PHARMACEUTICAL RESOURCES, INC.
1995 DIRECTORS' STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings hereinafter set forth
unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean Pharmaceutical Resources, Inc.
(c) "Date of Grant" shall mean the date an Eligible Director is initially
elected to the Board of Directors.
(d) "Eligible Director" shall mean any director of the Company other than
(i) any director of the Company on the Effective Date of this Plan, or (ii) any
person who, at the time of his election to the Board, is an employee of the
Company or any of its subsidiaries.
(e) "Fair Market Value" shall mean, with respect to any share of stock on
any day: (i) if the principal market for the Stock is The New York Stock
Exchange, any other national securities exchange or the NASDAQ National Market,
the closing sales price of the Stock on such day as reported by such exchange or
market system, or on a consolidated tape reflecting transactions on such
exchange or market system, or (ii) if the principal market for the Stock is not
a national securities exchange or the NASDAQ National Market and the Stock is
quoted on the National Association of Securities Dealers Automated Quotations
System, the mean between the closing bid and the closing asked prices for the
Stock on such day as quoted on such System, or (iii) if the principal market for
the Stock is not quoted on the National Association of Securities Dealers
Automated Quotations System, the mean between the highest bid and lowest asked
prices for the Stock on such day as reported by the National Quotation Bureau,
Inc.; provided that if clauses (i), (ii) and (iii) of this paragraph are all
inapplicable, or if no trades have been made or no quotes are available for such
day, the Fair Market Value of the Stock shall be determined by the Company by
any method which it deems to be appropriate. The determination of the Company
shall be conclusive as to the Fair Market Value of the Stock.
(f) "Option" shall mean an Eligible Director's stock option to purchase
Stock granted pursuant to the provisions of Article V hereof.
(g) "Option Price" shall mean the price at which an Optionee may purchase a
share of Stock under a Stock Option Agreement.
(h) "Optionee" shall mean an Eligible Director to whom an Option has been
granted hereunder.
(i) "Plan" shall mean the Pharmaceutical Resources, Inc. 1995 Directors'
Stock Option Plan, the terms of which are set forth herein, as amended form time
to time.
(j) "Qualified Domestic Relations Order" shall have the meaning assigned to
such term under the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
(k) "Stock" shall mean the common stock, par value $.01 per share, of the
Company or, in the event that the outstanding shares of Stock are hereafter
changed into or exchanged for different stock or securities of the Company or
some other corporation, such other stock or securities.
(l) "Stock Option Agreement" shall mean an agreement between the Company
and the Optionee under which the Optionee may purchase Stock in accordance with
the Plan.
(m) "Stockholders" shall mean the holders of outstanding shares of Stock of
the Company.
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as the "Pharmaceutical Resources, Inc.
1995 Directors' Stock Option Plan".
2.2 Purpose. The purpose of the Plan is to advance the interests of the
Company and its Stockholders by affording Eligible Directors of the Company an
opportunity to acquire or increase their proprietary interests in the Company,
and thereby to encourage their continued service as directors and to provide
them additional incentives to achieve the growth objectives of the Company.
2.3 Effective Date. The Plan shall become effective on the date of its
adoption by the Board of Directors of the Company, subject to the approval of
the Plan by the Stockholders within one year after the effective date. Any
Options granted under the Plan prior to such approval shall be effective when
made, but shall be conditioned upon, and subject to, such approval of the Plan
by the Stockholders (and no Options shall be exercisable prior to such
approval).
2.4 Termination Date. The Plan shall terminate and no further Options
shall be granted hereunder on or after May 31, 2005.
2
ARTICLE III
PARTICIPANTS
Each Eligible Director shall participate in the Plan as of the date that he
is elected as a member of the Board.
ARTICLE IV
SHARES OF STOCK SUBJECT TO PLAN
4.1 Limitations. Subject to any antidilution adjustment pursuant to
Section 4.2 hereof, the maximum number of shares of Stock which may be issued
and sold hereunder shall not exceed 100,000 shares of Stock in the aggregate,
and 15,000 shares of Stock for any individual. Shares of Stock subject to an
Option may be either authorized and unissued shares or shares issued and later
acquired by the Company; provided, however, the shares of Stock with respect to
which an Option has been exercised shall not again be available for grant
hereunder. If outstanding Options granted hereunder shall terminate or expire
for any reason without being wholly exercised prior to the termination of the
Plan pursuant to Section 2.4 hereof, new Options may be granted hereunder
covering such unexercised shares.
4.2 Antidilution. In the event that the outstanding shares of Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of merger,
consolidation, reorganization, recapitalization, reclassification, combination
of shares, stock split or stock dividend:
(a) The aggregate number and kind of shares of Stock for which
Options may be granted hereunder shall be adjusted appropriately;
(b) The rights under outstanding Options granted hereunder, both as
to the number of subject shares and the Option price, shall be adjusted
appropriately; and
(c) Where dissolution or liquidation of the Company or any merger or
combination in which the Company is not a surviving corporation is
involved, each outstanding Option granted hereunder shall terminate, but
the Optionee shall have the right, immediately prior to such dissolution,
liquidation, merger or combination, to exercise his Option, in whole or in
part, to the extent that it shall not have been exercised, without regard
to the date on which such Option would otherwise have become exercisable
pursuant to Section 5.4(a) hereof or any limitation on such exercise
pursuant to Section 5.4(b) hereof.
3
The foregoing adjustments and the manner of application thereof shall
be determined solely by the Board, and any such adjustment may provide for the
elimination of fractional share interests. The adjustments required under this
Article shall apply to any successor or successors of the Company and shall be
made regardless of the number or type of successive events requiring adjustments
hereunder.
ARTICLE V
OPTIONS
5.1 Option Grant, Number of Shares and Agreement. On the Date of
Grant, each Eligible Director shall automatically be granted the right and
option to purchase all or any part of an aggregate of 15,000 shares of Stock.
Such Option shall be evidenced by a written Stock Option Agreement, dated as of
the Date of Grant and executed by the Company and the Optionee, stating the
Option's duration, time of exercise, and exercise price. The terms and
conditions of the Option shall be consistent with the Plan.
5.2 Option Price. The Option Price of the Stock subject to each
Option shall be the Fair Market Value of the Stock on its Date of Grant.
5.3 Exercise Period. The period for the exercise of each Option (the
"Exercise Period") shall expire on the tenth anniversary of the Date of Grant.
5.4 Option Exercise.
(a) Subject to Section 5.4(b) hereof, one-third of the Options
granted under the Plan to an Eligible Director shall become exercisable
("vest") on each of the first three anniversaries of the Date of Grant;
provided, however, that if, prior to any date on which an Option is
scheduled to vest under this Section 5.4(a), an Eligible Director shall
have ceased to serve as a member of the Board for any reason, the Options
scheduled to vest on such date and all remaining unvested Options shall
immediately terminate. An Option which shall have vested pursuant to this
Section 5.4(a) shall remain exercisable, subject to Section 5.4(b) hereof,
at all times during the remainder of the Exercise Period regardless of
whether the Optionee thereafter continues to serve as a member of the
Board.
(b) In addition to the conditions set forth in Section 5.4(a)
hereof, each Eligible Director shall only be entitled to exercise Options
which shall have vested under such Section 5.4(a):
(i) if such exercise shall occur prior to the second anniversary of
the Date of Grant, the Optionee would own at least 1,500 shares of Stock
immediately after such exercise;
4
(ii) if such exercise shall occur on or after the second
anniversary of the Date of Grant, but prior to the third anniversary
thereof, the Optionee would own at least 3,000 shares of Stock immediately
after such exercise; and
(iii) if such exercise shall occur on or after the third
anniversary of the Date of Grant, the Optionee would own at least 4,500
shares of Stock immediately after such exercise.
(c) An Option may be exercised at any time or from time to time
during the term of the Option as to any or all full shares which have
become exercisable in accordance with this Section, but not as to less than
100 shares of Stock unless the remaining shares of Stock that are so
exercisable are less than 100 shares of Stock. The Option price is to be
paid in full in cash upon the exercise of the Option. The holder of an
Option shall not have any of the rights of a Stockholder with respect to
the shares of Stock subject to the Option until such shares of Stock have
been issued or transferred to him upon the exercise of his Option.
(d) An Option shall be exercised by written notice of exercise of
the Option, with respect to a specified number of shares of Stock,
delivered to the Company at its principal office, and by cash payment to
the Company as said office of the full amount of the Option price for such
number of shares. In addition to, and prior to the issuance of a
certificate for shares pursuant to any Option exercise, the Optionee shall
pay to the Company in cash the full amount of any federal and state
withholding or other employment taxes applicable to the taxable income of
such Optionee resulting from such exercise.
(e) At the discretion of the Board, the Stock Option Agreement
may provide that an Option granted under the Plan may be exercised with
respect to a specified number of shares of Stock by written notice of
exercise to the Company stating that (i) the option price for the shares
and any withholding tax due thereon will be paid to the Company directly by
a broker-dealer designated by the optionee and irrevocable instructions to
such effect have been furnished by the optionee to such broker-dealer; and
(ii) an advice from the broker-dealer confirming payment to the Company
will be promptly delivered to the Company. The exercise of any such option
shall be irrevocable at the time of notice to the Company; provided,
however, that the Company shall not be required to deliver certificates for
shares of Stock with respect to the exercise of the option until the
Company has confirmed the receipt of good and sufficient funds in payment
of the purchase price thereof.
5.5 Non-transferability of Option. Options may not be transferred by
an Optionee otherwise than by will, the laws of descent and distribution, or by
a Qualified Domestic Relations Order. During the lifetime of an Optionee, his
Option may be exercised only by him (or by his guardian or legal representative,
should one be appointed) or by his spouse to whom the Option has been
transferred pursuant to the terms of a Qualified Domestic
5
Relations Order. In the event of the death of an Optionee, any Option held by
him may be exercised by his legatee(s) or other distributee(s) or by his
personal representative.
ARTICLE VI
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate
for shares of Stock purchased upon the exercise of any Option granted hereunder
or any portion thereof unless, in the opinion of counsel to the Company, there
has been compliance with all applicable legal requirements. An Option granted
under the Plan may provide that the Company's obligation to deliver shares of
Stock upon the exercise thereof may be conditioned upon the receipt by the
Company of a representation as to the investment intention of the holder thereof
in such form as the Company shall determine to be necessary or advisable solely
to comply with the provisions of the Securities Act of 1933, or any other
federal, state or local securities laws.
ARTICLE VII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may, at any time, terminate the Plan, and may, at any time
and from time to time and in any respect, amend or modify the Plan; provided,
however, that this Plan shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
ARTICLE VIII
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall neither affect any other stock option,
incentive or other compensation plans in effect for the Company or any of its
subsidiaries, nor shall the adoption of the Plan preclude the Company from
establishing any other forms of incentive or other compensation plan for
directors of the Company.
ARTICLE IX
MISCELLANEOUS
6
9.1 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
9.2 Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall refer also to
the feminine pronoun.
9.3 Headings etc.. Headings of articles and paragraphs hereof are
inserted for convenience and reference, and do not constitute a part of the
Plan.
7