SCHEIN PHARMACEUTICAL, INC.
OPTION AGREEMENT
PURSUANT TO THE
1997 STOCK OPTION PLAN
AGREEMENT, dated as of December 17, 1998, between Schein
Pharmaceutical, Inc. ("SPINC") and Xxxxx Xxxxxxx (the "Participant").
Preliminary Statement
The Stock Option Committee of the Board of Directors of SPINC, pursuant to
SPINC's 1997 Stock Option Plan, annexed hereto as Exhibit A (the "Plan"), has
authorized the granting to the Participant, as an employee, of a nonqualified
stock option (the "Option") to purchase the number of shares of SP INC's
common stock, par value $.01 per share (the "Common Stock"), set forth below.
The parties hereto desire to enter into this Agreement in order to set forth
the terms of the Option.
Accordingly, the parties hereto agree as follows:
1. Tax Matters. No part of the Option granted hereby is
intended to qualify as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986, as amended.
Grant of Option. Subject in all respects to the Plan and the terms and
conditions set forth herein, the Participant is hereby granted the Option to
purchase from SPINC up to 75,000 Shares (as defined in the Plan), at a price
per Share of $13.625 (the "Option Price").
Vesting. Provided that the Participant has not incurred a Termination of
Employment (as defined in the Plan), the Option shall become exercisable in
three installments, with the first installment becoming exercisable six months
after the date of this agreement and the remaining installments on the First
and Second anniversary of this agreement. Subject to Section 4 hereof, to the
extent that the Option has become exercisable with respect to a number of
Shares, the Option may thereafter be exercised by the Participant with respect
to such Shares, in whole or in part, at any time or from time to time prior to
the expiration of the Option as provided herein.
2. Effect of Termination of Employment
(a) Upon Termination of Employment of the Participant, all
outstanding Options then exercisable and not exercised by the Participant
prior to such Termination of Employment (and any Options not previously
exercisable but made exercisable by the Committee (as defined in the Plan) at
or after the Termination of Employment) shall remain exercisable by the
Participant to the extent not exercised for the following time periods
(subject to Section 5 and Section 7):
(i) In the event of the Participant's death, such Options
shall remain exercisable (by the legal representative of 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 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 years from
the date of the Participant's death.
(ii) In the event of the Participant's Disability (as
defined in the Plan), or the Participant's retirement at or after age 65 (or,
with the consent of the Committee or under an early retirement policy of the
Company (as defined in the Plan), before age 65), or if the Participant's
employment is terminated by the Company without Cause (as defined below), such
Options shall remain exercisable for one 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 years from
the date of the Participant's Termination of Employment.
(b) Upon the Termination of Employment of a Participant for
Cause or by the Participant in violation of an agreement between the
Participant and SPINC or any of its Subsidiaries (as defined in the Plan), or
if it is discovered after such Termination of Employment that such Participant
had engaged in conduct that would have justified a Termination of Employment
for Cause, all outstanding Options shall immediately be canceled. Termination
of Employment for "Cause" for purposes of this Section 4(b) means (i) the
Participant's willful and continued failure substantially to perform his or
her duties with the Company, (ii) fraud, misappropriation or intentional
material damage to the property or business of the Company or (iii) commission
of a felony.
(c) In the event of Termination of Employment for any reason
other than as provided in Section 4(a) or 4(b), all outstanding Options not
exercised by the Participant prior to such Termination of Employment shall
remain exercisable (to the extent exercisable by such Participant immediately
before such termination) for a period of three months after such termination,
provided that the Committee in its discretion may extend such time period to
up to one year from the date of the Participant's Termination of Employment,
and provided further that no Options that were not exercisable during the
period of employment shall thereafter become exercisable, unless the Committee
determines that such Options shall be exercisable.
3. Acceleration of Exercisability.
(a) Upon a Termination of Employment of the Participant due to
the death or Disability of the Participant, or the retirement of the
Participant prior to age 65 with the consent of the Committee or under an
early retirement policy of the Company, all Options granted and not previously
exercisable shall immediately become fully exercisable.
(b) All Options granted and not previously exercisable shall
become fully exercisable immediately upon a Termination of Employment of the
Participant by the Company without Cause, if the Termination of Employment
occurs subsequent to a Change of Control (as defined herein). For this
purpose, a "Change of Control" shall be deemed to have occurred upon:
(i) an acquisition by any individual, entity or
group (within the meaning of Section 13d-3 or 14d-1 of the Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of more than 50% of the combined voting power
of the then outstanding voting securities of SPINC entitled to vote
generally in the election of directors (the "Outstanding SPINC Voting
Securities"); excluding, however, the following: (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 5(b) are
satisfied; or
(ii) a change in the composition of the Board (as
defined in the Plan) such that the individuals who, as of the Effective
Date (as defined in the Plan), constitute the Board (the Board as of the
Effective Date 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 Effective Date and
whose election, or nomination for election by SPINC stockholders, was
approved by the members of the Board who also are members of the
Incumbent Board (or so deemed to be pursuant to this proviso) shall be
deemed a member of the Incumbent Board; but, provided further, that any
such individual whose initial assumption of office is in connection with
a Change of Control described in (i), (iii) or (iv) of this Section 5(b)
or 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 (as defined in the
Plan)) 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 deemed
a member of the Incumbent Board; or
(iii) the approval by the stockholders of SPINC 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 a Corporate Transaction pursuant to which (A) the beneficial owners
(or beneficiaries of the beneficial owners) of the outstanding Shares
and Outstanding SPINC 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
SPINC 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, 20% or more of the outstanding
Shares or Outstanding SPINC Voting Securities, as the case may be) will
beneficially own, directly or indirectly, 20% 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 SPINC of (A)
a complete liquidation or dissolution of SPINC or (B) the sale or other
disposition of all or substantially all the assets of SPINC; 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
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 the individuals
and entities who were the beneficial owners (or beneficiaries of the
beneficial owners), respectively, of the outstanding Shares and
Outstanding SPINC 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 SPINC 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, 20% or more of the outstanding
Shares or Outstanding SPINC Voting Securities, as the case may be) will
beneficially own, directly or indirectly, 20% 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.
4. Exercise of Option.
(a) The Option may be exercised by the Participant by delivering
notice to the Committee of the election to exercise the Option and of the
number of Shares with respect to which the Option is being exercised, which
notice shall be accompanied by payment in full for the Shares. Payment for
such Shares may be made as follows:
(i) in cash or by certified check, bank draft or money
order payable to the order of SPINC;
(ii) if so permitted by the Committee: (A) through the
delivery of unencumbered Shares (including Shares acquired under the Option
then being exercised), provided such Shares (or such Option) have been owned
by the Participant for at least six months, or such longer period as required
by applicable accounting standards to avoid a charge to earnings, (B) through
a combination of Shares and cash as provided above, (C) by delivery of a
promissory note of the Participant to SPINC, or (D) 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;
(iii) through the delivery of irrevocable instructions to a
broker to deliver promptly to SPINC an amount equal to the aggregate Purchase
Price (as defined in the Plan); or
(iv) on such terms and conditions as may be acceptable to
the Committee and in accordance with applicable law.
(b) Upon receipt of payment and satisfaction of the
requirements, if any, as to withholding of taxes set forth in the Plan, SPINC
shall deliver to the Participant as soon as practicable a certificate or
certificates for the Shares then purchased.
5. Termination. Unless terminated as provided below or
otherwise pursuant to the Plan, the Option shall expire on the tenth
anniversary of this Agreement, or earlier as provided in the Plan upon a
Termination of Employment of the Participant.
6. Restriction on Transfer of Option. The Option granted
hereby is not transferable otherwise than by will or under the applicable laws
of descent and distribution and during the lifetime of me Participant may be
exercised only by the Participant or the Participant's guardian or legal
representative. In addition, the Option shall not be assigned, negotiated,
pledged or hypothecated in any way (whether by operation of law or otherwise),
and the Option shall not be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, negotiate, pledge or
hypothecate the Option, or in the event of any levy upon the Option by reason
of any execution, attachment or similar process contrary to the provisions
hereof, the Option shall immediately become null and void.
7. Rights as a Stockholder. The Participant shall have no
rights as a stockholder with respect to any Shares covered by the Option until
the Participant shall have become the holder of record of the Shares, and no
adjustments shall be made for dividends in cash or other property,
distributions or other rights in respect of any such Shares, except as
otherwise specifically provided for in the Plan.
8. Provisions of Plan Control. This Agreement is subject to all
the terms, conditions and provisions of the Plan and to such rules,
regulations and interpretations relating to the Plan as may be adopted by the
Committee and as may be in effect from time to time. The annexed copy of the
Plan is incorporated herein by reference. If and to the extent that this
Agreement conflicts or is inconsistent with the terms, conditions and
provisions of the Plan, the Plan shall control, and this Agreement shall be
deemed to be modified accordingly.
9. Notices. Any notice or communication given hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, or by United States mail, to the appropriate party at the address set
forth below (or such other address as the party shall from time to time
specify):
If to SPINC or the Committee, to:
Schein Pharmaceutical, Inc.
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Corporate Secretary
If to the Participant, to:
the address indicated on the signature page at the end of
this Agreement.
10. No Obligation to Continue Employment. This Agreement does
not guarantee that SPINC or any Subsidiary will employ the Participant for any
specific time period, nor does it modify in any respect SPINC's or any
Subsidiary's right to terminate or modify the Participant's employment or
compensation.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
SCHEIN PHARMACEUTICAL, INC.
By: /s/ Xxxxxx X. Xxxxx
Authorized Officer
/s/ Xxxxxx Xxxxxxx
Stock Option Participant
Address:
