As filed with the Securities and Exchange Commission on August 22, 1997.
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Incorporated KENDLE INTERNATIONAL INC. I.R.S. Employer
Under the Laws 441 VINE STREET, SUITE 700 Identification No.
of Ohio CINCINNATI, OHIO 45202 31-1274091
(513) 771-8221
1995 AND 1997 STOCK OPTION AND STOCK INCENTIVE PLANS
Gary P. Kreider, Esq.
Keating, Muething & Klekamp
One East Fourth Street
Cincinnati, Ohio 45202
(513) 579-6411
- --------------------------------------------------------------------------------
(Agent for Service of Process)
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Securities To Be Price Offering Registration
To Be Registered Registered Per Share(1) Price(1) Fee(2)
- ------------------- ---------------- ------------ --------- -------------
Common Stock,
No par value 1,743,907 Shares $14.00 $24,414,698 $7,399
- --------------------------------------------------------------------------------
(1) Estimated to calculate registration fee.
(2) Calculated pursuant to Rule 457(h) based on the average of the high and low
prices of the Common Stock on the Nasdaq National Market on August 21, 1997
of $14 per share.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed by Kendle International Inc. (the
"Company"), with the Securities and Exchange Commission are incorporated herein
by reference and made a part hereof:
1. Prospectus dated August 22, 1997 filed pursuant to Rule 424(b) under
the Securities Act of 1933.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934, prior to the filing of a post-effective amendment which indicates that
all Common Stock offered has been sold or which deregisters all Common Stock
then remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing such
documents.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
The legality of the Common Stock offered hereby will be passed upon for
the Company by Keating, Muething & Klekamp, P.L.L., 1800 Provident Tower, One
East Fourth Street, Cincinnati, Ohio 45202. Attorneys of Keating, Muething &
Klekamp own 6,000 shares of the Company's Common Stock.
Item 6. Indemnification of Directors and Officers
Ohio Revised Code, Section 1701.13(E), allows indemnification by the
registrant to any person made or threatened to be made a party to any
proceedings, other than a proceeding by or in the right of the registrant, by
reason of the fact that he is or was a director, officer, employee or agent of
the registrant, against expenses, including judgment and fines, if he acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the registrant and, with respect to criminal actions, in which
he had no reasonable cause to believe that his conduct was unlawful. Similar
provisions apply to actions brought by or in the right of the registrant, except
that
<PAGE>
no indemnification shall be made in such cases when the person shall have been
adjudged to be liable for negligence or misconduct to the registrant unless
deemed otherwise by the court. Indemnification is to be made by a majority vote
of a quorum of disinterested directors or the written opinion of independent
counsel or by the shareholders or by the court. The registrant's Code of
Regulations extends such indemnification.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits*
Exhibit 4.1 1995 Stock Option and Stock Incentive Plan
Exhibit 4.2 1997 Stock Option and Stock Incentive Plan
Exhibit 5 Opinion of Keating, Muething & Klekamp, P.L.L.
Exhibit 23.1 Consent of Coopers & Lybrand L.L.P.
Exhibit 23.2 Consent of Keating, Muething & Klekamp, P.L.L.
(included in Exhibit 5)
Exhibit 24 Power of Attorney (contained on the signature page)
- --------------
*All Exhibits filed herewith.
Item 9. Undertakings
9.1 The undersigned registrant hereby undertakes to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement.
9.2 The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
9.3 The undersigned registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
<PAGE>
9.4 The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
9.5 Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Cincinnati, Ohio, on August 22, 1997.
KENDLE INTERNATIONAL INC.
By:/S/ Candace Kendle Bryan
--------------------------
Candace Kendle Bryan
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Persons whose names are marked with an
asterisk (*) below hereby designate Candace Kendle Bryan or Timothy M. Mooney as
their attorney-in-fact to sign all amendments, including any post-effective
amend ments, to this Registration Statement.
Signature Capacity Date
--------- -------- ----
*/S/ Candace Kendle Bryan Chairman of the Board and August 22,1997
- --------------------------- Chief Executive Officer
Candace Kendle Bryan Principal Executive Officer)
*/S/ Christopher C. Bergen President, Chief Operating August 22,1997
- --------------------------- Officer, Secretary
Christopher C. Bergen and Director
*/S/ Timothy M. Mooney Vice President- Finance, August 22,1997
- --------------------------- Chief Financial Officer,
Timothy M. Mooney Treasurer, Assistant
Secretary (principal
financial officer and
principal accounting
officer) and Director
*
- --------------------------- Director August 22,1997
Philip E. Beekman
*
- --------------------------- Director August 22,1997
Charles A. Sanders
EXHIBIT 4.1
KENDLE RESEARCH ASSOCIATES, INC.
1995 STOCK OPTION
AND STOCK INCENTIVE PLAN
(1) ESTABLISHMENT OF THE PLAN
Kendle Research Associates, Inc., an Ohio corporation (hereinafter
referred to as the "Company"), herein sets forth the terms of its 1995 Stock
Option and Stock Incentive Plan (hereinafter referred to as the "Plan").
(2) DEFINITIONS
For purposes of the Plan, the following terms shall have the following
meanings:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the U.S. Internal Revenue Code of 1986 and the
Regulations thereunder, as now or hereafter amended.
(c) "COMMON STOCK" or "SHARES" means shares of the no par value common
stock of the Company.
(d) "COMPANY" means Kendle Research Associates, Inc., an Ohio corporation,
and any of its parent corporations or wholly-owned or majority-owned
subsidiary corporations.
(e) "FAIR MARKET VALUE," when used in reference to Shares of Common Stock
shall mean: (i) the value determined by the application of the
following formula (the "Fair Market Value Formula"):
<PAGE>
A. First, the Company's "Debt-Free Cash Flow" for the fiscal year
ending immediately prior to the date of the event in question
(i.e., a grant or award under the Plan, the Company's exercise of
a purchase option, or any other event requiring a determination
of the Shares' Fair Market Value) shall be determined by the
Board. For purposes of this Plan, the Company's "Debt- Free Cash
Flow" shall mean the Company's net income after income taxes,
plus depreciation, amortization, interest income and interest
expense, as adjusted for any extraordinary gains, losses or other
items, discontinued operations, and non-operating income or
losses.
B. Second, the Company's Fair Market Value shall be determined by
multiplying the Company's "Debt-Free Cash Flow" as determined
above by a valuation multiple determined by the Board in good
faith on an annual basis and based on reasonable business and
economic factors.
C. Third, the Fair Market Value per Share shall be determined by
dividing the Corporation's Fair Market Value as determined above
by the number of shares which are issued and outstanding on the
date of the event in question.
or (ii) such value as is determined by the Board in good faith using
any reasonable valuation method.
(f) "PARTICIPANT" means an officer, employee, director, consultant or
advisor of the Company who has been granted an option or award under
the Plan.
(g) "PLAN SHARES" means any Shares of Common Stock issued to a Participant
in connection with an option, grant or award under the Plan.
<PAGE>
(3) PURPOSES OF THE PLAN
The purposes of the Plan are to provide the Participants with additional
incentive and motivation to contribute to the Company's future growth and
continued success, by providing them with the opportunity to obtain a stock
ownership interest in the Company, and to enable the Company to attract and
retain the services of qualified officers, employees, directors, consultants and
advisors. The Plan is also intended to reinforce the commonality of interest
between the Company's shareholders and the Participants in the Plan
(4) ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of the
Company.
(b) Subject to any specific limitations contained in the Plan, the Board
shall have the sole and complete authority: (i) to select the
officers, employees, directors, consultants and advisors who shall
participate in the Plan; (ii) to make awards in such forms and amounts
as it shall determine; (iii) to impose such limitations, restrictions
or conditions upon awards as it shall deem appropriate; (iv) to
modify, amend, cancel or suspend awards, with the consent of any
Participant affected thereby; (v) to interpret the Plan and to adopt,
amend and rescind administrative guidelines and other rules and
regulations relating to the Plan; and (vi) to make all other
determinations and to take all other actions necessary or advisable
for the proper administration of the Plan. The Board's interpretation
and construction of any provision of the Plan, or of any award granted
under it, and any actions taken by the Board under the Plan, shall be
final and conclusive upon the Company, the Participants and all other
parties.
<PAGE>
(c) With respect to actions taken affecting the Plan, a majority of the
Board shall constitute a quorum, and the acts of a majority of the
members present at any meeting of the Board at which a quorum is
present, or acts approved in writing by a majority of the Board, shall
be considered as valid actions by the Board. The Board may designate
one or more officers or employees of the Company to execute documents
on its behalf or to perform such other non- discretionary, ministerial
duties as the Board may determine,
(5) TYPES OF AWARDS
The following kinds or types of awards may be granted under the Plan: (a)
Incentive Stock Options; (b) Non-Qualified Stock Options; (c) Restricted Stock;
(d) Performance Units; and (e) other stock awards or bonuses valued in whole or
in pan by reference to or which relay be payable in Shares. In connection with
any award or any deferred award granted under the Plan, payments may also be
made representing dividends, interest, or their equivalent.
(6) ELIGIBILITY TO PARTICIPATE
Only persons who are officers, employees, directors, consultants or
advisors of the Company shall be eligible to participate in and to receive
awards under the Plan. For purposes of this Plan, the term "consultant" or
"advisor" shall mean a consultant or advisor who has or will render bona fide
services to the Company other than in connection with the offer or sale of
securities in a capital raising transaction. An individual Participant may hold
more than one award under the Plan or under any similar plans adopted by the
Company.
(7) SHARES SUBJECT TO THE PLAN
(a) The Shares to be issued and delivered by the Company upon the exercise
of options or the payment of other awards granted under the Plan shall be Shares
of the no par value Common Stock, which may be either authorized but unissued
shares or treasury shares as determined by the Board.
<PAGE>
(b) The maximum number of Shares of Common Stock which may be issued under
the Plan shall be One Hundred Thousand (100,000) Shares. In the event of a
change in the number or nature of the Shares of outstanding Common Stock by
reason of a stock dividend, stock split, reverse stock split, recapitalization,
reorganization, merger, exchange of shares, or other similar capital
adjustments: (i) equitable proportionate adjustments may be made by the Board in
the number or kind of reserved for issuance pursuant to awards granted under the
Plan; and (ii) with to any outstanding options or other awards granted under the
Plan, equitable proportionate adjustments shall be made by the Board to the
number, class, exercise price, or other price of Shares subject to such
outstanding options or awards as the Board shall deem to be appropriate in order
to maintain the purpose of the original grant. The determination of the Board as
to any such adjustment shall be final, binding and conclusive
(c) If any option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the Shares subject to such option
shall again be available for issuance in connection with the grant of any type
of award under the Plan. If any Shares subject to any other type of award are
forfeited, or the award is terminated without issuance of the Shares or other
consideration, the Shares subject to such award shall again be available for
issuance in connection with the grant of any type of award under the Plan.
(8) STOCK OPTIONS
All Stock Options granted under the Plan shall be subject to the following
terms and conditions:
(a) The Board may, from time to time in its discretion, subject to the
provisions of the Plan, grant to any eligible Participant options to purchase
Shares of Common Stock in such amounts as it shall determine, which options may
be "Incentive Stock Options" (as defined in ss.422 of the Code and hereinafter
referred to as "ISOs") or "Non-Qualified Stock Options" (all other options
granted hereunder); provided, that ISOs may only be granted to a person who is a
bona fide "employee" of the Company at the time of the grant, as that term is
defined in the Code. All options granted pursuant to the Plan shall be evidenced
by a written Stock Option Agreement between the Company and the Participant. The
Stock Option Agreement shall be in such form and shall contain such terms and
conditions as the Board shall determine. The Stock Option Agreement shall
indicate whether the option is an ISO or a Non-Qualified Stock Option.
(b) The purchase price per share payable by a Participant upon the exercise
of each option granted under the Plan shall be determined by the Board at the
time of the grant of the option; provided, that: (i) the exercise or purchase
price per share of each Non-Qualified Stock Option shall not be less than ninety
percent (90%) of the Fair Market Value of the Shares on the date of the grant,
and (ii) the exercise or purchase price per share of each ISO shall not be less
than One Hundred (100%) percent of the Fair Market Value of the Shares on the
date of the grant, except as hereinafter provided. The exercise or purchase
price per share of each ISO granted to a Participant who, at the time of the
grant, owns more than Ten (10%) percent of the total combined voting power of
all classes of stock of the Company, shall not be less than One Hundred Ten
(110%) percent of the Fair Market Value of the Shares on the date of the grant.
An option shall be considered granted on the effective date of the Stock Option
Agreement, or on such later date as the Board shall specify in the Stock Option
Agreement.
<PAGE>
(c) The term during which each option granted under the Plan may be
exercised shall be determined by the Board at the time of the grant of the
option; provided, that in no event shall an ISO granted under the Plan be
exercisable in whole or in part more than ten (10) years from the date it is
granted. In addition, in the case of the grant of an ISO to a Participant who,
at the time of the grant, owns more than Ten (10%) percent of the total combined
voting power of all classes of stock of the Company, in no event shall such ISO
be exercisable in whole or in part more than five (5) years from the date it is
granted. Each Stock Option Agreement shall set forth a termination date on which
the option shall expire in all events.
The date(s) on which each option granted under the Plan shall become
exercisable shall be determined by the Board at the time of the grant of the
option. Options granted under the Plan may be exercisable immediately, or after
some specified period of time, or according to some specified schedule of
exercise, as determined by the Board. The Board may, in its sole discretion,
accelerate the date(s) on which an option may be exercised.
(d) More than one (1) option may be granted to any individual Participant
under the Plan, and the terms and conditions of options granted to the same
Participant or to other Participants may differ. Other than the overall limit on
the number of Shares reserved for issuance under the Plan, there is no specific
limitation on the number of Shares for which options may be granted to any
individual Participant, except as hereinafter provided. No option which is
intended to be an ISO shall be granted to a Participant during any calendar year
if the aggregate fair market value (determined at the time the option is
granted) of Shares with respect to which ISOs are exercisable for the first time
by such Participant during that calendar year under this or any other stock
option plan of the Company exceeds One Hundred Thousand ($100,000.00) Dollars.
<PAGE>
(e) An option granted under the Plan shall be exercised by the Participant
or by such other person as may be entitled to exercise the option, by sending or
delivering a written notice to the Board, or to such officer or other person as
the Board shall designate. The written notice shall state the number of Shares
with respect to which the option is being exercised, and shall be accompanied by
the payment of the full exercise or purchase price for such Shares. The exercise
or purchase price for the Shares may be paid in cash, or in the discretion of
the Board with shares of Common Stock or any other property, or in any
combination thereof. In addition, the Board, in its discretion, may allow for
the cashless exercise or conversion of an option, in which the Participant sells
or the Company retains option shares equal in Fair Market Value to the exercise
price. Any Shares of Common Stock that are delivered in total or partial payment
of the exercise or purchase price shall be valued at the Shares' Fair Market
Value on the date of the exercise of the option, or on such other date as the
Board may determine. A stock certificate(s) for the Shares purchased by the
exercise of an option shall be issued in the regular course of the Company's
business, subsequent to the exercise of the option and the payment of the
purchase price. No Participant entitled to exercise an option granted under the
Plan shall have any of the rights or privileges of a shareholder of the Company
with respect to any Shares issuable upon exercise of such option, until
certificates representing such Shares shall have been issued and delivered and
the Participant's name entered as a shareholder of record on the books of the
Company.
<PAGE>
(f) Options granted under the Plan shall not be assigned, transferred,
pledged or otherwise encumbered in any way, except in the event of the death of
a Participant, by the Participant's Will or by the applicable laws of descent
and distribution, or except pursuant to a qualified domestic relations order. In
the event of the death of a Participant, the Participant's estate, personal
representative, or the person or persons who acquire (by bequest or inheritance)
the rights to exercise any options granted under the Plan, may exercise any
available options or parts thereof, prior to the expiration of the exercise
period described in Paragraph (8)(g) of the Plan. Each option granted under the
Plan shall be exercisable during the Participants lifetime only by the
Participant or, if permissible under applicable law, by the Participant's
guardian or legal representative.
(g) (i) events upon the date determined by the Board at the time of the
grant of the option and specified in the Stock Option Agreement, which date with
respect to ISOs shall not exceed the periods described in Paragraph (8)(c) of
the Plan.
(ii) Unless otherwise specified in the Stock Option Agreement between
the Company and the Participant, if a Participant's employment, directorship, or
consulting relationship with the Company (hereinafter referred to as the
"Company Relationship") is terminated for any reason, other than "for cause," as
hereinafter defined, or other than because of the Participant's permanent
disability or death, any outstanding vested options may be exercised, to the
extent such options were vested and exercisable on the date the Participant's
Company Relationship was terminated, for a period of 90 days following the date
of such termination. If not exercised within such 90 day period, such options
shall terminate. Any options which were not vested or exercisable on the date
the Participant's Company Relationship was terminated shall terminate
immediately on that date. The Board may, in its sole discretion, grant options
under the Plan which survive, either in whole or in part, the termination of a
Participants Company Relationship for a period shorter or longer than 90 days,
upon such terms and conditions as the Board may determine. In addition, the
Board may, in its sole discretion, at the time of the termination of a
Participants Company Relationship, extend the exercise period of any option that
would otherwise have terminated. In no event, however, shall any option granted
under the Plan survive beyond the date described in Paragraph (8)(g)(i) above.
<PAGE>
(iii) All options granted to a Participant under the Plan, whether or not
vested or exercisable, shall terminate immediately on the date the Participant's
Company Relationship is terminated "for cause' as hereinafter defined. For
purposes of the Plan, a Participant's Company Relationship shall be deemed
terminated "for cause" if terminated because of: (i) the Participant's material
breach of an employment agreement, consulting agreement, agreement not to
compete, confidentiality agreement or other agreement with the Company, (ii) the
Participants theft of Company property, (iii) the Participant's conviction of a
felony or of a misdemeanor which materially impairs the Participant's ability to
perform his duties with the Company, (iv) the willful and continued failure by
the Participant to substantially perform his duties with the Company, (v) a
material misrepresentation in or omission from a Participant's job application
or job interview, (vi) unlawful possession or use of drugs, or (vii) willful and
continued conduct by the Participant which is demonstrably and materially
injurious to the Company, monetarily or otherwise.
(iv) Unless otherwise specified in the Stock Option Agreement between the
Company and the Participant, if a Participant's Company Relationship is
terminated by reason of the Participant's permanent disability or death, any
outstanding vested options may be exercised, to the extent such options were
vested and exercisable on the date of the Participant's permanent disability or
death, for a period of 12 months following the date of permanent disability or
death. If not exercised within such 12 month period, such options shall
terminate. Any options which were not vested or exercisable on the date of the
Participant's death or permanent disability shall terminate immediately on that
date. The Board may, in its sole discretion, grant options under the Plan which
survive, either in whole or in part, the permanent disability or death of a
Participant for a period of up to 36 months, upon such terms and conditions as
the Board may determine. In no event, however, shall any option granted under
the Plan survive beyond the date described in Paragraph (8)(g)(i) above.
<PAGE>
(9) RESTRICTED STOCK
All awards of Restricted Stock made under the Plan shall be subject to the
following terms and conditions:
(a) The Board may, from time to time in its discretion, subject to the
provisions of the Plan, award Shares of Restricted Stock to any Participant in
such amounts as it shall determine. The Company shall issue and deliver to a
Participant to whom an award of Restricted Stock has been made, the number of
Shares specified by the Board. A Participant to whom an award of Restricted
Stock has been made shall not be required to provide and consideration for the
Shares, other than the rendering of services or the payment of any minimum
amount required by applicable law, unless otherwise determined by the Board.
Each award of Restricted Stock made under the Plan shall be evidenced by a
written Restricted Stock Agreement between the Company and the Participant. The
Restricted Stock Agreement shall be in such form and shall contain such terms
and conditions as the Board shall determine More than one (1) award of
Restricted Stock may be granted to an individual Participant under the Plan, and
the terms and conditions of Restricted Stock Awards granted to the same
Participant or to other Participants may differ.
(b) Except as hereinafter provided, Shares of Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered by a Participant
during the "Restricted Period." The Restricted Period is the period of time, if
any, determined by the Board in its discretion, during which the Participant may
not sell, assign, transfer, pledge, or otherwise encumber the Shares and during
which the Shares are subject to forfeiture back to the Company. The Board may
<PAGE>
impost such additional limitations on the ownership of Restricted Stock during
the Restricted Period as it may determine. The Restricted Period shall commence
upon the date of the award of the Restricted Stock to the Participant and shall
terminate on the date(s) determined by the Board in its discretion. The
termination date(s) of the Restricted Period may be a single date on which all
of the Shares subject to the award are released from the transfer and other
restrictions or may be several dates on which a specified percentage of such
Shares are released from such restrictions. Except as hereinafter provided, the
Board may, in its sole discretion, accelerate the date(s) on which the
Restricted Period will terminate. Except for the restrictions on transfer and
unless otherwise determined by the Board, any Participant who owns Shares of
Restricted Stock shall have all of the rights of a shareholder with respect to
such Shares, Including but not limited to, the right to vote and the right to
receive dividends.
(c) Each stock certificate issued by the Company evidencing Shares of
Restricted Stock awarded under the Plan shall be registered in the name of the
Participant and shall bear the following or a similar legend: "The shares of
stock represented by this Certificate are subject to the terms and conditions
(including forfeiture) contained in the Kendle Research Associates, Inc. 1995
Stock Option and Stock Incentive Plan and may not be sold, assigned,
transferred, pledged or otherwise encumbered in any manner until _____________,
_______.
(d) If a Participant's Company Relationship is terminated during the
Restricted Period for any reason, all of the Shares of Restricted Stock which
are not then vested shall be forfeited back to the Company, subject to such
exceptions, if any, as are authorized by the Board with respect to the
termination of a Participant's Company Relationship due to normal retirement,
permanent disability, death, change of control, or other special circumstances.
Awards of Restricted Stock made under the Plan shall not be assigned,
<PAGE>
transferred, pledged or otherwise encumbered in any way. except in the event of
the death of a Participant, by the Participants Will or by the applicable laws
of descent and distribution, or except pursuant to a qualified domestic
relations order.
(e) Upon the lapse of the Restricted Period, the Shares of Restricted Stock
shall no longer be subject to the restrictions described in this Paragraph (9)
and the Company shall issue new stock certificates for the Shares registered in
the name of the Participant without the legend described in Paragraph (9)(c)
hereof.
(f) Any Shares of the Company's Common Stock issued to a Participant with
respect to Restricted Stock as a result of a stock split, stock dividend or
similar transaction shall be restricted to the same extent as such Restricted
Stock, unless otherwise determined by the Board.
(g) All other terms and conditions of an award of Restricted Stock shall be
determined by the Board.
(10) PERFORMANCE UNIT AWARDS
All awards of Performance Units made under the Plan shall be subject to
the following terms and conditions:
(a) The Board may, from time to time in its discretion, subject to the
provisions of the Plan, award Performance Units to any Participant in such
amounts as it shall determine. Each Performance Unit shall represent the right
of a Participant to receive an amount equal to a Payment Value, which Payment
Value shall be determined by the Board and shall be based upon the performance
of the Participant, the Company, or a division of the Company over a Performance
Period. A Participant to whom an award of Performance Units has been made shall
not be required to provide any consideration for a Performance Unit other than
<PAGE>
the rendering of services or the payment of any minimum amount required by
applicable law, unless otherwise determined by the Board. Each Performance Unit
awarded under the Plan shall be evidenced by a written Performance Unit
Agreement between the Company and the Participant. The Performance Unit
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall determine.
(b) The Performance Period for each Performance Unit awarded under the Plan
shall be of such duration as the Board shall establish at the time of the award.
The performance criteria for each Performance Unit awarded under the Plan shall
be determined by the Board. More than one award of Performance Units may be
granted to any individual Participant under the Plan, and the terms and
condition of Performance Units granted to the same Participant or to other
Participants, such as the Performance Periods and performance criteria, may
differ. If during a Performance Period there should occur, in the opinion of the
Board, significant changes in economic conditions or in the nature of the
operations of the Company which the Board did not foresee in establishing the
performance criteria for such Performance Period, and which in the Board's sole
judgment, have, or are expected to have, a substantial effect on the
Participant's or the Company's ability to meet the performance criteria, the
Board may revise the performance criteria formerly determined by it in such a
manner as the Board, in its sole judgment, may deem appropriate
(c) An award of Performance Units to a Participant shall terminate for all
purposes if the Participant does not remain, during the Performance Period,
continuously in the employ or other service of the Company, subject to such
exceptions, if any, as are authorized by the Board, with respect to the
termination of a Participants Company Relationship due to normal retirement,
permanent disability, death or other special circumstances. Performance Units
awarded under the Plan shall not be assigned, transferred, pledged or otherwise
encumbered in any way, except in the event of the death of a Participant, by the
Participant's Will or by the applicable laws of descent and distribution, or
except pursuant to a qualified domestic relations order.
<PAGE>
(d) The Payment Value of a Performance Unit shall be paid to a Participant
in cash, in Shares of Common Stock, or in a combination of cash and Shares as
determined by the Board in its sole discretion. The Payment Value of a
Performance Unit shall be paid to the Participant on such date following the
conclusion of the Performance Period as the Board shall designate at the time of
the award.
(e) All other terms and conditions of an award of Performance Units shall
be determined by the Board.
(11) OTHER STOCK UNIT AWARDS
(a) The Board may, from time to time in its discretion, subject to the
provisions of the Plan, grant to any Participant, either alone or in addition to
other awards made under the Plan, awards of Shares of the Company's Common Stock
and other awards that are valued in whole or in part by reference to or
otherwise based on Shares of the Company's Common Stock. Other Stock Unit Awards
may be paid in cash, in Shares of the Company's Common Stock, or in a
combination of cash and Shares, as determined by the Board in its sole
discretion.
(b) The Board shall determine the Participants to whom other Stock Unit
Awards are to be granted, the times at which such awards are to be made, the
number of Shares to be granted pursuant to such awards, and all other terms and
conditions of such awards. More than one Stock Unit Award may be granted to an
individual Participant under the Plan, and the terms and conditions of Stock
Unit Awards granted to the same Participant or to other Participants may differ.
A Participant shall not be permitted to sell, assign, transfer, pledge, or
otherwise encumber any Shares of Common Stock received pursuant to a Stock Unit
<PAGE>
Award prior to the later of the date on which the Shares are issued, or the date
on which any applicable restriction, performance or deferral period determined
by the Board lapses. A Participant to whom an award of Shares has been made
pursuant to a Stock Unit Award shall not be required to provide any
consideration for the Shares, other than the rendering of services or the
payment of any minimum amount required by applicable law, unless otherwise
determined by the Board,
(12) DEFERRALS OF AWARDS
The Board may permit Participants to defer the distribution of all or
any part of any award made under the Plan in accordance with such terms and
conditions as the Board shall establish.
(13) RESTRICTIONS ON TRANSFER OF SHARES
(a) Notwithstanding anything to the contrary contained in the Plan, the
Company shall not be obligated to issue Plan Shares to a Participant pursuant to
any option, award or other grant under the Plan, unless at the time of such
issuance, the Participant agrees not to sell, assign, give, encumber, pledge or
otherwise transfer legal or beneficial ownership of all or any of the Plan
Shares to any person, corporation or other entity, during life (whether
voluntarily or by involuntary legal action), or at death (whether by
testamentary disposition, intestate succession or contractual survivorship),
except as provided in this Paragraph (13). The Participant's acceptance of any
Plan Shares shall be deemed to constitute the Participant's agreement to comply
with the terms and conditions of this Paragraph (13). Any attempt to transfer
any interest in Plan Shares in violation of the restrictions contained in this
Paragraph (13), or in violation of the transfer restrictions and procedures
contained elsewhere in this Agreement, shall be ineffective and void, and the
Company shall refuse to register the Shares in the name of the transferee.
<PAGE>
(b) If a Participant should receive a bona fide offer for the purchase of
any Plan Shares or should otherwise desire to voluntarily sell or transfer any
Plan Shares, the Participant shall first give written notice to the Company of
his or her receipt of the bona fide offer or of his or her desire to sell or
transfer the Plan Shares. The written notice shall describe the offer or
proposed sale, including the name and address of the proposed transferee, the
number of Plan Shares to be transferred, the price per Share, the terms of
payment and all other material terms of the proposed transaction. The Company
shall have the first right, but not the obligation, to purchase the Participants
Plan Shares for the lesser of: (i) the price per Share being offered by the bona
fide offeror as described in the Participant's written notice to the Company; or
(ii) the amount determined under the Fair Market Value formula price described
in Paragraph (2)(e) hereof.
The Company shall exercise its option by sending a written notice to the
Participant within 30 days of the date of the Participant's notice to the
Company. If the Company exercises its option within such 30-day period, a
closing shall be held at the Company's principal place of business within 30
days thereafter on a mutually agreed-upon date and time. The Company may pay the
purchase price for the Plan Shares, as determined above, to the Participant (i)
in full in cash at the Closing, or (ii) at the election of the Company, in equal
monthly, quarterly or annual installments over a period not to exceed three
years from the date of Closing. If the Company elects to pay the purchase price
in installments, the Company shall deliver a promissory note (the "Note") to the
Participant at the Closing reflecting the payment terms and bearing interest on
the unpaid balance thereof at the "Prime Rate," plus two percent (2.0%) per
annum. Interest shall be payable on the same dates as the installments of
principal. The "Prime Rate" shall mean the prime rate announced by the
______________ Bank, Cincinnati, Ohio on the Closing date. The Note shall be
unsecured, The Note may be prepaid by the Company in whole or in part at any
time without penalty.
<PAGE>
If the Company fails to exercise its option to purchase the Plan Shares,
the Plan Shares or any number of them may be sold at any time within 90 days
from the date of the Participant's original notice to the Company, but only for
the price and on the terms specified in the original notice. No sale of the
Participants Plan Shares shall be made after the end of the 120-day period, nor
shall any change in the price or terms of sale or transfer be permitted, without
a new notice of intention to transfer in compliance with the requirements of
this Paragraph (13).
(c) For a period of 180 days after the termination of a Participants
Company Relationship with the Company, the Company shall have the right, but not
the obligation, to purchase all of the Participant's Plan Shares for the Fair
Market Value formula price described in Paragraph (2)(e) hereof. The Company may
exercise its option by sending a written notice to the Participant within the
180 day period. If the Company exercises its option within the 180 day period, a
closing shall be held at the Company's principal place of business within 30
days thereafter on a mutually agreed-upon date and time. The Company may pay the
purchase price for the Plan Shares to the Participant: (i) in full in cash at
the Closing, or (ii) at the election of the Company, in installments on the same
terms and conditions as provided in Paragraph (13)(b) hereof.
(d) All stock certificates now or hereafter issued by the Company to any
Participant under the Plan shall be subject to the transfer restrictions and
limitations of this Paragraph (13) and shall contain a restrictive legend to
that effect.
(e) The restrictions and provisions contained in this Paragraph (13) shall
terminate and be of no further force or effect with respect to Plan shares on
the earlier of: (i) the date the Company successfully completes an initial
public offering of its Common Stock pursuant to the Securities Act of 1933, as
amended, or (ii) the effective date of the Company's registration of its Common
Stock as a Class under the Securities Exchange Act of 1934, as amended.
<PAGE>
(14) EFFECT OF PLAN ON EMPLOYMENT STATUS
The fact that the Participant has been granted an option or award under the
Plan shall not affect the right of the Company to terminate the Participant's
Company Relationship at any time, subject to the provisions of any written
employment agreement or other agreement between the Company and such
Participant.
(15) AMENDMENT, MODIFICATION OR TERMINATION OF THE PLAN
The Board of Directors may terminate, amend or modify the Plan in its
discretion, at any time; provided, however, that no amendment, modification or
termination of the Plan shall affect any outstanding options or awards
theretofore granted under the Plan in any manner, without the consent of the
Participant or his or her successor-in-interest. In addition, any amendment or
modification that would increase the number of Shares reserved for issuance
under the Plan or change the requirements as to eligibility for participation in
the Plan, must also be approved by the holders of a majority of the Company's
issued and outstanding Shares of Common Stock.
(16) WITHHOLDING
Upon the transfer of Common Stock as a result of the exercise of a stock
option, the payment of a Restricted Stock award, or the payment of any other
award or qrant, the Company shall have the right to retain or sell without
notice, sufficient Shares to cover the amount of any tax required by any
governmental authority to be withheld or otherwise deducted and paid with
respect to such payment, remitting any balance to the Participant; provided,
however, that the Participant shall have the option to provide the Company with
the funds, including previously acquired Shares of the Company's Common Stock
(if acceptable to the Board in its discretion), to enable it to pay any such
tax.
<PAGE>
(17) SECURITIES LAWS
Notwithstanding anything to the contrary contained in the Plan, the Company
shall not be obligated to issue Shares of its Common Stock to a Participant
pursuant to any option, award or other grant under the Plan, unless at the time
of such issuance the Shares are registered, exempt, or the subject matter of an
exempt transaction under both federal and applicable state securities laws. if
requested to do so by the Board, as a condition to the exercise of an option or
the receipt of Shares, each Participant shall execute a certificate indicating
that he or she is purchasing the Common Stock for investment and not with any
present intention to sell or distribute the same.
(18) TERM OF THE PLAN
The Plan shall become effective on the date of its adoption by the
Company's shareholders. The Plan shall terminate ten years after its effective
date, or on such earlier date as may be determined by the Board of Directors. No
option shall be granted or other award made under the Plan following the Plan's
termination. The termination of the Plan shall not affect the rights of
Participants under outstanding options or awards previously granted under the
Plan, and all of such unexpired options and awards shall continue in full force
and effect after termination of the Plan, except as they may lapse or be
terminated under the terms and conditions of each individual grant or award.
<PAGE>
EXHIBIT 4.2
KENDLE INTERNATIONAL INC.
1997 STOCK OPTION AND STOCK INCENTIVE PLAN
<PAGE>
KENDLE INTERNATIONAL INC.
1997 STOCK OPTION AND STOCK INCENTIVE PLAN
SECTION 1
OBJECTIVES
The objectives of this 1997 Stock Option and Stock Incentive Plan are to
enable Kendle International Inc. (the "Company") to compete successfully in
retaining and attracting key employees of outstanding ability, to stimulate the
efforts of such employees toward the Company's objectives and to encourage the
identification of their interests with those of the Company's shareholders.
SECTION 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "Advisor" means any person, not including Eligible Employees, who
provides bona fide advisory or consultation services to the Company other than
services in connection with the offer or sale of securities in a capital-raising
transaction.
2.2 "Award" means any form of Stock Option, Stock Appreciation Right,
Restricted Stock Award, Unrestricted Stock Award or Performance Award granted
under this Plan.
2.3 "Award Agreement" means a written agreement setting forth the terms
of an Award.
2.4 "Award Date" or "Grant Date" means the date designated by the
Committee as the date upon which an Award is granted.
2.5 "Award Period" or "Term" means the period beginning on an Award Date
and ending on the expiration date of such Award.
2.6 "Board" means the Board of Directors of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended, or
successor legislation.
<PAGE>
2.8 "Committee" means the committee appointed by the Board and
consisting of three or more Directors. Members of the Committee who grant awards
pursuant to this Plan must qualify as Non-Employee Directors as defined by Rule
16b-3(b)(3)(i). To the extent that it is desired that compensation resulting
from an Award be excluded from the deduction limitation of Section 162(m) of the
Code, all members of the Committee granting an Award also shall be "outside
directors" within the meaning of Code Section 162(m). To the extent Ohio law
permits, the Committee may be comprised fewer than three directors.
2.9 "Disability" means a "permanent and total disability" within the
meaning of Section 22(e)(3) of the Code.
2.10 "Eligible Employee" means anyone who performs services for the
Company or a Subsidiary, including an officer or director of the Company or a
Subsidiary; and is compensated on a regular basis by the Company or a
Subsidiary. Directors who are not full-time employees of the Company or a
Subsidiary are not eligible to receive Awards under this Plan, except as set
forth in Subsection 6.4. Eligibility under this Plan shall be determined by the
Committee.
2.11 "Fair Market Value" means, as of any date, the average of the
highest and lowest quoted selling prices of a Share as reported on the National
Market System of The Nasdaq Stock Market (or such other consolidated transaction
reporting system on which the Shares are primarily traded), or if the Shares
were not traded on such date, then the next preceding day on which the Shares
were traded, all as reported by such source as the Committee may select. If the
Shares are not traded on a national securities exchange or other market system,
Fair Market Value shall be set under procedures established by the Committee.
2.12 "Incentive Option" means any Stock Option awarded under Section 6
of this Plan intended to be and designated as an "Incentive Stock Option" within
the meaning of Section 422 of the Code or any successor provision.
2.13 "Non-Employee Director" means any member of the Board who would not
qualify as an Eligible Employee.
2.14 "Non-Qualified Option" means any Stock Option awarded under this
Plan that is not an Incentive Stock Option.
2.15 "Officer" means a person who is considered to be an officer of the
Company under Rule 16a-1(f).
2.16 "Option Price" or "Exercise Price" means the price per share at
which Common Stock may be purchased upon the exercise of an Option or an Award.
2.17 "Participant" means an Eligible Employee, Non-Employee Director or
Advisor to whom an Award has been made pursuant to this Plan.
<PAGE>
2.18 "Restricted Stock" means Shares issued pursuant to a Restricted
Stock Award which are subject to the restrictions set forth in the related Award
Agreement.
2.19 "Restricted Stock Award" means an award of a fixed number of Shares
to a Participant which is subject to forfeiture provisions and other conditions
set forth in the Award Agreement.
2.20 "Retirement" means any termination of employment or service on the
Board (other than by death or Disability) by an employee or a director who is at
least 65 years of age (or 55 years of age with at least ten years of employment
with, or service on the Board of, the Company or a Subsidiary).
2.21 "Rule 16b-3" and "Rule 16a-1(f)" mean Securities and Exchange
Commission Regulations Sect. 240.16b-3 and Sect. 240.16a-1(f) or any
corresponding successor regulations.
2.22 "Share" means one share of the Company's Common Stock.
2.23 "Stock Appreciation Right" or "SAR" means the right to receive, for
each unit of the SAR, cash and/or Shares equal in value to the excess of the
Fair Market Value of one Share on the date of exercise of the SAR over the
reference price per Share established on the date the SAR was granted.
2.24 "Stock Option" or "Option" means the right to purchase Shares
granted pursuant to Section 6 of this Plan.
2.25 "Subsidiary" means any corporation, partnership, joint venture, or
other entity (i) of which the Company owns or controls, directly or indirectly,
25% or more of the outstanding voting stock (or comparable equity participation
and voting power) or (ii) which the Company otherwise controls (by contract or
any other means); except that when the term "Subsidiary" is used in the context
of an award of an Incentive Option, the term shall have the same meaning given
to it in the Code. "Control" means the power to direct or cause the direction of
the management and policies of a corporation or other entity.
2.26 "Transfer" means alienation, attachment, sale, assignment, pledge,
encumbrance, charge or other disposition; and the terms "Transferred" or
"Transferable" have corresponding meanings.
SECTION 3
ADMINISTRATION
3.1 This Plan shall be administered and interpreted by the Committee.
<PAGE>
3.2 The Committee shall have full authority to grant, pursuant to the
terms of this Plan, to Eligible Employees and Advisors: (i) Stock Options, (ii)
Stock Appreciation Rights, (iii) Restricted Stock, (iv) Unrestricted Stock and
(v) Performance Awards. In particular, the Committee shall have the authority:
(a) to select the Eligible Employees and Advisors to whom Awards may
be granted;
(b) to determine the types and combinations of Awards to be granted to
Eligible Employees and Advisors;
(c) to determine the number of Shares or monetary units which may be
subject to each Award;
(d) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Award (including, but not limited to, the term,
price, exercisability, method of exercise, any restriction or limitation on
transfer, any vesting schedule or acceleration, or any forfeiture
provisions or waiver, regarding any Award) and the related Shares, based on
such factors as the Committee shall determine; and
(e) to modify or waive any restrictions or limitations contained in,
and grant extensions to the terms of or accelerate the vestings of, any
outstanding Awards as long as such modifications, waivers, extensions or
accelerations are not inconsistent with the terms of this Plan, but no such
changes shall impair the rights of any Participant without his or her
consent.
3.3 The Committee shall have the authority to adopt, alter and repeal
administrative rules, guidelines and practices governing this Plan and perform
all acts, including the delegation of its administrative responsibilities, as it
deems advisable; to construe and interpret the terms and provisions of this Plan
and any Award issued under this Plan; and to otherwise supervise the
administration of this Plan. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in this Plan or in any related Award
Agreement in the manner and to the extent it deems necessary to carry this Plan
into effect.
3.4 Any action, decision, interpretation or determination by or at the
direction of the Committee concerning the application or administration of this
Plan shall be final and binding upon all persons and need not be uniform with
respect to its determination of recipients, amount, timing, form, terms or
provisions of Awards.
SECTION 4
SHARES SUBJECT TO PLAN
4.1 Shares. Subject to adjustment as provided in Subsection 4.2, the
aggregate number of Shares which may be issued under this Plan shall not exceed
One Million (1,000,000) Shares.
<PAGE>
If any Award granted under this Plan shall expire, terminate or be canceled
for any reason without having been exercised in full, the number of unacquired
Shares subject to such Award shall again be available for future grants. The
Committee may make such other determinations regarding the counting of Shares
issued pursuant to this Plan as it deems necessary or advisable, provided that
such determinations shall be permitted by law.
4.2 Adjustment Provisions.
(a) If the Company shall at any time change the number of issued Shares
without new consideration to the Company (such as by stock dividend, stock
split, recapitalization, reorganization, exchange of shares, liquidation,
combination or other change in corporate structure affecting the Shares) or make
a distribution of cash or property which has a substantial impact on the value
of issued Shares, the total number of Shares reserved for issuance under the
Plan shall be appropriately adjusted and the number of Shares covered by each
outstanding Award and the reference price or Fair Market Value for each
outstanding Award shall be adjusted so that the aggregate consideration payable
to the Company and the value of each such Award shall not be changed.
(b) Notwithstanding any other provision of the Plan, and without
affecting the number of Shares reserved or available hereunder, the Committee
may authorize the issuance, continuation or assumption of Awards or provide for
other equitable adjustments after changes in the Shares resulting from any
merger, consolidation, sale of assets, acquisition of property or stock,
recapitalization, reorganization or similar occurrence in which the Company is
the continuing or surviving corporation, upon such terms and conditions as it
may deem equitable and appropriate.
4.3 Dissolution or Liquidation. In the event of the dissolution or
liquidation of the Company or any merger, consolidation or combination in which
the Company is not the surviving corporation or in which the outstanding Shares
of the Company are converted into cash, other securities or other property, each
outstanding Award shall terminate as of a date fixed by the Committee, provided
that not less than 20 days' written notice of the date of expiration shall be
given to each holder of an Award and each such holder shall have the right
during such period following notice to exercise the Award as to all of the
shares covered by the option.
SECTION 5
DURATION OF PLAN
This Plan shall continue in effect until August __, 2007, unless
terminated sooner by the Board pursuant to Section 12.
<PAGE>
SECTION 6
STOCK OPTIONS
6.1 Grants. Stock options may be granted alone or in addition to other
Awards granted under this Plan. Each Option granted shall be designated as
either a Non-Qualified Option or an Incentive Option and in each case such
Option may or may not include Stock Appreciation Rights. One or more Stock
Options and/or Stock Appreciation Rights may be granted to any Eligible Employee
or Advisor, except that only Non-Qualified Options may be granted to Advisors.
6.2 Incentive Options. Any option designated by the Committee as an
Incentive Stock Option will be subject to the general provisions applicable to
all Options granted under the Plan plus the following specific provisions:
(a) If an Incentive Stock Option is granted to a person who owns,
directly or indirectly, stock representing more than 10% of (i) the
total combined voting power of all classes of stock of the Company, or
(ii) a corporation that owns 50% or more of the total combined voting
power of all classes of stock of the Company,
(i) The Option Price must equal at least 110% of the Fair
Market Value on the date of grant; and
(ii) The term of the Option shall not be greater than five
years from the date of grant.
(b) The aggregate Fair Market Value of Shares, determined at the
date of grant, with respect to which Incentive Stock Options that may be
exercised for the first time during any calendar year under this Plan or
any other plan maintained by the Company shall not exceed $100,000.
(c) Qualification under the Code. Notwithstanding anything in
this Plan to the contrary, no term of this Plan relating to Incentive
Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted under this Plan be exercised, so as to
disqualify this Plan under Section 422 of the Code, or, without the
consent of the Participants affected, to disqualify any Incentive Option
under Section 422 of the Code.
6.3 Terms of Options. Except as otherwise required by Subsections 6.2
and 6.4, Options granted under this Plan shall be subject to the following terms
and conditions and shall be in such form and contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem desirable:
(a) Option Price. The Option Price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at
the time of grant, except that no Incentive Option may be granted for an
Option Price less than 100% of Fair Market Value on the Grant Date and
no Non-Qualified Stock Option may be granted for an Option Price less
than 95% of the Fair Market Value on the Date of Grant.
<PAGE>
(b) Option Term. The Term of each Stock Option shall be fixed
by the Committee, but no Option shall be exercisable more than ten years
after its Award Date.
(c) Exercisability. A Stock Option shall be exercisable at such
time or times and subject to such terms and conditions as shall be
specified in the Award Agreement.
(d) Method of Exercise. Stock Options may be exercised in whole
or in part at any time during the Option Term by giving written notice
of exercise to the Company specifying the number of Shares to be
purchased. Such notice shall be accompanied by payment in full of the
Option Price in cash unless some other form of consideration is approved
by the Committee at or after the grant. If and to the extent determined
by the Committee at or after grant, payment in full or in part may also
be made in the form of Common Stock owned by the Participant for at
least six months prior to exercise or by reduction in the number of
Shares issuable upon exercise based, in each case, on the Fair Market
Value of the Common Stock on the payment date.
(e) Transferability of Options. Stock Options shall be
Transferable as provided in Section 10 of this Plan.
6.4 Award of Options to Non-Employee Directors.
(a) Grants. The Company shall make the following immediately
exercisable grants of Non-Qualified Stock Options to Non-Employee
Directors under this Plan:
(i) On the date on which the Company consummates its
initial public offering of Common Stock as registered under the
Securities Act of 1933, an Option for Ten Thousand Shares.
(ii) On the date on which a person first becomes a
Non-Employee Director, whether by election or appointment, an
Option for Five Thousand Shares.
(iii) An Option for Five Thousand Shares upon election as
a director at the first Annual Shareholders' Meeting held after
the Company's initial public offering and
(iv) An Option for One Thousand Shares upon each annual
election as a director thereafter.
<PAGE>
(b) Terms and Conditions of Options Granted to Non-Employee
Directors.
(i) Term. The Term of all Options shall be 10 years from the
Award Date of the Option.
(ii) Option Price. The Option Price of all Options shall be
the Fair Market Value of a Share on the Grant Date.
(iii) Transferability and Termination. All Options shall be
Transferable as provided in Section 10 of this Plan and shall
terminate in accordance with Section 11 of this Plan, except that
the timing provisions of Subsections 11.2 and 11.3 may not be
varied by Committee determination.
SECTION 7
STOCK APPRECIATION RIGHTS
7.1 Grant. A Stock Appreciation Right may be granted either with or
without reference to all or any part of a Stock Option. A "Tandem SAR" means an
SAR granted with reference to a Stock Option (the "Reference Option"). A
"Non-Tandem SAR" means an SAR granted without reference to a Stock Option. If
the Reference Option is a Non-Qualified Option, a Tandem SAR may be granted at
or after the date of the Reference Option; if the Reference Option is an
Incentive Option, the Grant Date of a Tandem SAR must be the same as the Grant
Date of the Reference Option. Any SAR shall have such terms and conditions, not
inconsistent with this Plan, as are established by the Committee in connection
with the Award.
7.2 Term. A Tandem SAR shall terminate and no longer be exercisable upon
the termination of its Reference Option. A Non-Tandem SAR may have a term no
longer than 10 years from its Grant Date.
7.3 Exercise. A Tandem SAR may only be exercisable at the times and, in
whole or in part, to the extent that its Reference Option is exercisable. The
exercise of a Tandem SAR shall automatically result in the surrender of the
applicable portion of its Reference Option. A Non- Tandem SAR shall be
exercisable in whole or in part as provided in its Award Agreement. Written
notice of any exercise must be given in the form prescribed by the Committee.
7.4 Payment. For purposes of payment of an SAR, the reference price per
Share shall be the Option Price of the Reference Option in the case of a Tandem
SAR and shall be the Fair Market Value of a Share on the Grant Date in the case
of a Non-Tandem SAR. The Committee shall determine the form of payment.
<PAGE>
7.5 Transferability and Termination. Stock Appreciation Rights shall be
Transferable as provided in Section 11.1 of this Plan and shall terminate in
accordance with Section 11 of this Plan.
SECTION 8
RESTRICTED AND UNRESTRICTED STOCK AWARDS
8.1 Grants of Restricted Stock Awards. The Committee may, in its
discretion, grant one or more Restricted Stock Awards to any Eligible Employee
or Advisor. Each Restricted Stock Award shall specify the number of Shares to be
issued to the Participant, the date of such issuance, the price, if any, to be
paid for such Shares by the Participant and the restrictions imposed on such
Shares. The Committee may grant Awards of Restricted Stock subject to the
attainment of specified performance goals, continued employment or such other
limitations or restrictions as the Committee may determine.
8.2 Terms and Conditions of Restricted Awards. Restricted Stock Awards
shall be subject to the following provisions:
(a) Issuance of Shares. Shares of Restricted Stock may be issued
immediately upon grant or upon vesting as determined by the Committee.
(b) Stock Powers and Custody. If Shares of Restricted Stock are issued
immediately upon grant, the Committee may require the Participant to
deliver a duly signed stock power, endorsed in blank, relating to the
Restricted Stock covered by such an Award. The Committee may also require
that the stock certificates evidencing such shares be held in custody by
the Company until the restrictions on them shall have lapsed.
(c) Shareholder Rights. Unless otherwise determined by the Committee
at the time of grant, Participants receiving Restricted Stock Awards shall
not be entitled to dividend or voting rights for the Restricted Shares
until they are fully vested.
8.3 Unrestricted Stock Awards. The Committee may make awards of
unrestricted Common Stock to key Eligible Employees and Advisors in recognition
of outstanding achievements or contributions by such employees and advisors.
Unrestricted Shares issued on a bonus basis under this Subsection 8.3 may be
issued for no cash consideration. Each certificate for unrestricted Common Stock
shall be registered in the name of the Participant and delivered immediately to
the Participant.
<PAGE>
SECTION 9
PERFORMANCE AWARDS
9.1 Performance Awards.
(a) Grant. The Committee may, in its discretion, grant
Performance Awards to Eligible Employees and Advisors. A Performance
Award shall consist of the right to receive either (i) Common Stock or
cash of an equivalent value, or a combination of both, at the end of a
specified Performance Period (defined below) or (ii) a fixed dollar
amount payable in cash or Shares, or a combination of both, at the end
of a specified Performance Period. The Committee shall determine the
Eligible Employees and Advisors to whom and the time or times at which
Performance Awards shall be granted, the number of Shares or the amount
of cash to be awarded to any person, the duration of the period (the
"Performance Period") during which, and the conditions under which, a
Participant's Performance Award will vest, and the other terms and
conditions of the Performance Award in addition to those set forth in
Subsection 9.2.
(b) Criteria for Award. The Committee may condition the grant or
vesting of a Performance Award upon the attainment of specified
performance goals; the appreciation in the Fair Market Value, book value
or other measure of value of the Common Stock; the performance of the
Company based on earnings or cash flow; or such other factors or
criteria as the Committee shall determine.
9.2 Terms and Conditions of Performance Awards. Performance Awards
granted pursuant to this Section 9 shall be subject to the following terms and
conditions:
(a) Dividends. Unless otherwise determined by the Committee at
the time of the grant of the Award, amounts equal to any dividends
declared during the Performance Period with respect to any Shares
covered by a Performance Award will not be paid to the Participant.
(b) Payment. Subject to the provisions of the Award Agreement and
this Plan, at the expiration of the Performance Period, share
certificates, cash or both (as the Committee may determine) shall be
delivered to the Participant, or his or her legal representative or
guardian, in a number or an amount equal to the vested portion of the
Performance Award.
(c) Transferability. Performance Awards shall be Transferable
as provided in Section 10 of this Plan.
(d) Termination of Employment or Advisory Relationship. Subject
to the applicable provisions of the Award Agreement and this Plan, upon
<PAGE>
termination of a Participant's employment or advisory relationship
with the Company or a Subsidiary for any reason during the Performance
Period for a given Award, the Performance Award in question will vest
or be forfeited in accordance with the terms and conditions
established by the Committee.
SECTION 10
TRANSFERABILITY OF AWARDS
No Award or benefit payable under this Plan shall be Transferable by the
Participant during his or her lifetime and may not be assigned, exchanged,
pledged, transferred or otherwise encumbered or disposed of except by a domestic
relations order pursuant to Section 414(p)(1)(B) of the Code, or by will or the
laws of descent and distribution. Awards shall be exercisable during a
Participant's lifetime only by the Participant or by the Participant's guardian
or legal representative.
SECTION 11
TERMINATION
11.1 Termination at Expiration of Term. During any period of continuous
employment or business relationship with the Company or a Subsidiary, an Award
will be terminated only if it is fully exercised or if it has expired by its
terms. For purposes of this Plan, any leave of absence approved by the Company
shall not be deemed to be a termination of employment.
11.2 Termination by Death, Disability or Retirement. If a Participant's
employment by the Company or a Subsidiary terminates by reason of death,
Disability or Retirement, or in the case of an advisory relationship, if such
business relationship terminates by reason of death or Disability, any Award
held by such Participant, unless otherwise determined by the Committee at grant,
shall be fully vested and may thereafter be exercised by the Participant or by
the Participant's beneficiary or legal representative, for a period of one year
following termination of employment (or such longer period as the Committee may
specify at or after grant in all cases other than Incentive Options) or until
the expiration of the stated term of such Award, whichever period is shorter.
11.3 Other Termination. Unless otherwise determined by the Committee at
or after grant, if a Participant's employment by, or business relationship with,
the Company or a Subsidiary terminates for any reason other than death,
Disability or Retirement, the Award will terminate on the earlier to occur of
the stated expiration date or 90 calendar days after termination of the
employment or business relationship. If a Participant dies during the 90 day
period following the termination of the employment or business relationship, any
unexercised Award held by the Participant (or transferred by the Participant in
accordance with Section 10 of this Plan) shall be exercisable, to the full
extent that such Award was exercisable at the time of death, for a period of
90 calendar days from the date of death of the Participant or until the
expiration of the stated term of the Award, whichever occurs first.
<PAGE>
SECTION 12
TERMINATION OR AMENDMENT OF THIS PLAN
12.1 Termination or Amendment. The Board may at any time, amend, in
whole or in part, any or all of the provisions of this Plan, or suspend or
terminate it entirely; provided, however, that, unless otherwise required by
law, the rights of a Participant with respect to any Awards granted prior to
such amendment, suspension or termination may not be impaired without the
consent of such Participant; and, provided further, no amendment which would
increase the number of shares available under this Plan may be made without
shareholder approval.
SECTION 13
GENERAL PROVISIONS
13.1 No Right to Continued Employment or Business Relationship. Neither
the establishment of the Plan nor the granting of any Award hereunder shall
confer upon any Participant any right to continue in the employ of, or in any
business relationship with, the Company or any Subsidiary, or interfere in any
way with the right of the Company or any Subsidiary to terminate such employment
or business relationship at any time.
13.2 Other Plans. In no event shall the value of, or income arising
from, any Awards issued under this Plan be treated as compensation for purposes
of any pension, profit sharing, life insurance, disability or other retirement
or welfare benefit plan now maintained or hereafter adopted by the Company or
any Subsidiary, unless such plan specifically provides to the contrary.
13.3 Withholding of Taxes. The Company shall have the right to deduct
from any payment to be made pursuant to this Plan, or to otherwise require,
prior to the issuance or delivery of any Shares or the payment of any cash to a
Participant, payment by the Participant of any Federal, state, local or foreign
taxes required by law to be withheld. The Committee may permit any such
withholding obligation to be satisfied by reducing the number of Shares
otherwise deliverable or by accepting the delivery of previously owned Shares.
Any fraction of a Share required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the Participant.
13.4 Reimbursement of Taxes. The Committee may provide in its discretion
that the Company may reimburse a Participant for federal, state, local and
foreign tax obligations incurred as a result of the grant or exercise of an
Award issued under this Plan.
<PAGE>
13.5 Governing Law. This Plan and actions taken in connection with it
shall be governed by the laws of the State of Ohio, without regard to the
principles of conflict of laws.
13.6 Liability. No employee of the Company nor member of the Committee
or the Board shall be liable for any action or determination taken or made in
good faith with respect to the Plan or any Award granted hereunder and, to the
fullest extent permitted by law, all employees and members shall be indemnified
by the Company for any liability and expenses which may occur through any claim
or cause of action arising under or in connection with this Plan or any Awards
granted under this Plan.
EXHIBIT 5
OPINION OF KEATING, MUETHING & KLEKAMP
FACSIMILE (513) 579-6956
August 22, 1997
Direct D(513) 579-6411
E-Mail: gkreideKMKlaw.com
Ladies and Gentlemen:
This firm is general counsel to Kendle International Inc.(the "Company")
and as such, we are familiar with the Company's Articles of Incorporation, Code
of Regulations and corporate proceedings generally. We have reviewed the
corporate records as to the establishment of the Company's 1995 and 1997 Stock
Option Plans which call for the issuance of shares of Common Stock to employees
of the Company and its subsidiaries upon exercise of options granted to them.
Based solely upon such examination, we are of the opinion that:
1. The Company is a duly organized and validly existing corporation under
the laws of the State of Ohio; and
2. The Company has taken all necessary and required corporate actions in
connection with the proposed issuance of 1,743,907 shares of Common Stock
pursuant to the 1995 and 1997 Stock Option Plans, and such Common Stock, when
issued and delivered, will be validly issued, fully paid and non-assessable
shares of Common Stock of the Company free of any claim of pre-emptive rights.
We hereby consent to be named in the Registration Statement and the
Prospectus part thereof as the attorneys who have passed upon legal matters in
connection with the issuance of the aforesaid Common Stock and to the filing of
this opinion as an exhibit to the Registration Statement.
Yours truly,
KEATING, MUETHING & KLEKAMP, P.L.L.
BY: /S/Edward E. Steiner
--------------------------------
Edward E. Steiner
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-8 to be filed on August 22, 1997 of our report dated March 21, 1997
except as to the information presented in Notes 10 and 11, for which the date is
August 20, 1997, on our audits of the consolidated financial statements of
Kendle International Inc. as of December 31, 1995 and 1996, and for the three
years in the period ended December 31, 1996, appearing in the registration
statement on Form S-1 (File No. 333-30581) of Kendle International Inc. filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933.
/s/Coopers & Lybrand L.L.P.
Cincinnati, Ohio
August 20, 1997
