HENRY SCHEIN, INC.
1994 STOCK OPTION PLAN
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AS AMENDED AND RESTATED EFFECTIVE AS OF APRIL 1, 2003
Table of Contents
1. Purposes of the Plan.................................................. 1
2. Definitions........................................................... 1
3. Effective Date/Expiration of Plan..................................... 5
4. Administration........................................................ 5
(a) Duties of the Committee...................................... 5
(b) Advisors..................................................... 6
(c) Indemnification.............................................. 6
(d) Meetings of the Committee.................................... 6
5. Shares; Adjustment upon Certain Events................................ 7
(a) Shares to be Delivered; Fractional Shares.................... 7
(b) Number of Shares............................................. 7
(c) Individual Participant Limitations........................... 7
(d) Adjustments; Recapitalization, etc........................... 7
6. Awards and Terms of Options........................................... 9
(a) Grant........................................................ 9
(b) Exercise Price............................................... 9
(c) Number of Shares............................................. 9
(d) Exercisability............................................... 9
(e) Special Rule for Incentive Options........................... 10
(f) Acceleration of Exercisability on Change of Control.......... 10
(g) Exercise of Options.......................................... 12
7. Effect of Termination of Employment or Termination of Consultancy..... 12
(a) Death, Disability; Retirement, etc........................... 12
(b) Cause or Voluntary Termination............................... 13
(c) Other Termination............................................ 13
8. Nontransferability of Options......................................... 14
9. Rights as a Stockholder............................................... 14
10. Determinations........................................................ 14
11. Termination, Amendment and Modification............................... 15
12. Non-Exclusivity....................................................... 15
13. Use of Proceeds....................................................... 16
14. General Provisions.................................................... 16
(a) Right to Terminate Employment or Consultancy................. 16
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(b) Purchase for Investment...................................... 16
(c) Trusts, etc.................................................. 16
(d) Notices...................................................... 16
(e) Severability of Provisions................................... 17
(f) Payment to Minors, Etc....................................... 17
(g) Headings and Captions........................................ 17
(h) Controlling Law.............................................. 17
15. Issuance of Stock Certificates; Legends and Payment of Expenses....... 17
(a) Stock Certificates........................................... 17
(b) Legends...................................................... 17
(c) Payment of Expenses.......................................... 17
16. Listing of Shares and Related Matters................................. 17
17. Withholding Taxes..................................................... 18
18. Section 16(b) of the Act.............................................. 18
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HENRY SCHEIN, INC.
1994 STOCK OPTION PLAN
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AS AMENDED AND RESTATED EFFECTIVE AS OF APRIL 1, 2003
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1. PURPOSES OF THE PLAN
The purposes of this Henry Schein, Inc. 1994 Stock Option Plan, as
amended and restated effective as of April 1, 2003, are to enable HSI and its
Subsidiaries (each as defined herein) to attract, retain and motivate the Key
Employees and Consultants (each as defined herein) who are important to the
success and growth of the business of HSI and to create a long-term mutuality of
interest between the Key Employees and Consultants and the stockholders of HSI
by granting the Key Employees and Consultants options (which, in the case of Key
Employees, may be either incentive stock options (as defined herein) or
non-qualified stock options and, in the case of Consultants, shall be
non-qualified options) to purchase HSI Common Stock (as defined herein).
2. DEFINITIONS
(a) "Acquisition Event" means a merger or consolidation in which HSI
is not the surviving entity, or any transaction that results in the acquisition
of all or substantially all of HSI's outstanding Common Stock by a single person
or entity or by a group of persons and/or entities acting in concert, or the
sale or transfer of all or substantially all of HSI's assets.
(b) "Act" means the Securities Exchange Act of 1934, as amended and
the rules and regulations promulgated thereunder.
(c) "Board" means the Board of Directors of HSI.
(d) "Cause" has the meaning set forth in Section 7(b).
(e) "Change of Control" has the meaning set forth in Section 6(f).
(f) "Class A Option" means an Option evidenced by a Class A Option
Agreement.
(g) "Class A Option Agreement" has the meaning set forth in Section
6(a).
(h) "Class B Option" means an Option evidenced by a Class B Option
Agreement.
(i) "Class B Option Agreement" has the meaning set forth in Section
6(a).
(j) "Code" means the Internal Revenue Code of 1986, as amended.
(k) "Committee" means such committee (or subcommittee), if any,
appointed by the Board to administer the Plan, consisting of two or more
directors as may be appointed from time to time by the Board, each of whom shall
qualify as a "non-employee director" within the meaning of Rule 16b-3
promulgated under the Act and as an "outside director" as defined under Section
162(m) of the Code. If the Board does not appoint a committee for this purpose,
"Committee" means the Board.
(l) "Common Stock" means the voting common stock of HSI, par value
$.0l, any Common Stock into which the Common Stock may be converted and any
Common Stock resulting from any reclassification of the Common Stock.
(m) "Company" means HSI and its Subsidiaries, any of whose Key
Employees or Consultants are Participants in the Plan.
(n) "Consultant" means any individual (or any wholly-owned corporate
alter ego of any individual) who provides key bona fide consulting or advisory
services to the Company, as determined by the Committee, which services are not
in connection with the offer and sale of securities in a capital-raising
transaction.
(o) "Corporate Transaction" has the meaning set forth in Section
6(f)(i).
(p) "Disability" means a permanent and total disability, as
determined by the Committee in its sole discretion, provided that in no event
shall any disability that is not a permanent and total disability within the
meaning of Section 22(e)(3) of the Code be treated as a Disability. A Disability
shall be deemed to occur at the time of the determination by the Committee of
the Disability.
(q) "Effective Date" has the meaning set forth in Section 3.
(r) "Fair Market Value" means the value of a Share (as defined
herein) on a particular date, determined as follows:
(i) If the Common Stock is listed or admitted to trading on such
date on a national securities exchange or quoted through NASDAQ Stock
Market, Inc. ("NASDAQ"), the closing sales price of a Share as reported on
the relevant composite transaction tape, if applicable, or on the principal
such exchange (determined by trading value in the Common Stock) or through
NASDAQ, as the case may be, on such date, or in the absence of reported
sales on such day, the mean between the reported bid and asked prices
reported on such composite transaction tape or exchange or through NASDAQ,
as the case may be, on such date; or
(ii) If the Common Stock is not listed or quoted as described in
the preceding clause, but bid and asked prices are quoted through NASDAQ,
the mean between the bid and asked prices as quoted by NASDAQ on such date;
or
(iii) If the Common Stock is not listed or quoted on a national
securities exchange or through NASDAQ or, if pursuant to (i) and (ii) above
the Fair Market Value is to be determined based upon the mean of the bid
and asked prices and the Committee determines that such mean does not
properly reflect the Fair Market Value, by such other method as the
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Committee determines to be reasonable and consistent with applicable law;
or
(iv) If the Common Stock is not publicly traded, such amount as
is set by the Committee in good faith.
(s) "Family Member" means, with respect to any Participant, any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, including adoptive relationships, trusts for the exclusive
benefit of such individuals, and any other entity owned solely by such
individuals.
(t) "HSI" means Henry Schein, Inc.
(u) "HSI Agreement" means the Amended and Restated HSI Agreement
dated as of February 16, 1994 among HSI and certain other parties.
(v) "HSI Closing" means the closing of the HSI Public Offering.
(w) "HSI Public Offering" means an initial public offering of shares
of HSI Common Stock at a Market Capitalization which is not less than the
Minimum Market Capitalization then in effect and as a result of which at least
20% of the common equity of HSI will be publicly held by at least 300 holders
and such shares of HSI Common Stock will be listed or admitted to trading on the
New York Stock Exchange or the American Stock Exchange or quoted on NASDAQ or is
on such terms and conditions as are approved by Marvin Schein prior to the
effective date thereof.
(x) "Incentive Stock Option" means any Option which is intended to
qualify as an "incentive stock option" as defined in Section 422 of the Code.
(y) "Incumbent Board" has the meaning set forth in Section 6(f)(ii).
(z) "Key Employee" means any person who is an executive officer or
other valuable staff, managerial, professional or technical employee of the
Company, as determined by the Committee, including those individuals described
in Section 5(d)(iv). A Key Employee may, but need not, be an officer or director
(with the exception of a non-employee director) of the Company.
(aa) "Market Capitalization" means (i) the per share initial pubic
offering price, multiplied by (ii) the number of shares outstanding immediately
prior to the HSI Closing less the aggregate number of shares issued pursuant to
the 1994 Stock Purchase Agreement between HSI and the HSI Employee Stock
Ownership Plan (the "HSI ESOP") or held by the HSI ESOP which are outstanding on
such date.
(bb) "Minimum Market Capitalization" means $48,000,000 on August 15,
1992, which amount shall increase on each day thereafter as follows:
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From August 15, 1992 until the 1st anniversary thereof: $15,123 per day;
From the 1st anniversary thereof until the 2nd anniversary thereof: $16,862
per day;
From the 2nd anniversary thereof until the 3rd anniversary thereof: $18,802
per day;
From the 3rd anniversary thereof until the 4th anniversary thereof: $20,964
per day;
From the 4th anniversary thereof until the 5th anniversary thereof: $23,375
per day;
From the 5th anniversary thereof until the 6th anniversary thereof: $26,063
per day;
From the 6th anniversary thereof until the 7th anniversary thereof: $29,060
per day; and
Thereafter: $32,402 per day.
(cc) "Option" means the right to purchase one Share at a prescribed
Purchase Price on the terms specified in the Plan and the Option Agreement. An
Option may be an Incentive Stock Option or a non-qualified option.
(dd) "Option Agreement" means a Class A Option Agreement or Class B
Option Agreement.
(ee) "Outstanding HSI Voting Securities" has the meaning set forth in
section 6(f)(i).
(ff) "Participant" means a Key Employee or Consultant of the Company
who is granted Options under the Plan.
(gg) "Person" means an individual, entity or group within the meaning
of Section 13d-3 or 14d-1 of the Act.
(hh) "Plan" means the Henry Schein, Inc. 1994 Stock Option Plan, as
amended from time to time.
(ii) "Purchase Price" means purchase price per Share.
(jj) "Securities Act" means the Securities Act of 1933, as amended.
(kk) "Share" means a share of Common Stock.
(ll) "Subsidiary" means any "subsidiary corporation" within the
meaning of Section 424(f) of the Code. An entity shall be deemed a Subsidiary of
HSI only for such periods as the requisite ownership relationship is maintained.
(mm) "Substantial Stockholder" means any Participant who at the time
of grant owns directly or is deemed to own by reason of the attribution rules
set forth in Section 424(d) of the Code, Shares possessing more than 10% of the
total combined voting power of all classes of stock of HSI.
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(nn) "Termination of Employment" means termination of the relationship
with HSI and its Subsidiaries so that an individual is no longer an employee or
director of HSI or any of its Subsidiaries. In the event an entity shall cease
to be a Subsidiary of HSI, any individual who is not otherwise an employee of
HSI or another Subsidiary of HSI shall incur a Termination of Employment at the
time the entity ceases to be a Subsidiary. A Termination of Employment shall not
include a leave of absence approved for purposes of the Plan by the Committee.
(oo) "Termination of Consultancy" means termination of the
relationship with HSI and its Subsidiaries so that an individual is no longer a
Consultant of HSI or any of its Subsidiaries. In the event an entity shall cease
to be a Subsidiary of HSI, any individual who is not otherwise a Consultant of
HSI or another Subsidiary of HSI shall incur a Termination of Consultancy at the
time the entity ceases to be a Subsidiary; provided, that if a Consultant
becomes a Key Employee upon his Termination of Consultancy, the Committee, in
its sole discretion, may determine that no Termination of Consultancy shall be
deemed to occur until such later time as such Consultant ceases to be either a
Key Employee or a Consultant. A Termination of Consultancy shall not include a
leave of absence approved for purposes of the Plan by the Committee.
3. EFFECTIVE DATE/EXPIRATION OF PLAN
The Plan became as originally adopted effective as of September 30,
1994 (the "Effective Date"), and was amended and restated effective as of June
6, 2001. The Plan was subsequently amended and restated in the form set forth
herein effective as of April 1, 2003, subject to stockholder approval by a
majority of the total votes cast in person or by proxy (the "Restated Effective
Date"). Grants of Options under the Plan may be made on and after the Effective
Date and the Restated Effective Date. No Option shall be granted under the Plan
on or after September 30, 2009, but Options previously granted may extend beyond
that date.
4. ADMINISTRATION
(a) Duties of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full authority to interpret the Plan and to
decide any questions and settle all controversies and disputes that may arise in
connection with the Plan; to establish, amend, and rescind rules for carrying
out the Plan; to administer the Plan, subject to its provisions; to select
Participants in, and grant Options under, the Plan; to determine the terms,
exercise price and form of exercise payment for each Option granted under the
Plan; to determine which Options granted under the Plan to Key Employees shall
be Incentive Stock Options; to prescribe the form or forms of instruments
evidencing Options and any other instruments required under the Plan (which need
not be uniform) and to change such forms from time to time; and to make all
other determinations and to take all such steps in connection with the Plan and
the Options as the Committee, in its sole discretion, deems necessary or
desirable; provided, that all such determinations shall be in accordance with
the express provisions, if any, contained in the HSI Agreement, Option Agreement
and the Plan. The Committee shall not be bound to any standards of uniformity or
similarity of action, interpretation or conduct in the discharge of its duties
hereunder, regardless of the apparent similarity of the matters coming before
it. The determination, action or conclusion of the Committee in connection with
the foregoing shall be final, binding and conclusive.
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(b) Advisors. The Committee may designate the Secretary of HSI, other
employees of the Company or competent professional advisors to assist the
Committee in the administration of the Plan, and may grant authority to such
persons (other than professional advisors) to execute Option Agreements (as
defined herein) or other documents on behalf of the Committee; provided, that no
Participant may execute any Option Agreement granting Options to such
Participant. The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan, and may rely upon
any opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company.
(c) Indemnification. No officer, member or former member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it. To the maximum extent
permitted by applicable law or the Certificate of Incorporation or By-Laws of
HSI and to the extent not covered by insurance, each officer, member or former
member of the Committee or of the Board shall be indemnified and held harmless
by HSI against any cost or expense (including reasonable fees of counsel
reasonably acceptable to HSI) or liability (including any sum paid in settlement
of a claim with the approval of HSI), and advanced amounts necessary to pay the
foregoing at the earliest time and to the fullest extent permitted, arising out
of any act or omission to act in connection with the Plan, except to the extent
arising out of such officer's, member's or former member's own fraud or bad
faith. Such indemnification shall be in addition to any rights of
indemnification the officers, members or former members may have as directors
under applicable law or under the Certificate of Incorporation or By-Laws of HSI
or any Subsidiary of HSI.
(d) Meetings of the Committee. The Committee shall select one of its
members as a Chairman and shall adopt such rules and regulations as it shall
deem appropriate concerning the holding of its meetings and the transaction of
its business. Any member of the Committee may be removed at any time either with
or without cause by resolution adopted by the Board, and any vacancy on the
Committee may at any time be filled by resolution adopted by the Board. All
determinations by the Committee shall be made by the affirmative vote of a
majority of its members. Any such determination may be made at a meeting duly
called and held at which a majority of the members of the Committee were in
attendance in person or through telephonic communication. Any determination set
forth in writing and signed by all of the members of the Committee shall be as
fully effective as if it had been made by a majority vote of the members at a
meeting duly called and held.
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5. SHARES; ADJUSTMENT UPON CERTAIN EVENTS
(a) Shares to be Delivered; Fractional Shares. Shares to be issued
under the Plan shall be made available at the discretion of the Board, either
from authorized but unissued Shares or from issued Shares reacquired by HSI and
held in treasury. No fractional Shares will be issued or transferred upon the
exercise of any Option. In lieu thereof, HSI shall pay a cash adjustment equal
to the same fraction of the Fair Market Value of one Share on the date of
exercise.
(b) Number of Shares. Subject to adjustment as provided in this
Section 5, the maximum aggregate number of Shares that may be issued under the
Plan shall be 8,579,635 Shares of Common Stock of which a maximum of 237,897 of
such Shares shall be covered by Class A Options and the balance of such Shares
shall be covered by Class B Options. If Options are for any reason canceled, or
expire or terminate unexercised, the Shares covered by such Options shall again
be available for the grant of Options, subject to the foregoing limit, provided
that the number of Shares covered by Class A Options shall be reduced by that
number of Class A Options that are cancelled, expire or are terminated. In
addition, if Common Stock has been exchanged by a Participant as full or partial
payment to HSI of the Purchase Price or for required withholding, or if the
number of shares of Common Stock otherwise deliverable has been reduced for full
or partial payment to HSI of the Purchase Price or for required withholding, the
number of shares of Common Stock exchanged or reduced shall again be available
under the Plan.
(c) Individual Participant Limitations. The maximum number of Shares
subject to any Option which may be granted under this Plan to each Participant
on or after the HSI Public Offering shall not exceed 100,000 Shares (subject to
any adjustment pursuant to Section 5(d)) during each fiscal year of HSI during
the entire term of the Plan. To the extent that Shares for which Options are
permitted to be granted to a Participant pursuant to Section 5(c) during a
fiscal year are not covered by a grant of an Option to a Participant issued in
such fiscal year, such Shares shall automatically increase the number of Shares
available for grant of Options to such Participant in the subsequent fiscal year
during the term of the Plan.
(d) Adjustments; Recapitalization, etc. The existence of the Plan and
the Options granted hereunder shall not affect in any way the right or power of
the Board or the stockholders of HSI to make or authorize any adjustment,
recapitalization, reorganization or other change in HSI's capital structure or
its business, any merger or consolidation of HSI, any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting Common
Stock, the dissolution or liquidation of HSI or any of its Subsidiaries, or any
sale or transfer of all or part of its assets or business or any other corporate
act or proceeding. If and whenever HSI takes any such action, however, the
following provisions, to the extent applicable, shall govern:
(i) If and whenever HSI shall effect a stock split, stock
dividend, subdivision, recapitalization or combination of Shares or other
changes in HSI's Common Stock, (x) the Purchase Price (as defined herein)
per Share and the number and class of Shares and/or other securities with
respect to which outstanding Options thereafter may be exercised, and (y)
the total number and class of Shares and/or other securities that may be
issued under this Plan, shall be proportionately adjusted by the Committee.
The
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Committee may also make such other adjustments as it deems necessary to
take into consideration any other event (including, without limitation,
accounting changes) if the Committee determines that such adjustment is
appropriate to avoid distortion in the operation of the Plan.
(ii) Subject to Section 5(d)(iii), if HSI merges or consolidates
with one or more corporations, then from and after the effective date of
such merger or consolidation, upon exercise of Options theretofore granted,
the Participant shall be entitled to purchase under such Options, in lieu
of the number of Shares as to which such Options shall then be exercisable
but on the same terms and conditions of exercise set forth in such Options,
the number and class of Shares and/or other securities or property
(including cash) to which the Participant would have been entitled pursuant
to the terms of the agreement of merger or consolidation if, immediately
prior to such merger or consolidation, the Participant had been the holder
of record of the total number of Shares receivable upon exercise of such
Options (whether or not then exercisable).
(iii) In the event of an Acquisition Event, the Committee may, in
its discretion, and without any liability to any Participant, terminate all
outstanding Options as of the consummation of the Acquisition Event by
delivering notice of termination to each Participant at least 20 days prior
to the date of consummation of the Acquisition Event; provided that, during
the period from the date on which such notice of termination is delivered
to the consummation of the Acquisition Event, each Participant shall have
the right to exercise in full all of the Options that are then outstanding
(without regard to limitations on exercise otherwise contained in the
Options). If an Acquisition Event occurs and the Committee does not
terminate the outstanding Options pursuant to the preceding sentence, then
the provisions of Section 5(d)(ii) shall apply.
(iv) Subject to Sections 5(b) and (c), the Committee may grant
Options under the Plan in substitution for options held by employees or
consultants of another corporation who concurrently become employees or
consultants of the Company as the result of a merger or consolidation of
the employing or engaging corporation with the Company, or as the result of
the acquisition by the Company of property or stock of the employing or
engaging corporation. The Company may direct that substitute awards be
granted on such terms and conditions as the Committee considers appropriate
in the circumstances.
(v) If, as a result of any adjustment made pursuant to the
preceding paragraphs of this Section 5, any Participant shall become
entitled upon exercise of an Option to receive any securities other than
Common Stock, then the number and class of securities so receivable
thereafter shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect
to the Common Stock set forth in this Section 5, as determined by the
Committee in its discretion.
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(vi) Except as hereinbefore expressly provided, the issuance by
HSI of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or other securities, and in any case whether or
not for fair value, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number and class of Shares and/or other
securities or property subject to Options theretofore granted or the
Purchase Price per Share.
6. AWARDS AND TERMS OF OPTIONS
(a) Grant. The Committee may grant Options, including, in the case of
grants to Key Employees, Options intended to be Incentive Stock Options, to Key
Employees and Consultants of the Company. Each Option shall be evidenced by a
Class A Option agreement ("Class A Option Agreement") or Class B Option
agreement ("Class B Option Agreement"), as applicable.
(b) Exercise Price. The Purchase Price deliverable upon the exercise
of an Option shall be determined by the Committee, subject to the following: (i)
in the case of Class A Options (A) prior to the HSI Public Offering, the
Purchase Price shall not be less than $416.67 per Share, and (B) on or after the
HSI Public Offering, the Purchase Price shall not be less than the Fair Market
Value per Share on the date the Option is granted, and (ii) in the case of Class
B Options or Incentive Stock Options, the Purchase Price shall not be less than
100% (110% for an Incentive Stock Option granted to a Substantial Stockholder)
of the Fair Market Value per Share on the date the Class B Option or Incentive
Stock Option is granted.
(c) Number of Shares. The Option Agreement shall specify the number
of Options granted to the Participant, as determined by the Committee in its
sole discretion, subject to Section 5(c) hereof.
(d) Exercisability. At the time of grant, the Committee shall specify
when and on what terms the Options granted shall be exercisable. In the case of
Options not immediately exercisable in full, the Committee may at any time
accelerate the time at which all or any part of the Options may be exercised and
may waive any other conditions to exercise, subject to the terms of the Option
Agreement and the Plan, and provided that the Committee may not accelerate the
exercise date prior to the HSI Closing. No Option shall be exercisable after the
expiration of ten (10) years from the date of grant (five (5) years in the case
of an Incentive Stock Option granted to a Substantial Stockholder). Each Option
shall be subject to earlier termination as provided in Section 7 below.
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(e) Special Rule for Incentive Options. If required by Section 422 of
the Code, to the extent the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by a
Key Employee during any calendar year (under all plans of his or her employer
corporation and its parent and subsidiary corporations) exceeds $100,000, such
Options shall not be treated as Incentive Stock Options. Nothing in this special
rule shall be construed as limiting the exercisability of any Option, unless the
Committee expressly provides for such a limitation at time of grant.
(f) Acceleration of Exercisability on Change of Control. Upon a Change
of Control (as defined herein) of HSI all Options theretofore granted and not
previously exercisable shall become fully exercisable. For this purpose, a
"Change of Control" shall be deemed to have occurred upon:
(i) an acquisition by any Person of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Act) of 33% (20% with
respect to Options granted prior to the Restated Effective Date) or more of
either (A) the then outstanding Shares or (B) the combined voting power of
the then outstanding voting securities of HSI entitled to vote generally in
the election of directors (the "Outstanding HSI Voting Securities");
excluding, however, the following: (w) any acquisition directly from the
Company, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from the Company, (x) any acquisition by the Company, (y)
any acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or (z) any acquisition by any corporation
pursuant to a reorganization, merger, consolidation or similar corporate
transaction (in each case, a "Corporate Transaction"), if, pursuant to such
Corporate Transaction, the conditions described in clauses (A), (B) and (C)
of paragraph (iii) of this Section 6 are satisfied; or
(ii) a change in the composition of the Board such that the
individuals who, as of the Restated Effective Date, constitute the Board
(the Board as of the date hereof shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided that for purposes of this Subsection any individual
who becomes a member of the Board subsequent to the date hereof whose
election, or nomination for election by HSI's stockholders, was approved by
a vote of at least a majority of those individuals who are members of the
Board and who are also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such individual
were a member of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of the
Incumbent Board; or
(iii) the approval by the stockholders of HSI of a Corporate
Transaction or, if consummation of such Corporate Transaction is subject,
at the time of such approval by stockholders, to the consent of any
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government or governmental agency, the obtaining of such consent (either
explicitly or implicitly by consummation); excluding, however, such a
Corporate Transaction pursuant to which (A) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of
the outstanding Shares and Outstanding HSI Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares of
common stock of the corporation resulting from such Corporate Transaction
and the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors, in
substantially the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the outstanding Shares and Outstanding HSI
Voting Securities, as the case may be, (B) no Person (other than the
Company, any employee benefit plan (or related trust) of the Company or the
corporation resulting from such Corporate Transaction and any Person
beneficially owning, immediately prior to such Corporate Transaction,
directly or indirectly, 33% (20% with respect to Options granted prior to
the Restated Effective Date) or more of the outstanding Shares or
Outstanding HSI Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 33% (20% with respect to Options granted prior
to the Restated Effective Date) or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the then outstanding securities
of such corporation entitled to vote generally in the election of directors
and (C) individuals who were members of the Incumbent Board will constitute
at least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(iv) the approval of the stockholders of HSI of (A) a complete
liquidation or dissolution of HSI or (B) the sale or other disposition of
all or substantially all of the assets of HSI; excluding, however, such a
sale or other disposition to a corporation with respect to which, following
such sale or other disposition, (x) more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors will be
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the outstanding Shares and Outstanding HSI Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to
such sale or other disposition, of the outstanding Shares and Outstanding
HSI Voting Securities, as the case may be, (y) no Person (other than the
Company and any employee benefit plan (or related trust) of the Company or
such corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 33% (20% with
respect to Options granted prior to the Restated Effective Date) or more of
the outstanding Shares or Outstanding HSI Voting Securities, as the case
may be) will beneficially own, directly or indirectly, 33% (20% with
respect to Options granted prior to the Restated Effective Date) or more
of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors and (z) individuals who were members of the Incumbent Board
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will constitute at least a majority of the members of the board of
directors of such corporation.
(g) Exercise of Options.
(i) A Participant may elect to exercise one or more Options by
giving written notice to the Committee at any time subsequent to an HSI Closing
of such election and of the number of Options such Participant has elected to
exercise, accompanied by payment in full of the aggregate Purchase Price for the
number of shares for which the Options are being exercised.
(ii) Shares purchased pursuant to the exercise of Options shall
be paid for at the time of exercise as follows:
(A) in cash or by check, bank draft or money order payable
to the order of HSI;
(B) if so permitted by the Committee: (x) through the
delivery of unencumbered Shares (including Shares being acquired pursuant
to the Options then being exercised), provided such Shares (or such
Options) have been owned by the Participant for such period as may be
required by applicable accounting standards to avoid a charge to earnings,
(y) through a combination of Shares and cash as provided above, (z) to the
extent permitted by applicable law, by delivery of a promissory note of the
Participant to HSI, such promissory note to be payable on such terms as are
specified in the Option Agreement (except that, in lieu of a stated rate of
interest, the Option Agreement may provide that the rate of interest on the
promissory note will be such rate as is sufficient, at the time the note is
given, to avoid the imputation of interest under the applicable provisions
of the Code), or by a combination of cash (or cash and Shares) and the
Participant's promissory note; provided, that, if the Shares delivered upon
exercise of the Option is an original issue of authorized Shares, at least
so much of the exercise price as represents the par value of such Shares
shall be paid in cash or by a combination of cash and Shares; or
(C) on such other terms and conditions as may be acceptable
to the Committee and in accordance with applicable law. Except as provided
in subsection (h) below, upon receipt of payment, HSI shall deliver to the
Participant as soon as practicable a certificate or certificates for the
Shares then purchased.
(h) Deferred Delivery of Common Stock. The Committee may, in its
discretion, permit Participants to defer delivery of Common Stock acquired
pursuant to a Participant's exercise of an Option in accordance with the terms
and conditions established by the Committee.
7. EFFECT OF TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY
(a) Death, Disability; Retirement, etc. Except as otherwise provided
in the Participant's Option Agreement, upon Termination of Employment or
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Termination of Consultancy, all outstanding Options then exercisable and not
exercised by the Participant prior to such Termination of Employment or
Termination of Consultancy (and any Options not previously exercisable but made
exercisable by the Committee at or after the Termination of Employment or
Termination of Consultancy) shall remain exercisable by the Participant to the
extent not theretofore exercised for the following time periods (subject to
Section 6(d)):
(i) In the event of the Participant's death, such Options shall
remain exercisable (by the Participant's estate or by the person given
authority to exercise such Options by the Participant's will or by
operation of law) for a period of one (1) year from the date of the
Participant's death, provided that the Committee, in its discretion, may at
any time extend such time period to up to three (3) years from the date of
the Participant's death.
(ii) In the event the Participant retires at or after age 65 (or,
with the consent of the Committee or under an early retirement policy of
the Company, before age 65), or if the Participant's employment terminates
due to Disability, such Options shall remain exercisable for one (1) year
from the date of the Participant's Termination of Employment, provided that
the Committee, in its discretion, may at any time extend such time period
to up to three (3) years from the date of the Participant's Termination of
Employment or Termination of Consultancy.
(b) Cause or Voluntary Termination. Upon the Termination of
Employment or Termination of Consultancy of a Participant for Cause (as defined
herein) or by the Participant in violation of an agreement between the
Participant and HSI or any of its Subsidiaries, or if it is discovered after
such Termination of Employment or Termination of Consultancy that such
Participant had engaged in conduct that would have justified a Termination of
Employment or Termination of Consultancy for Cause, all outstanding Options
shall immediately be canceled, provided that with respect to Options granted on
or after the Restated Effective Date, upon any such termination the Committee
may, in its discretion, require the Participant to promptly pay to the Company
(and the Company shall have the right to recover) any gain the Participant
realized as a result of the exercise of any Option that occurred within one (1)
year prior to such Termination of Employment or Termination of Consultancy or
the discovery of conduct that would have justified a Termination of Employment
or Termination of Consultancy for Cause. Termination of Employment or
Termination of Consultancy shall be deemed to be for "Cause" for purposes of
this Section 7(b) if (i) the Participant shall have committed fraud or any
felony in connection with the Participant's duties as an employee or consultant
(as applicable) of HSI or any of its Subsidiaries, or willful misconduct or any
act of disloyalty, dishonesty, fraud or breach of trust or confidentiality as to
HSI or any of its Subsidiaries or the commission of any other act which causes
or may reasonably be expected to cause economic or reputational injury to HSI or
any of its Subsidiaries or (ii) such termination is or would be deemed to be for
Cause under any employment or consulting agreement between HSI or any of its
Subsidiaries and the Participant.
(c) Other Termination. In the event of Termination of Employment or
Termination of Consultancy for any reason other than as provided in Section 7(a)
or in 7(b), all outstanding Options not exercised by the Participant prior to
such Termination of Employment or Termination of Consultancy shall remain
exercisable (to the extent exercisable by such Participant immediately before
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such termination) for a period of three (3) months after such termination,
provided that the Committee in its discretion may extend such time period to up
to one (1) year from the date of the Participant's Termination of Employment or
Termination of Consultancy, and provided further that unless otherwise
determined by the Committee at grant, no Options that were not exercisable
during the period of employment shall thereafter become exercisable.
8. NONTRANSFERABILITY OF OPTIONS
(a) Except as provided in Section 8(b), no Option shall be
transferable by the Participant otherwise than by will or under applicable laws
of descent and distribution, and during the lifetime of the Participant may be
exercised only by the Participant or his or her guardian or legal
representative. In addition, no Option shall be assigned, negotiated, pledged or
hypothecated in any way (whether by operation of law or otherwise), and no
Option shall be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, negotiate, pledge or hypothecate any Option, or in
the event of any levy upon any Option by reason of any execution, attachment or
similar process contrary to the provisions hereof, such Option shall immediately
become null and void.
(b) Notwithstanding the foregoing or any prohibition on transfer
contained in any Option Agreement issued before May 26, 1999, a non-qualified
Option may be transferred, in whole or in part, to a Family Member of the
Participant by gift or domestic relations order unless, with respect to Options
granted on or after May 26, 1999, the Participant's Option Agreement expressly
limits or eliminates such transferability. Effective on the Restated Effective
Date Options are not transferable as provided in Section 8(a), except that the
Committee may determine at the time of grant or thereafter that a non-qualified
Option that is not otherwise transferable pursuant to this Section is
transferable to a Family Member in whole or in part and in such circumstances,
and under such conditions, as specified by the Committee. Any Option so
transferred may thereafter be transferred by the transferee to any other Family
Member of the Participant, and may be exercised by any permitted transferee at
such times and to such extent that such Option would have been exercisable by
the Participant if no transfer had occurred.
9. RIGHTS AS A STOCKHOLDER
A Participant (or a permitted transferee of an Option pursuant to
Section 8(b)) shall have no rights as a stockholder with respect to any Shares
covered by such Participant's Option until such Participant (or a permitted
transferee of an Option pursuant to Section 8(b)) shall have become the holder
of record of such Shares, and no adjustments shall be made for dividends in cash
or other property or distributions or other rights in respect to any such
Shares, except as otherwise specifically provided for in this Plan.
10. DETERMINATIONS
Each determination, interpretation or other action made or taken
pursuant to the provisions of this Plan by the Committee shall be final,
conclusive and binding for all purposes and upon all persons, including, without
limitation, the Participants, HSI and its Subsidiaries, directors, officers and
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other employees of HSI and its Subsidiaries, and the respective heirs,
executors, administrators, personal representatives and other successors in
interest of each of the foregoing.
11. TERMINATION, AMENDMENT AND MODIFICATION
The Plan shall terminate at the close of business on September 30,
2009, unless terminated sooner as hereinafter provided, and no Option shall be
granted under the Plan on or after that date. The termination of the Plan shall
not terminate any outstanding Options which by their terms continue beyond the
termination date of the Plan. At any time prior to September 30, 2009, the Board
or the Committee may amend or terminate the Plan or suspend the Plan in whole or
in part. Notwithstanding the foregoing, however, no such amendment may, without
the approval of the stockholders of HSI, (i) increase the total number of Shares
which may be acquired upon exercise of Options granted under the Plan; (ii)
change the types of employees, consultants or other advisors eligible to be
Participants under the Plan; (iii) effect any change that would require
stockholder approval under Section 162(m) of the Code; or (iv) reduce the
Purchase Price of any outstanding Options (except pursuant to Section 5(d)).
Nothing contained in this Section 11 shall be deemed to prevent the
Board or the Committee from authorizing amendments of outstanding Options, so
long as all Options outstanding at any one time shall not call for issuance of
more Shares than the remaining number provided for under the Plan and so long as
the provisions of any amended Options would have been permissible under the Plan
if such Option had been originally granted or issued as of the date of such
amendment with such amended terms; provided, however, that no outstanding Option
may be amended to reduce the Purchase Price specified therein or canceled in
consideration for an award having a lower exercise price without the approval of
the stockholders of HSI; provided further, however, that the foregoing proviso
shall not be deemed to prohibit adjustments related to stock splits, stock
dividends, mergers, recapitalizations or other changes in the capital structure
or business of HSI pursuant to Section 5(d).
Notwithstanding anything to the contrary contained in this Section 11,
no termination, amendment or modification of the Plan may, without the consent
of the Participant or the transferee of such Participant's Option, alter or
impair the rights and obligations arising under any then outstanding Option.
12. NON-EXCLUSIVITY
Subject to the express provisions contained in the HSI Agreement,
neither the adoption of the Plan by the Board nor the submission of the Plan to
the stockholders of HSI for approval shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting or
issuance of stock options, Shares and/or other incentives otherwise than under
the Plan, and such arrangements may be either generally applicable or limited in
application.
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13. USE OF PROCEEDS
The proceeds of the sale of Shares subject to Options under the Plan
are to be added to the general funds of HSI and used for its general corporate
purposes as the Board shall determine.
14. GENERAL PROVISIONS
(a) Right to Terminate Employment or Consultancy. Neither the
adoption of the Plan nor the grant of Options shall impose any obligations on
the Company to continue the employment or engagement as a consultant of any
Participant, nor shall it impose any obligation on the part of any Participant
to remain in the employ of the Company, subject however to the provisions of any
agreement between the Company and the Participant.
(b) Purchase for Investment. If the Board determines that the law so
requires, the holder of an Option granted hereunder shall, upon any exercise or
conversion thereof, execute and deliver to HSI a written statement, in form
satisfactory to HSI, representing and warranting that such Participant is
purchasing or accepting the Shares then acquired for such Participant's own
account and not with a view to the resale or distribution thereof, that any
subsequent offer for sale or sale of any such Shares shall be made either
pursuant to (i) a registration statement on an appropriate form under the
Securities Act, which registration statement shall have become effective and
shall be current with respect to the Shares being offered and sold, or (ii) a
specific exemption from the registration requirements of the Securities Act, and
that in claiming such exemption the holder will, prior to any offer for sale or
sale of such Shares, obtain a favorable written opinion, satisfactory in form
and substance to HSI, from counsel approved by HSI as to the availability of
such exception.
(c) Trusts, etc. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option
thereunder) shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between HSI and any Participant or the executor,
administrator or other personal representative or designated beneficiary of such
Participant, or any other persons. Any reserves that may be established by HSI
in connection with the Plan shall continue to be part of the general funds of
HSI, and no individual or entity other than HSI shall have any interest in such
funds until paid to a Participant. If and to the extent that any Participant or
such Participant's executor, administrator, or other personal representative, as
the case may be, acquires a right to receive any payment from HSI pursuant to
the Plan, such right shall be no greater than the right of an unsecured general
creditor of HSI.
(d) Notices. Each Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing to such
Participant of notices and the delivery to such Participant of agreements,
Shares and payments. Any notices required or permitted to be given shall be
deemed given if directed to the person to whom addressed at such address and
mailed by regular United States mail, first class and prepaid. If any item
mailed to such address is returned as undeliverable to the addressee, mailing
will be suspended until the Participant furnishes the proper address.
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(e) Severability of Provisions. If any provisions of the Plan shall
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions of the Plan, and the Plan shall be construed and
enforced as if such provisions had not been included.
(f) Payment to Minors, Etc. Any benefit payable to or for the benefit
of a minor, an incompetent person or other person incapable of receipting
therefor shall be deemed paid when paid to such person's guardian or to the
party providing or reasonably appearing to provide for the care of such person,
and such payment shall fully discharge the Committee, the Company and their
employees, agents and representatives with respect thereto.
(g) Headings and Captions. The headings and captions herein are
provided for reference and convenience only. They shall not be considered part
of the Plan and shall not be employed in the construction of the Plan.
(h) Controlling Law. The Plan shall be construed and enforced
according to the laws of the State of New York.
15. ISSUANCE OF STOCK CERTIFICATES;
LEGENDS AND PAYMENT OF EXPENSES
-------------------------------
(a) Stock Certificates. Upon any exercise of an Option and payment of
the exercise price as provided in such Option, a certificate or certificates for
the Shares as to which such Option has been exercised shall be issued by HSI in
the name of the person or persons exercising such Option and shall be delivered
to or upon the order of such person or persons.
(b) Legends. Certificates for Shares issued upon exercise of an
Option shall bear such legend or legends as the Committee, in its discretion,
determines to be necessary or appropriate to prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act
or to implement the provisions of any agreements between HSI and the Participant
with respect to such Shares.
(c) Payment of Expenses. The Company shall pay all issue or transfer
taxes with respect to the issuance or transfer of Shares, as well as all fees
and expenses necessarily incurred by the Company in connection with such
issuance or transfer and with the administration of the Plan.
16. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board shall determine in its sole discretion that
the listing, registration or qualification of the Shares covered by the Plan
upon any national securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the award or sale of Shares
under the Plan, no Shares will be delivered unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable to
the Board.
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17. WITHHOLDING TAXES
Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option, HSI shall have the right to require the
Participant or such other person to pay to HSI the amount of any taxes which HSI
may be required to withhold before delivery to such Participant or other person
of cash or a certificate or certificates representing such Shares.
Upon the disposition of Shares acquired pursuant to the exercise of an
Incentive Stock Option, HSI shall have the right to require the payment of the
amount of any taxes which are required by law to be withheld with respect to
such disposition.
Unless otherwise prohibited by the Committee or by applicable law, a
Participant may satisfy any statutorily required withholding tax obligation by
any of the following methods, or by a combination of such methods: (a) securing
payment in cash or property in lieu of withholding; (b) authorizing HSI to
withhold from the Shares otherwise payable to such Participant (1) one or more
of such Shares having an aggregate Fair Market Value, determined as of the date
the withholding tax obligation arises, less than or equal to the amount of the
total withholding tax obligation or (2) cash in an amount less than or equal to
the amount of the total withholding tax obligation; or (c) delivering to HSI
previously acquired Shares (none of which Shares may be subject to any claim,
lien, security interest, community property right or other right of spouses or
present or former family members, pledge, option, voting agreement or other
restriction or encumbrance of any nature whatsoever) having an aggregate Fair
Market Value, determined as of the date the withholding tax obligation arises,
less than or equal to the amount of the total withholding tax obligation.
18. SECTION 16(B) OF THE ACT
All elections and transactions under the Plan by persons subject to
Section 16 of the Act involving Shares are intended to comply with all exemptive
conditions under Rule 16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Act, as it may deem necessary or proper for the administration and
operation of the Plan and the transaction of business thereunder.
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