issued by the
Company to such holders.
5.5 Ownership and Transfer Restrictions. The Board, in its sole
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Option Agreement or
other agreement between the Company and the holders of such shares and may be
referred to on the certificates evidencing such shares.
5.6 Limitations on Exercise of Options. No Option may be
exercised to any extent by anyone after the first to occur of the following
events:
(a) The expiration of twelve (12) months from the date of the
Optionee's death;
(b) the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);
(c) the expiration of seven (7) days from the date of the
Optionee's Termination of Directorship by reason of removal for cause (as
determined by the Board in its sole discretion);
(d) the expiration of thirty (30) days from the date of the
Optionee's Termination of Directorship for any reason other than such Optionee's
death, removal for cause or his permanent and total disability, unless the
Optionee dies within said three-month period; or
(e) The expiration of ten years from the date the Option was
granted.
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ARTICLE VI
ADMINISTRATION
6.1 Duties and Powers of Board. It shall be the duty of the Board
to conduct the general administration of this Plan in accordance with its
provisions. The Board shall have the power to interpret this Plan and the
agreements pursuant to which Options are granted, and to adopt such rules for
the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
6.2 Majority Rule; Unanimous Written Consent. The Board shall act
by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Board.
6.3 Professional Assistance; Good Faith Actions. All expenses and
liabilities which members of the Board incur in connection with the
administration of this Plan shall be borne by the Company. The Board may employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Company and the Company's officers and Directors shall be entitled to rely upon
the advice, opinions or valuations of any such persons. All actions taken and
all interpretations and determinations made by the Board in good faith shall be
final and binding upon all Optionees, the Company and all other interested
persons. No members of the Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan or
the Options and all members of the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Not Transferable. Options under this Plan may not be sold,
pledged, assigned, or transferred in any manner other than by will or the laws
of descent and distribution or pursuant to a QDRO, unless and until such Options
have been exercised, or the shares underlying such Options have been issued, and
all restrictions applicable to such shares have lapsed. No Option or interest
therein shall be liable for the debts, contracts or engagements of the Optionee
or his or her successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
During the lifetime of the Optionee only he or she may exercise
an Option (or any portion thereof) granted to him or her under the Plan, unless
it has been disposed of pursuant to a QDRO. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Option Agreement or other
agreement, be exercised by his or her personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
7.2 Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 7.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board. However, without approval of
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the Company's stockholders given within twelve months before or after the action
by the Board, no action of the Board may, except as provided in Section 7.3,
increase the limits imposed in Section 2.1 on the maximum number of shares which
may be issued under this Plan, and no action of the Board may be taken that
would otherwise require stockholder approval as a matter of applicable law,
regulation or rule. No amendment, suspension or termination of this Plan shall,
without the consent of the holder of Options alter or impair any rights or
obligations under any Options theretofore granted, unless the Option Agreement
itself otherwise expressly so provides. No Options may be granted during any
period of suspension or after termination of this Plan.
7.3 Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 7.3(d), in the event that the Board
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Board's sole discretion, affects the
Common Stock such that an adjustment is determined by the Board to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Option, then the Board shall, in such manner as it may deem equitable,
adjust any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options may be granted
under the Plan (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, and
(iii) the exercise price with respect to any Option.
(b) Subject to Sections 7.3(b)(vi) and 7.3(d), in the event of
any Corporate Transaction or other transaction or event described in Section
7.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Board in its sole discretion is hereby authorized to
take any one or more of the following actions whenever the Board determines that
such action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Option under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:
(i) In its sole discretion, and on such terms and conditions
as it deems appropriate, the Board may provide, either by the terms of
the Option Agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Optionee's
request, for either the purchase of any such Option for an amount of
cash equal to the amount that could have been attained upon the exercise
of such Option or realization of the Optionee's rights had such Option
been currently exercisable or the replacement of such Option with other
rights or property selected by the Board;
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(ii) In its sole discretion, the Board may provide, either
by the terms of the Option Agreement or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised
after such event;
(iii) Subject to subsection (d), in its sole discretion, and
on such terms and conditions as it deems appropriate, the Board may
provide, either by the terms of such Option or by action taken prior to
the occurrence of such transaction or event, that for a specified period
of time prior to such transaction or event, such Option shall be
exercisable as to all shares covered thereby, notwithstanding anything
to the contrary in (A) Section 4.4 or (B) the provisions of the
applicable Option Agreement;
(iv) In its sole discretion, and on such terms and
conditions as it deems appropriate, the Board may provide, either by the
terms of such Option or by action taken prior to the occurrence of such
transaction or event, that upon such event, such option be assumed by
the successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options covering the
stock of the successor or survivor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices; and
(v) In its sole discretion, and on such terms and conditions
as it deems appropriate, the Board may make adjustments in the number
and type of shares of Common Stock (or other securities or property)
subject to outstanding Options and/or in the terms and conditions of
(including the exercise price), and the criteria included in,
outstanding Options and Options which may be granted in the future.
(vi) None of the foregoing discretionary terms of this
Section 7.3(b) shall be permitted to the extent that such discretion
would be inconsistent with the applicable exemptive conditions of Rule
16b-3. In the event of Corporate Transaction, to the extent that the
Board does not have the ability under Rule 16b-3 to take or to refrain
from taking the discretionary actions set forth in Section 7.3(b)(iii)
above, each Option shall be exercisable as to all shares covered thereby
during the five days immediately preceding the consummation of such
Corporate Transaction and subject to such consummation, notwithstanding
anything to the contrary in Section 4.4 or the vesting schedule of such
Options. In the event of a Corporate Transaction, to the extent that the
Board does not have the ability under Rule 16b-3 to take or to refrain
from taking the discretionary actions set forth in Section 7.3(b)(ii)
above, no Option may be exercised following such Corporate Transaction
unless such Option is, in connection with such Corporate Transaction,
either assumed by the successor or survivor corporation (or parent or
subsidiary thereof) or replaced with a comparable right with respect to
shares of the capital stock of the successor or survivor corporation (or
parent or subsidiary thereof).
(c) Subject to Section 7.3(d) and 7.8, the Board may, in its sole
discretion, include such further provisions and limitations in any Option
Agreement as it may deem equitable and in the best interests of the Company.
(d) No adjustment or action described in this Section 7.3 or in
any other provision of the Plan shall be authorized to the extent that such
adjustment or action would result in short-swing profits liability under Section
16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3 unless
the Board determines that the Option is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any Option shall
always be rounded to the next whole number.
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7.4 Approval of Plan by Stockholders. This Plan will be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of this Plan. Options may be granted prior
to such stockholder approval, provided that such Options shall not be
exercisable prior to the time when this Plan is approved by the stockholders,
and provided further that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under this Plan shall
thereupon be cancelled and become null and void.
7.5 Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee of
any sums required by federal, state or local tax law to be withheld with respect
to the issuance or exercise of any Option. The Board may in its sole discretion
allow such Optionee to elect to have the Company withhold shares of Common Stock
otherwise issuable under such Option (or allow the return of shares of Common
Stock) having a Fair Market Value equal to the sums required to be withheld.
7.6 Loans. The Board may, in its sole discretion, extend one or
more loans to Independent Directors in connection with the exercise of an Option
granted under this Plan. The terms and conditions of any such loan shall be set
by the Board.
7.7 Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to Options under the Plan
consistent with the provisions of the Plan, the Board shall have the right (to
the extent consistent with the applicable exemptive conditions of Rule 16b-3) to
provide, in the terms of Options granted under the Plan, or to require the
recipient to agree by separate written instrument, that (a) any proceeds, gains
or other economic benefit actually or constructively received by the recipient
upon any receipt or exercise of the Option or upon the receipt or resale of any
Common Stock underlying such Option must be paid to the Company, and (b) the
Option shall terminate and any unexercised portion of such Option shall be
forfeited, if (i) the Optionee incurs a Termination of Directorship prior to a
specified date, or within a specified time period following receipt or exercise
of the Option, or (ii) the Optionee at any time, or during a specified time
period, engages in any activity in competition with the Company, or which is
inimical, contrary or harmful to the interests of the Company, as further
defined by the Board.
7.8 Limitations Applicable to Section 16 Persons. Notwithstanding
any other provision of this Plan, this Plan and any Option granted to any
individual who is then subject to Section 16 of the Exchange Act shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Options granted
hereunder shall be deemed amended to the extent necessary to conform to such
applicable exemptive rule.
7.9 Effect of Plan Upon Options and Compensation Plans. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (a) to establish any other forms of
incentives or compensation for Employees, Directors or consultants of the
Company or any Subsidiary or (b) to grant or assume options or other rights
otherwise than under this Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
firm or association.
7.10 Compliance with Laws. This Plan, the granting and vesting of
Options under this Plan and the issuance and delivery of shares of Common Stock
under Options granted hereunder are
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subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and the Options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
7.11 Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this Plan.
7.12 Governing Law. This Plan and any agreements hereunder shall
be administered, interpreted and enforced under the internal laws of the state
of New York without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of Algos Pharmaceutical Corporation on __________________
1996.
Executed on this ____ day of _______________, 199___.
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Secretary
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FIRST AMENDMENT TO
THE ALGOS PHARMACEUTICAL CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Effective January 16, 1997, Section 3.2 of the Plan is hereby amended
in its entirety to read as follows:
"3.2 Granting of Options
(a) During the term of the Plan, each person who is initially elected
or appointed to the Board, and who is an Independent Director at the time of
such initial election or appointment automatically shall be granted an Option to
purchase ten thousand (10,000) shares of Common Stock (subject to adjustment as
provided in Section 7.3) on the date of such initial election or appointment.
Members of the Board who are employees of the Company who subsequently incur a
Termination of Employment and remain on the Board will not receive an initial
Option grant pursuant to this subsection (a), but to the extent that they are
otherwise eligible, will receive, after such Termination of Employment, Options
as described in subsection (b) below.
(b) During the term of the Plan, on the date of the first meeting of
the Board that occurs in each calendar year each Independent Director then
serving as such automatically shall be granted an Option to purchase five
thousand (5,000) shares of Common Stock (subject to adjustment as provided in
Section 7.3).
(c) All the foregoing Option grants authorized by this Section 3.2 are
subject to stockholder approval of the Plan in accordance with Section 7.4."
2. Effective January 16, 1997, Section 4.4 of the Plan is hereby amended
in its entirety to read as follows:
"4.4 Option Vesting
(a) Options granted pursuant to Section 3.2(a) shall become exercisable
in cumulative annual installments of one-third each on each of the first, second
and third annual meetings of stockholders of the Company at which Directors are
elected following the date of grant, without variation or acceleration hereunder
except as provided in Section 7.3(b).
(b) Options granted pursuant to Section 3.2(b) shall become exercisable
in full on the first anniversary of the date of the grant, without variation or
acceleration hereunder except as provided in Section 7.3(b).
(c) No portion of an Option which is unexercisable at the Optionee's
Termination of Directorship shall thereafter become exercisable."