HENRY SCHEIN, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
As Amended and Restated Effective as of April 1, 2003
1. PURPOSE OF THE PLAN
The purposes of this Henry Schein, Inc. 1996 Non-Employee Director Stock
Incentive Plan, as amended and restated effective as of April 1, 2003, are to
enable Henry Schein, Inc. (the "Company") to attract, retain and motivate
directors of the Company who are not employees of the Company or its
subsidiaries ("Non-Employee Directors") and who are important to the success of
the Company and to create a mutuality of interest between the Non-Employee
Directors and the stockholders of the Company by granting such directors options
to purchase Common Stock (as defined herein) of the Company and Other
Stock-Based Awards (as defined herein).
2. DEFINITIONS
(a) "Acquisition Event" means a merger or consolidation in which the
Company is not the surviving entity, or any transaction that results in the
acquisition of all or substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities in
concert, or the sale or transfer of all or substantially all of the Company'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 the Company.
(d) "Cause" has the meaning set forth in Section 8(b).
(e) "Change of Control" has the meaning set for in Section 6(e).
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "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. If the Board does not appoint a committee for this purpose or the Board
removes the Committee for any reason, "Committee" means the Board.
(h) "Common Stock" means the voting common stock of the Company, par value
$.01, any common stock into which the common stock may be converted and any
common stock resulting from any reclassification of the common stock.
(i) "Company" means Henry Schein, Inc., a Delaware corporation.
1
(j) "Corporate Transaction" has the meaning set forth in Section 6(e)(i)
(k) "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 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.
(l) "Effective Date' has the meaning set forth in Section 3.
(m) "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 the NASDAQ Stock Market,
Inc. ("'NASDAQ"), the closing sales price of a Share as reported on the relevant
composite transaction tape, if applicable, or on such principal 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 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.
(n) "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.
(o) "HSI Agreement" means the Amended and Restated HSI Agreement dated as
of February 16, 1994 among the Company and certain other parties.
(p) "Incumbent Board" has the moaning set forth in Section 6(e)(ii).
(q) "Non-Employee Directors" means directors of the Company who are not
employees of the Company or its subsidiaries.
(r) "Other Stock-Based Award" shall mean an award of Common Stock and
2
other awards made pursuant to Section 7 that are valued in whole or in part by
reference to, or are payable in or otherwise based on, Common Stock.
(s) "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 granted under the Plan may only be a non-qualified stock Option, and no
Option is intended to qualify as an "incentive stock option" under Section 422
of the Code.
(t) "Outstanding HSI Voting Securities" has the meaning set forth in
Section 6(e)(i).
(u) "Participant" means a Non-Employee Director who is granted Options
under the Plan.
(v) "Person" means an individual, entity or group within the meaning of
Section l3d-3 or 14d-1 of the Act.
(w) "Plan" means the Henry Schein, Inc. 1996 Non-Employee Director Stock
Incentive Plan, as amended from time to time.
(x) "Purchase Price' means purchase price per Share.
(y) "Securities Act" means the Securities Act of 1933, as amended.
(z) "Share" means a share of Common Stock.
(aa) "Termination of Services" means termination of the relationship with
the Company so that an individual is no longer a director of the Company.
3. EFFECTIVE DATE/EXPIRATION OF PLAN
This Plan shall become effective as of March 22, 1996 (the "Effective
Date"), and was amended on March 4, 2002, subject to its approval not later than
the date of the Company's 2002 Annual Meeting of Stockholders by the holders of
a majority of the outstanding shares of Common Stock entitled to vote thereon.
The Plan was subsequently amended and restated 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, and
Other Stock-Based Awards may be granted after the Restated Effective Date,
provided that, if this Plan is not approved in accordance with the preceding
sentence on or before such annual meeting, all Options and Other Stock-Based
Awards granted pursuant to the Plan shall be null and void. Options may not be
exercised prior to such approval. No Option or Other Stock-Based Award shall be
granted under the Plan on or after the tenth anniversary of the Effective Date,
but Options or Other Stock-Based Awards 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
3
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 and/or Other Stock-Based Awards under, the
Plan; to determine the terms, exercise price and form of exercise payment for
each Option or Other Stock-Based Award granted under the Plan; to prescribe the
form or forms of instruments evidencing Options and Other Stock-Based Awards 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 and Other
Stock-Based Awards 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, award 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.
(b) Advisors. The Committee may designate the Secretary of the Company,
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 (or
other award agreement) or other documents on behalf of the Committee; PROVIDED,
that no Participant may execute any Option agreement (or other award agreement)
granting Options or Other Stock-Based Awards 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. To the maximum extent permitted by law, no officer,
member or former officer or member of the Committee or the Board shall be liable
for any action or determination made in good faith with respect to the Plan or
any Option or Other Stock-Based Awards granted under it. To the maximum extent
permitted by applicable law or the Certificate of Incorporation or By-Laws of
the Company and to the extent not covered by insurance, each officer, member or
former officer or member of the Committee or of the Board shall be indemnified
and held harmless by the Company against any cost or expense (including
reasonable fees of counsel reasonably acceptable to the Company) or liability
(including any sum paid in settlement of a claim with the approval of the
Company), 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 officer's or member's own fraud or bad faith. Such
indemnification shall be in addition to any rights of indemnification the
officers, members or former officers or members may have as directors under
applicable law or under the Certificate of Incorporation or By-Laws of the
Company or otherwise.
(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
4
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 vote of such members at a meeting
duly called and held.
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 the Company
and held in treasury. No fractional Shares will be issued or transferred upon
the exercise of any Option or as a result of the conversion of any Other
Stock-Based Awards. In lieu thereof, the Company 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 200,000 Shares of Common Stock. If Options or Other Stock-Based Awards are
for any reason canceled, or expire or terminate unexercised (as applicable), the
Shares covered by such Options and such Other Stock-Based Awards shall again be
available for grant, subject to the foregoing limit. In addition, if Common
Stock has been exchanged by a Participant as full or partial payment to the
Company 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 the Company 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) Adjustments; Recapitalization, etc. The existence of the Plan and the
Options and Other Stock-Based Awards granted hereunder shall not affect in any
way the right or power of the Board or the stockholders of the Company to make
or authorize any adjustment, recapitalization, reorganization or other change in
the Company's capital structure or its business, any merger or consolidation of
the Company, any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting Common Stock, the dissolution or liquidation of the
Company or any sale or transfer of all or part of its assets or business or any
other corporate act or proceeding. If and whenever the Company takes any such
action, however, the following provisions, to the extent applicable, shall
govern:
(i) If and whenever the Company shall effect a stock split, stock
dividend, subdivision, recapitalization or combination of Shares or other
changes in the Company'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 or Other
Stock-Based Awards converted, 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 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
5
determines that such adjustment is appropriate to avoid distortion in the
operation of the Plan.
(ii) Subject to Section 5(c)(iii), if the Company 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 or conversion of Other Stock-Based Awards, the Participant shall be
entitled to purchase under such Options and receive under such Other Stock-Based
Awards, in lieu of the number of Shares as to which such Options shall then be
exercisable, or Other Stock-Based Awards be converted, but on the same terms and
conditions set forth in the applicable award agreement, 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) or
upon conversion of such Other Stock-Based Awards.
(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 or Other Stock-Based Award (solely to the extent such award
gives a Participant an exercise right) 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 or such Other Stock-Based Awards
described in this subsection (iii) 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 or
Other Stock-Based Award described in this subsection (iii) pursuant to the
preceding sentence, then the provisions of Section 5(c)(ii) shall apply.
(iv) 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 or conversion of Other Stock-Based Awards 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.
(v) Except as hereinbefore expressly provided, the issuance by the
Company 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 Other Stock-Based Awards and Options theretofore granted of
the Purchase Price per Share.
6
6. AWARDS AND TERMS OF OPTIONS;
(a) Grant. The Committee may grant Options to Non-Employee Directors.
(b) Exercise Price. The Purchase Price deliverable upon the exercise of an
Option shall equal 100% of the Fair Market Value on the date of grant.
(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.
(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. No Option shall be exercisable after the expiration of
ten (10) year from the date of grant. Each Option shall be subject to earlier
termination as provided in Section 8 below.
(e) Acceleration of Exercisability on Change of Control. All Options
granted and not previously exercisable shall become exercisable immediately upon
the later of a Change of Control (as defined herein) or approval of this Plan in
accordance with Section 3. 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 the Company 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 hereof, 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 the Company's stockholders,
was approved by a vote of at least a majority of those individuals who are
members of 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
7
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 the Company 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
government or governmental agency, the obtaining of such consent (either
explicitly or implicitly by consummation), excluding, however, such
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, notwithstanding the
foregoing, no Change of Control will occur if the Incumbent Board approves
the Corporate Transaction; or
(iv) the approval of the stockholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company;
excluding, however, such 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
8
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
will constitute at least a majority of the members of the board of
directors of such corporation.
(f) Exercise of Options.
(i) A Participant may elect to exercise one or more Options by giving
written notice to the Committee 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 the Company;
(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 or (y)
through a combination of Shares and cash as provided above, 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. Upon receipt of payment,
the Company shall deliver to the Participant as soon as practicable a
certificate or certificates for the Shares then purchased.
7. AWARDS OF OTHER STOCK-BASED AWARDS
Other Stock-Based Awards, including, without limitation, stock appreciation
rights, performance shares, deferred shares, shares of Common Stock and
restricted stock units, may be granted either alone, or in addition to, or in
tandem with, Options. The Company may, in its discretion, permit Non-Employee
Directors to defer a portion of their cash compensation in the form of Other
Stock-Based Awards granted under this Plan, subject to the terms and conditions
of any deferred compensation arrangement established by the Company.
9
Subject to the provisions of this Plan, the Committee shall have authority
to determine the Non-Employee Directors to whom and the time or times at which
such Other Stock-Based Awards shall be made, the number of shares of Common
Stock to be awarded pursuant to such Other Stock-Based Awards, and all other
conditions of the Other Stock-Based Awards.
(a) Other Stock-Based Awards made pursuant to this Section shall be
subject to the following terms and conditions:
(i) Dividends. Unless otherwise determined by the Committee at
the time of grant, subject to the provisions of the award agreement and this
Plan, the recipient of an Other Stock-Based Award shall be entitled to receive,
currently or on a deferred basis, dividends or dividend equivalents with respect
to the number of shares of Common Stock covered by the Other Stock-Based Award,
as determined at the time of grant by the Committee, in its sole discretion.
(ii) Vesting. Other Stock-Based Awards and any Common Stock
covered by any such Other Stock-Based Award shall vest or be forfeited to the
extent so provided in the award agreement, as determined by the Committee, in
its sole discretion.
(iii) Waiver of Limitation. The Committee may, in its sole
discretion, waive in whole or in part any or all of the limitations imposed
hereunder (if any) with respect to any or all of an Other Stock-Based Award
granted under this Plan.
(iv) Price. Common Stock or Other Stock-Based Awards purchased
pursuant to a purchase right awarded under this Plan shall be priced as
determined by the Committee.
8. EFFECT OF TERMINATION OF SERVICES ON OPTIONS AND OTHER STOCK-BASED AWARDS
(a) Death, Disability, Retirement, etc. Except as otherwise provided in
the Participant's option agreement or in this Plan, upon Termination of
Services, all outstanding Options then exercisable and not exercised by the
Participant prior to such Termination of Services (and any Options not
previously exercisable but made exercisable by the Committee at or after the
Termination of Services) 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, before age 65), or if the Participant's
services terminate due to Disability, such Options shall remain exercisable
for one (1) year from the date of the Participant's Termination of
Services, 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
10
Participant's Termination of Services.
(b) Cause or Voluntary Termination. Upon the Termination of Services of a
Participant for cause (as defined herein) or if it is discovered after such
Termination of Services that such Participant had engaged in conduct that would
have justified a Termination of Services 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 Services or the discovery of conduct that
would have justified a Termination of Services for Cause. Termination of
Services shall be deemed to be for "Cause" for purposes of this Section 8(b) if
the Participant shall have committed fraud or any felony in connection with the
Participant's duties as a director of the Company or willful misconduct or any
act of disloyalty, dishonesty, fraud or breach of trust, confidentiality or
fiduciary duties as to the Company or the commission of any other act which
causes or may reasonably be expected to cause economic or reputational injury to
the Company.
(c) Other Termination. In the event of Termination of Services for any
reason other than as provided in Section 8(a) and 8(b), all outstanding Options
then exercisable and not exercised by the Participant prior to such Termination
of Services shall remain exercisable (to the extent exercisable by such
Participant immediately before 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 Services.
(d) Rules Applicable to Other Stock-Based Awards. Subject to the award
agreement and this Plan, upon a Participant's Termination of Service for any
reason during any period or restriction as may be applicable for an Other
Stock-Based Award, the Other Stock-Based Awards in question shall vest or be
forfeited in accordance with the terms and conditions established by the
Committee at the time of grant or thereafter.
9. NONTRANSFERABILITY OF OPTIONS AND OTHER STOCK-BASED AWARDS
Except as otherwise provided below, no Option or Other Stock-Based Award
shall be transferable by the Participant otherwise than by will or under
applicable laws of descent and distribution, and during the lifetime of the
holder may be exercised only by the holder or his or her guardian or legal
representative. In addition, no Option or Other Stock-Based Award shall be
assigned, negotiated, pledged or hypothecated in any way (whether by operation
of law or otherwise), and no Option or Other Stock-Based Award shall be subject
to execution, attachment or similar process. Upon any attempt to transfer,
assign, negotiate, pledge or hypothecate any Option or Other Stock-Based Award,
or in the event of any levy upon any Option or Other Stock-Based Award by reason
of any execution, attachment or similar process contrary to the provisions
hereof, such Option or Other Stock-Based Award shall immediately be cancelled.
Notwithstanding the foregoing, the Committee may determine at the time of
grant or thereafter that an Option or Other Stock-Based Award 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 or Other Stock-Based Award so
11
transferred may thereafter be transferred by the transferee to any other Family
Member of the Participant, and any Option or Other Stock-Based Award (solely to
the extent such award gives a Participant an exercise right) may be exercised by
any permitted transferee at such times and to such extent that such Option or
such Other Stock-Based Award would have been exercisable by the Participant if
no transfer had occurred.
10. RIGHTS AS A STOCKHOLDER
A holder of an Option or Other Stock-Based Award shall have no rights as a
stockholder with respect to any Shares covered by such holder's Option or Other
Stock-Based Award until such holder 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.
11. 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 holders of any Options or Other Stock-Based Awards and Non-Employee
Directors and their respective heirs, executors, administrators, personal
representatives and other successors in interest.
12. TERMINATION, AMENDMENT AND MODIFICATION
The Plan shall terminate at the close of business on the tenth anniversary
of the Effective Date, unless terminated sooner as hereinafter provided, and no
Option or Other Stock-Based Award shall be granted under the Plan on or after
that date. The termination of the Plan shall not terminate any outstanding
Options or Other Stock-Based Awards which by their terms continue beyond the
termination date of the Plan. At any time prior to the tenth anniversary of the
Effective Date, 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 the Company,
(i) increase the total number of Shares which may be subject to Options or Other
Stock-Based Award granted under the Plan; or (ii) change the requirements for
eligibility for participation in the Plan.
Subject to the provisions of this Section 12, nothing contained in this
Section 12 (except as provided in the next paragraph) shall be deemed to prevent
the Board or the Committee from authorizing amendments of outstanding Options or
Other Stock-Based Awards of Participants, including, without limitation, the
reduction of the Purchase Price specified therein (or the granting or issuance
of new Options at a lower Purchase Price upon cancellation of outstanding
Options), so long as (i) all Options outstanding at any one time shall not call
for issuance of more Shares than the remaining number provided for under the
Plan, (ii) 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 and (iii) the provisions
regarding stockholder approval set forth below in this Section 12 are complied
with.
Notwithstanding anything to the contrary contained in this Section 12,
without the approval of the stockholders of the Company, no outstanding Option
12
may be modified to reduce the Purchase Price thereof nor may a new Option at a
lower price be substituted for a simultaneously surrendered Option, provided
that the foregoing shall not apply to adjustments or substitutions in accordance
with Section 5.
Notwithstanding anything to the contrary contained in this Section 12, no
termination, amendment or modification of the Plan may, without the consent of
the Participant or the transferee of such Participant's Option or Other
Stock-Based Award, alter or impair the rights and obligations arising under any
then outstanding Option or Other Stock-Based Award.
13. 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 the Company 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.
14. USE OF PROCEEDS
The proceeds of the sale of Shares subject to Options or Other Stock-Based
Awards under the Plan are to be added to the general funds of the Company and
used for its general corporate purposes as the Board shall determine.
15. GENERAL PROVISIONS
(a) Right to Terminate Services. Neither the adoption of the Plan nor the
grant of Options or Other Stock-Based Awards shall impose any obligations on the
Company to retain any Participant as a director nor shall it impose any
obligation on the part of any Participant to remain a director.
(b) Purchase for Investment. If the Board determines that the law so
requires, the holder of an Option or Other Stock-Based Award granted hereunder
shall, upon any exercise or conversion thereof, execute and deliver to the
Company a written statement, in form satisfactory to the Company, 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 in
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 the Company,
from counsel approved by the Company 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 or
Other Stock-Based Award thereunder) shall create or be construed to create a
trust of any kind, or a fiduciary relationship, between the Company and any
Participant or the executor, administrator or other personal representative or
13
designated beneficiary of such Participant, or any other persons. Any reserves
that may be established by the Company in connection with the Plan shall
continue to be part of the general funds of the Company, and no individual or
entity other than the Company 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 the Company pursuant
to the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company.
(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.
(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) Readings 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.
16. 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, or upon conversion of an Other
Stock-Based Award, a certificate or certificates for the Shares as to which such
Option has been exercised or Other Stock-Based Award has been converted, shall
be issued by the Company in the name of the person or persons exercising such
Option or converting such Other Stock-Based Award 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 or
conversion of an Other Stock-Based Award 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 the Company 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
14
expenses necessarily incurred by the Company in connection with such issuance or
transfer and with the administration of the Plan.
17. 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.
18. WITHHOLDING TAXES
Where a Participant or other person is entitled to receive Shares pursuant
to the exercise of an Option or the conversion of an Other Stock-Based Award,
the Company shall have the right to require the Participant or such other person
to pay to the Company the amount of any taxes which the Company may be required
to withhold before delivery to such Participant or other person of cash or a
certificate or certificates representing such Shares.
15