EXHIBIT 10.2
CHATTEM, INC.
NON-STATUTORY STOCK OPTION PLAN - 1998
1. PURPOSE
The Chattem, Inc. Non-Statutory Stock Option Plan - 1998 (the "Plan") is
designed to enable officers and key management employees of Chattem, Inc.
(the "Company") and its Subsidiaries to continue to acquire shares of the
Company's common stock and thus to share in the future success of the
Company's business. Accordingly, the Plan is intended as a further means not
only of attracting and retaining outstanding management personnel, but also
of promoting a closer identity of interest between key management employees
and the Company and its shareholders.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms, when
used in the Plan, shall have the meanings set forth in this Section 2.
(a) "Beneficiary" means the person or persons designated in writing by
the Optionee or, in the absence of such a designation or if the
designated person or persons predecease the Options, the Optionee's
Beneficiary shall be the person or persons who acquire the right
to exercise the Option by bequest or inheritance. In order to be
effective, an Optionee's designation of a Beneficiary must be on
file with the Committee before the Optionee's death. Any such
designation may be revoked in writing and a new written designation
substituted therefor at any time before the Optionee's death.
(b) "Board of Directors" or "Board" means the board of directors of the
Company.
(c) "Change in Control" means:
(i) Change of 1/3 or more of the directors of the Company within
any twelve (12) month period; or
(ii) Change of 1/2 or more of the directors of the Company within
any twenty-four (24) month period; or
(iii) Acquisition by any person of the ownership of or right to
vote thirty-five percent (35%) or more of the Company's
outstanding voting stock. For purposes of this paragraph
(iii): (A) "person" shall mean any person, corporation,
partnership or other entity and any affiliate or associate
thereof and (B) "affiliate" and "associate" shall have the
meanings given to them in Rule 12b-2 promulgated under the
Exchange Act.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(e) "Committee" means the Compensation Committee of the Board of
Directors. The Committee shall consist of three (3) directors of the
Company who are not employees of the Company and its subsidiaries.
No member of the Committee shall be eligible to participate in the
Plan. Each member of the Committee shall be a "disinterested person,"
as such term may be defined for purposes of Rule 16b-3 or its
successors under the Exchange Act.
(f) "Company" means Chattem, Inc., a corporation incorporated under the
laws of the State of Tennessee.
(g) "Disability" means a disability that entitles the Optionee to
benefits under the Company's Long-Term Disability Plan, as amended
from time to time.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(i) "Fair Market Value" means the closing sale price on the last business
day prior to the date on which Fair Market Value needs to be
determined as reported in the Wall Street Journal, or the average
of the high and low bids on such day if no sale exists.
(j) "Option" means an option to purchase a share or shares of the
Company's common stock.
(k) "Option Agreement" means the written agreement to be entered into by
the Company and the Optionee, as provided in Section 7 hereof.
(l) "Optionee" means a person to whom an Option has been granted under
the Plan.
(m) "Retirement" means retirement from employment with the Company and
its Subsidiaries, as determined by the Committee in its sole
discretion.
(n) "Shares" means shares of the Company's common stock.
(o) "Subsidiary" means a subsidiary corporation as defined in Section
425(f) of the Code (or a successor provision of similar import).
(p) "Term" means the period during which a particular Option may be
exercised in accordance with Section 10 hereof.
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3. EFFECTIVE DATE OF THE PLAN
The Plan shall become effective when adopted by the Board of Directors
and an appropriate registration statement filed with the Securities and
Exchange Commission becomes effective; provided, however, that if the Plan is
not approved by the holders of a majority of the outstanding Shares present,
or represented, and entitled to vote at the meeting before the first
anniversary of its adoption by the board, the Plan and all Options granted
under the Plan prior to such anniversary shall be null and void and shall be
of no effect.
4. NUMBER AND SOURCE OF SHARES SUBJECT TO THE PLAN
(a) The Company may grant Options under the Plan for not more than Three
Hundred Fifty Thousand (350,000) Shares (subject, however, to
adjustment as provided in Section 14 hereof) which shall be provided
by the issuance of Shares authorized but unissued.
(b) In the event that an Option shall for any reason lapse or be
terminated without being exercised in whole or in part, the Shares
subject to the Option shall be restored to the total number of
Shares with respect to which Options may be granted under the Plan,
but only to the extent that the Option has not been exercised
previously.
5. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee.
(b) The Committee shall adopt such rules and regulations (including
amendments thereto) as it may deem proper; provided, however, that
it may take action only upon the agreement of a majority of its
members then in office. Any action that the Committee may take
through a written instrument signed by a majority of its members
then in office shall be as effective as though taken at a meeting
duly called and held.
(c) The powers of the Committee shall include plenary authority to
interpret the Plan, and, subject to the provisions hereof, the
Committee shall determine the persons to whom Options shall be
granted, the number of Shares subject to each Option, the Term of
each Option, the date on which each Option shall be granted, and
the provisions of each Option Agreement.
6. PLAN PARTICIPANTS ELIGIBLE TO RECEIVE OPTIONS
(a) Options may be granted under the Plan to key management employees
of the Company or any Subsidiary, including officers and directors
who, in the judgment of the
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Committee, have a substantial impact on the Company's attainment of
corporate goals. All determinations by the Committee as to the
identity of the persons to whom Options shall be granted hereunder
shall be conclusive. No director who is a member of the Committee
shall be entitled to participate in the Plan.
(b) An individual employee may receive no more than one Option hereunder
during any three (3) year period. The grant of an Option in any year
shall not give the Optionee any right to Options in future years or
any right to be retained in the employ of the Company or its
Subsidiaries.
7. OPTION AGREEMENTS
(a) No Option shall be exercised by an Optionee unless the Optionee shall
have executed and delivered an Option Agreement.
(b) Appropriate officers of the Company are hereby authorized to execute
and deliver Option Agreements in the name of the Company as directed
from time to time by the Committee.
8. NON-STATUTORY OPTIONS
It is intended that the Options granted hereunder shall not be "incentive
stock options" within the meaning of the Code.
9. OPTION PRICE
The Option price to be paid by the Optionee to the Company for each Share
purchased upon the exercise of the Option shall be determined by the
Committee and shall not be less than the Fair Market Value of the Share on
the date the Option is granted, but may exceed Fair Market Value in the sole
discretion of the Committee.
10. TERM OF OPTION; EXERCISE OF OPTION
(a) Each Option granted under the Plan shall be exercisable as
provided in this Section 10. In no event may an Option be
exercised before the approval of the Plan by the holders of a
majority of the outstanding Shares present, or represented,
and entitled to vote at the meeting within the period specified
by Section 3 hereof. The Term of each Option shall end (unless the
Option shall have terminated earlier under any other provisions
of the Plan) on a date ten (10) years from the date of grant of
the Option.
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(b) Each Option shall become exercisable and vested with respect to
twenty-five percent (25%) of the Shares purchasable thereunder on
the first anniversary of the date of the grant of the Option. The
option to purchase an additional twenty-five percent (25%) of such
Shares shall become exercisable and vested, on a cumulative basis,
on each of the three succeeding anniversaries of the date of the
grant of the Option, so that four (4) years from the date of such
grant the option to purchase all such Shares shall have become
exercisable and vested. Notwithstanding the foregoing vesting
schedule (i) each Option shall become exercisable in full
immediately upon a Change in Control and (ii) upon the death,
disability or retirement of an Optionee or termination of an
Optionee's employment pursuant to Section 12(e), any Option held by
such Optionee shall be exercisable in full in accordance with the
provisions of Section 12. When exercising an Option, the Optionee
may purchase less than the full number of Shares then available
under the Option.
(c) Options shall be exercised by delivering or mailing to the Committee:
(1) a notice, in the form and in the manner prescribed by the
Committee, specifying the number of Shares to be purchased,
and
(2) payment in full of the Option price for the Shares in cash
and/or by the tender of Shares (by delivering the
appropriate stock certificates) to the Committee; provided,
however, that (i) the Committee shall determine acceptable
methods for tendering shares to exercise an Option under the
Plan, and may impose such limitations and prohibitions on
the use of Shares to exercise an Option as it deems
appropriate and (ii) the Committee may permit Optionees to
pay for any Shares subject to an Option by delivering to the
Committee a properly executed exercise notice together with
a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds
to pay the purchase price.
The Company may enter into agreements for coordinated
procedures with one or more brokerage firms in connection
with exercises of Options. The value of any Shares tendered
in accordance with this Paragraph (c) shall be determined on
the basis of their Fair Market Value on the date of exercise.
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(d) Subject to the provisions of Section 11(a) hereof, upon receipt of
the notice of exercise and upon payment of the Option price, the
Company shall promptly deliver to the Optionee a certificate or
certificates for the Shares purchased, without charge to the
Optionee for issue or transfer tax.
11. CONDITIONS ON EXERCISE
(a) The exercise of each Option granted under the Plan shall be subject
to the condition that if at any time the Company shall determine in
its discretion that the satisfaction of withholding tax or other
withholding liabilities, or that the listing, registration or
qualification of any Shares otherwise deliverable upon such exercise
upon any securities exchange or under any State or Federal law, or
the consent or approval of any regulatory body, is necessary or
desirable as a condition of, or in connection with, such exercise or
the delivery or purchase of Shares, then in any such event such
exercise or payment shall not be effective or be made unless such
withholding, listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions
not acceptable to the Company. Any such postponement shall not
extend the time within which the Option may be exercised; and neither
the Company nor its directors or officers shall have any obligation
or liability to the Optionee or to a Beneficiary with respect to any
Shares as to which the Option shall lapse because of such
postponement.
(b) All Options granted under the Plan shall be non-transferable other
than by will or by the laws of descent and distribution in
accordance with Section 12(a) hereof, and an Option may be exercised
during the lifetime of the Optionee only by the Optionee.
Further, to the extent required by Rule 16-3 or its successors
under the Exchange Act, Shares acquired by persons subject to
Section 16 of the Exchange Act may not be transferred for at least
six (6) months after the later of (i) the grant of the Option pursuant
to which such Shares were acquired or (ii) approval of the Plan by
the holders of a majority of the outstanding Shares present, or
represented, and entitled to vote at the meeting.
(c) Subject to the provisions of Section 11(b), upon the purchase of
Shares under an Option, the stock certificate or certificates may,
at the request of the Optionee (or the Optionee's Beneficiary, where
the Option is exercised by the Beneficiary), be issued in the name
of the
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Optionee (or Beneficiary) and the name of another person as joint
tenants with the right of survivorship.
12. EXERCISE OF OPTION AFTER DEATH, DISABILITY, RETIREMENT, OR OTHER
TERMINATION OF EMPLOYMENT.
(a) Death. If an Optionee's employment with the Company or a Subsidiary
shall cease due to the Optionee's death, any Option held by the
Optionee on the date of the Optionee's death may be exercised only
with three (3) years after the Optionee's death and only by the
Optionee's Beneficiary. If an Optionee shall die within three (3)
years after cessation of employment while the Option is exercisable
pursuant to Paragraph (b) below, or if the Optionee shall die within
three (3) years after cessation of employment while the Option is
exercisable pursuant to Paragraph (c) below, any Option held by the
Optionee on the date of this death may be exercised after the
Optionee's death only within the remainder of the period prescribed
by Paragraph (b) or Paragraph (c), as the case may be, and only by the
the Optionee's Beneficiary. Notwithstanding the foregoing, in no
event shall the Option be exercisable after the expiration date
thereof specified in the Option Agreement.
(b) Disability. If an Optionee's employment with the Company or a
Subsidiary ceases due to Disability, the Optionee may exercise the
Option at any time within three (3) years after the Optionee shall
so cease to be an employee; provided, however, that in no event
shall the Option be exercisable after the expiration date thereof
specified in the Option Agreement.
(c) Retirement. If an Optionee's employment with the Company or a
Subsidiary ceases due to Retirement, the Optionee may exercise the
Option at any time within three (3) years after the Optionee shall
so cease to be an employee; provided, however, that in no event
shall the Option be exercisable after the expiration date thereof
specified in the Option Agreement.
(d) Leave of Absence. The Committee shall have the sole authority to
determine whether, in any particular case, a leave of absence shall
result in a termination of employment for purposes of this Section 12.
(e) Divestiture. If an Optionee's employment with the Company or a
Subsidiary ceases due to divestiture of a Subsidiary or other
distinct business unit of the Company, the Optionee may exercise the
Option at any time within ninety (90) days after the divestiture,
provided that the Optionee is an employee on the actual date of the
divestiture; and further provided, that in no event
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shall the Option be exercisable after the expiration date thereof
specified in the Option Agreement.
(f) Termination for Other Reasons. Upon termination of an Optionee's
employment with the Company or a Subsidiary for any reason other
than those specified in a Paragraphs (a) through (e) above, the
Optionee may exercise the Option (to the extent vested) at any time
within thirty (30) days after such termination; provided, however,
that in no event shall the Option be exercisable after the
expiration date thereof specified in the Option Agreement.
13. STOCKHOLDER RIGHTS
No person shall have any rights of a stockholder by virtue of an Option
Except with respect to Shares actually issued to him or her, and the issuance
of Shares shall confer no retroactive right to dividends.
14. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event that there is a change in the Shares through merger,
consolidation, reorganization, recapitalization, or otherwise, or if
there shall be any dividend on the Company's Shares, payable in such Shares,
or if there shall be a stock split or combination of Shares, the Aggregate
number of Shares available for Options, the number of Shares subject to
outstanding Options, and the Option price per shares of each outstanding
Option shall be proportionately adjusted by the Committee as it deems equitable
in its absolute discretion, to prevent dilution or enlargement of the rights of
the Optionee; provided, that any fractional Shares resulting from such
adjustments shall be eliminated. The Committee's determination with respect
to any such adjustments shall be conclusive.
15. EFFECT OF MERGER OR OTHER REORGANIZATION
If the Company shall be the surviving corporation in a merger or other
reorganization, Options shall extend to stock and securities of the Company
to the same extent that a holder of that number of shares immediately before
the merger or consolidation corresponding to the number of Shares covered by
the Option would be entitled to have or obtain stock and securities of the
Company under the terms of the merger or consolidation.
16. TERMINATION, SUSPENSION OR MODIFICATION OF PLAN
The Committee may at any time terminate, suspend or modify the Plan,
except that the Committee shall not, without the authorization of the holders
of a majority of the Company's outstanding Shares at a shareholders' meeting
duly called and held, change (other than through adjustment for changes in
capitalization
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as provided in Section 14 hereof): (a) the aggregate number of Shares with
respect to which Options may be granted; (b) the class of persons eligible
for Options; (c) the Option price; or (d) the maximum duration of the Plan.
No termination, suspension or modification of the Plan shall adversely affect
any right acquired by an Optionee, or by any Beneficiary, under the terms of
an Option granted before the date of such termination, suspension or
modification, unless such Optionee or Beneficiary shall consent; but it shall
be presumed conclusively that any adjustment for changes in capitalization in
accordance with Section 14 hereof does not adversely affect any such right.
17. APPLICATION OF PROCEEDS
The proceeds received by the Company from the sale of Shares under the
Plan shall be used for general corporate purposes.
18. DURATION OF THE PLAN
Unless sooner terminated in accordance with Section 16 hereof, the Plan
shall remain effect for a period of five (5) years from the date of its
adoption by the Board of Directors. Expiration of such five (5) year period
shall not affect the vesting of previously granted Options pursuant to
Section 10(b) hereof.
19. COMPLIANCE WITH RULE 16b-3
With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
20. GOVERNING LAW
The Plan shall be construed and its provisions enforced and administered
in accordance with the laws of the State of Tennessee except to the extent
that such laws may be superseded by any Federal law.
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