NICHE PHARMACEUTICALS, INC.
1996 Senior Executive Stock Option Plan
---------------------------------------
1. Purpose of the Plan. The Niche Pharmaceuticals, Inc.
1996 Senior Executive Stock Option Plan (the "Plan") is intended to advance the
interests of Niche Pharmaceuticals, Inc. (the "Company") by providing an
incentive and reward for certain senior executives (the "Senior Executives") who
are in a position to contribute substantially to the progress and success of the
Company, to closely align the interests of the Senior Executives with the
interests of stockholders of the Company by linking benefits to stock
performance and to retain the services of such Senior Executives. This is
accomplished by providing for the granting of "Options" to the Senior
Executives.
2. Administration. The Plan shall be administered by the Board
of Directors of the Company (the "Board of Directors") or by a committee (the
"Committee") chosen by the Board of Directors. Except as herein specifically
provided, the interpretation and construction by the Board of Directors or the
Committee of any provision of the Plan or of any Option granted under it shall
be final and conclusive. The receipt of Options by Directors, or any members of
the Committee, shall not preclude their vote on any matters in connection with
the administration or interpretation of the Plan.
1
3. Shares Subject to the Plan. The stock subject to
Options granted under the Plan shall be shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), whether authorized but unissued
or held in the Company's treasury, or shares purchased from stockholders
expressly for use under the Plan. The maximum number of shares of Common Stock
which may be issued pursuant to Options granted under the Plan shall not exceed
in the aggregate four hundred five thousand (405,000) shares, subject to
adjustment in accordance with the provisions of Section 11 hereof. The Company
shall, at all times while the Plan is in force, reserve such number of shares of
Common Stock as will be sufficient to satisfy the requirements of all
outstanding Options granted under the Plan.
4. Participation; Number of Options.
(a) The Senior Executives that shall be eligible to
receive Options under the Plan shall be Stephen F. Brandon
("Brandon"), Thomas F. Reed ("Reed"), Jean Sperry ("Sperry") and
Allan Avery ("Avery").
(b) The Board of Directors may grant to the following
Senior Executives Options covering the number of shares set forth next to their
respective names below:
Name Number of Shares Underlying Options
---- -----------------------------------
Brandon 283,500
Reed 72,900
Sperry 24,300
Avery 24,300
2
5. Options under the Plan. The Options granted under
the Plan shall be subject to the following terms and conditions:
(a) The option price of the shares subject to an
Option shall be Five Dollars ($5.00) per share, subject to adjustment in
accordance with the provisions of Section 11 hereof.
(b) The Options shall vest to the extent of one-third
(1/3) of the number of shares covered thereby in each of 1999, 2000 and 2001,
respectively, upon the date that the Company's audited financial statements for
the fiscal years ended December 31, 1998, 1999 and 2000, respectively, are
issued, provided that the Company's cumulative pre-tax income from operations
from January 1, 1997 through December 31, 1997, 1998 or 1999, as the case may
be, as reflected in the Company's audited financial statements through the end
of the particular fiscal year, exceeds $300,000, $3,000,000 or $7,500,000,
respectively, without giving effect to any deferred financing costs resulting
from the issuance by the Company to Dominant Construction Corp. of 100,000
shares of Common Stock, in the Company's bridge financing transaction which
closed on December 9, 1996 (the "Cumulative Goals"), provided, however, that, in
the event a Cumulative Goal through the end of a particular year is not met, the
installment of Options which would have vested for that particular year had the
Cumulative Goal been met will nevertheless
3
vest in a future year if the Cumulative Goal which relates to the vesting of
Options through the end of that future year is met. As an example of the
foregoing, in the event the Company's pre-tax income from operations (as
determined above) for the first fiscal year ended December 31, 1997 equals
$200,000, the initial one-third installment of the Option will not then vest;
however, in the event the cumulative pre-tax income from operations for the
fiscal year ended December 31, 1997 and 1998 equal $3,100,000, then at such
time, the Option will vest to the extent of two-thirds of the shares covered
thereby.
(c) The Options granted under the Plan shall expire
on December 31, 2006 at 5:00 p.m. Roanoke, Texas time (subject to earlier
termination as expressly provided in Section 9 hereof).
6. Stock Option Agreement. Each Option granted under
the Plan shall be authorized by the Board of Directors or the
Committee, and shall be evidenced by a Stock Option Agreement which
shall be executed by the Company and by the Senior Executive to
whom such Option is granted.
7. Rights of Option Holders. The holder of any Option
granted under the Plan shall have none of the rights of a
stockholder with respect to the stock covered by his Option until
such stock shall be transferred to him upon the exercise of his
Option.
4
8. Transferability. No Option granted under the Plan shall be
transferable by the Senior Executive to whom it was granted otherwise than by
Will or the laws of descent and distribution, and, during the lifetime of such
Senior Executive, shall not be exercisable by any other person, but only by him.
9. Termination of Employment or Death.
(a) Subject to the terms of the Stock Option
Agreement, if the employment or services of a Senior Executive shall be
terminated for cause or voluntarily by the Senior Executive, then his Option
shall expire forthwith. Subject to the terms of the Stock Option Agreement, and
except as provided in subsections (b) and (c) of this Section 9, if such
employment or services shall terminate for any other reason, then such Option
may be exercised at any time within three (3) months after such termination,
subject to the provisions of subsection (d) of this Section 9. For purposes of
the Plan, the retirement of a Senior Executive either pursuant to a pension or
retirement plan adopted by the Company or at the normal retirement date
prescribed from time to time by the Company shall be deemed to be termination of
such Senior Executive's employment other than voluntarily or for cause. For
purposes of this subsection (a), a Senior Executive who leaves the employ or
services of the Company to become an employee or non-employee Director of, or a
consultant or advisor to, a
5
subsidiary corporation of the Company or a corporation (or subsidiary or parent
corporation of the corporation) which has assumed the Option of the Company as a
result of a corporate reorganization, etc., shall not be considered to have
terminated his employment.
(b) If the Senior Executive holding an Option under
the Plan dies (i) while employed by, or while serving as a non-employee Director
for or a consultant or advisor to, the Company or a subsidiary corporation of
the Company, or (ii) within three (3) months after the termination of his
employment or services other than voluntarily by the Senior Executive or for
cause, then such Option may, subject to the provisions of subsection (d) of this
Section 9, be exercised by the estate of the Senior Executive, or by a person
who acquired the right to exercise such Option by bequest or inheritance or by
reason of the death of such Senior Executive at any time within one (1) year
after such death.
(c) Subject to the terms of the Stock Option
Agreement, if the Senior Executive holding an Option under the Plan ceases
employment or services because of permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) while employed by, or while serving as
a non-employee Director for or consultant or advisor to, the Company or a
subsidiary corporation of the Company, then such Option may, subject to the
6
provisions of subsection (d) of this Section 9, be exercised at any time within
one (1) year after his termination of employment, termination of Directorship or
termination of consulting or advisory services, as the case may be, due to the
disability.
(d) An Option may not be exercised pursuant to this
Section 9 except to the extent that the Senior Executive was entitled to
exercise the Option at the time of termination of employment, termination of
Directorship, termination of consulting or advisory services, or death, and in
any event may not be exercised after the expiration of the Option.
(e) For purposes of this Section 9, the employment
relationship of the Senior Executive will be treated as continuing intact while
he is on military or sick leave or other bona fide leave of absence (such as
temporary employment by the Government) if such leave does not exceed ninety
(90) days, or, if longer, so long as his right to reemployment is guaranteed
either by statute or by contract.
10. Exercise of Options.
(a) Upon vesting, any Option granted under the Plan
shall be exercisable as provided herein, in whole at any time, or in part from
time to time, prior to expiration. The Board of Directors or the Committee, in
its absolute discretion, may provide in any Stock Option Agreement that the
7
exercise of any Options granted under the Plan shall be subject (i) to such
condition or conditions as it may impose, and (ii) to such limitations as it may
impose.
(b) An Option granted under the Plan shall be
exercised by the delivery by the holder thereof to the Company at its principal
office (attention of the Secretary) of written notice of the number of shares
with respect to which the Option is being exercised. Such notice shall be
accompanied, or followed within ten (10) days of delivery thereof, by payment of
the full option price of such shares, and payment of such option price shall be
made by the holder's delivery of (i) his check payable to the order of the
Company, or (ii) previously acquired Common Stock, the fair market value of
which shall be determined as of the date of exercise, or by the holder's
delivery of any combination of the foregoing (i) and (ii). In addition, the
holder shall, upon notification of the amount due and prior to or concurrently
with delivery to the holder of a certificate representing such shares, pay
promptly any amount necessary to satisfy applicable Federal, state or local tax
withholding requirements (the "Withholding Tax"). Alternatively, the Holder and
the Company can agree prior to the delivery to the Holder of a certificate
representing such shares, that the Company can withhold such number of shares
issuable upon the exercise of the Option having a fair market value as
determined as of the date of exercise equal to the amount necessary to satisfy
the Withholding Tax.
8
11. Adjustment Upon Change in Capitalization.
(a) In the event that the outstanding Common Stock
is hereafter changed by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares,
reverse split, stock dividend or the like, an appropriate adjustment shall be
made by the Board of Directors or the Committee in the aggregate number of
shares available under the Plan, and in the number of shares and option price
per share subject to outstanding Options. If the Company shall be reorganized,
consolidated, or merged with another corporation, the holder of an Option shall
be entitled to receive upon the exercise of his Option the same number and kind
of shares of stock or the same amount of property, cash or securities as he
would have been entitled to receive upon the happening of any such corporate
event as if he had been, immediately prior to such event, the holder of the
number of shares covered by his Option.
(b) Any adjustment in the number of shares shall
apply proportionately to only the unexercised portion of the Option granted
hereunder. If fractions of a share would result from any such adjustment, the
adjustment shall be revised to the next lower whole number of shares.
9
12. Further Conditions of Exercise.
(a) Unless prior to the exercise of the Option the
issuance of the shares issuable upon such exercise have been registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, the notice of exercise shall be accompanied by a representation or
agreement of the person or estate exercising the Option to the Company to the
effect that such shares are being acquired for investment purposes and not with
a view to the distribution thereof, or such other documentation as may be
required by the Company, unless in the opinion of counsel to the Company such
representation, agreement or documentation is not necessary to comply with such
Act.
(b) The Company shall not be obligated to deliver
any Common Stock until it has been listed on each securities exchange on which
the Common Stock may then be listed and until there has been qualification under
or compliance with such federal or state laws, rules or regulations as the
Company may deem applicable. The Company shall use reasonable efforts to obtain
such listing, qualification and compliance.
13. Effectiveness of the Plan. The Plan was adopted by
the Board of Directors on December 11, 1996.
10
14. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted
under the Plan) shall terminate on December 10, 2006, which is within ten (10)
years from the date of its adoption by the Board of Directors, or sooner as
hereinafter provided, and no Option shall be granted after termination of the
Plan.
(b) The Board of Directors may at any time, on or
before the termination date referred to in Section 14(a) hereof, terminate the
Plan, or from time to time make such modifications or amendments to the Plan as
it may deem advisable.
(c) No termination, modification, or amendment of
the Plan may, without the consent of the Senior Executive to whom any Option
shall have been granted, adversely affect the rights conferred by such Option.
15. Not a Contract of Employment. Nothing contained in the
Plan or in any Stock Option Agreement executed pursuant hereto shall be deemed
to confer upon any Senior Executive to whom an Option is or may be granted
hereunder any right to remain in the employ or service of the Company or a
subsidiary corporation of the Company or any entitlement to any remuneration or
other benefit pursuant to any consulting or advisory arrangement.
16. Use of Proceeds. The proceeds from the sale of
shares pursuant to Options granted under the Plan shall constitute general funds
of the Company.
11
17. Indemnification of Board of Directors or Committee.
In addition to such other rights of indemnification as they may have, the
members of the Board of Directors or the Committee, as the case may be, shall be
indemnified by the Company to the extent permitted under applicable law against
all costs and expenses reasonably incurred by them in connection with any
action, suit, or proceeding to which they or any of them may be a party by
reason of any action taken or failure to act under or in connection with the
Plan or any rights granted thereunder and against all amounts paid by them in
settlement thereof or paid by them in satisfaction of a judgment of any such
action, suit or proceeding, except a judgment based upon a finding of bad faith.
Upon the institution of any such action, suit, or proceeding, the member or
members of the Board of Directors or the Committee, as the case may be, shall
notify the Company in writing, giving the Company an opportunity at its own cost
to defend the same before such member or members undertake to defend the same on
his or their own behalf.
18. Definitions. For purposes of the Plan, the terms
"parent corporation" and "subsidiary corporation" shall have the meanings set
forth in Sections 424(e) and 424(f) of the Code, respectively, and the masculine
shall include the feminine and the neuter as the context requires.
19. Governing Law. The Plan shall be governed by, and all
questions arising hereunder shall be determined in accordance with, the laws of
the State of Delaware.
12
K:\WPDOC\CORP\NICHE\STKOPT\SENIOSOP.AGM