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EXHIBIT 4.5
KING PHARMACEUTICALS, INC.
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
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1. NAME AND PURPOSE. This plan shall be called the King Pharmaceuticals,
Inc. Non-Employee Director Stock Option Plan (the "Plan"). The Plan is intended
to encourage stock ownership by Non-Employee Directors (as such term is defined
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of King Pharmaceuticals, Inc., a Tennessee corporation (the
"Company"), to provide such directors with an additional incentive to manage the
Company effectively and to contribute to its success, and to provide a form of
compensation which will attract and retain highly qualified individuals as
members of the Board of Directors of the Company.
2. EFFECTIVE DATE AND TERM OF THE PLAN. The Plan shall become effective on
the date of the adoption of the Plan by the Board of Directors; however, the
Plan shall be approved by the vote of the holders of a majority of the
outstanding shares of the Company's common stock within twelve (12) months of
the adoption of the Plan by the Board. Options may not be granted under the Plan
after the tenth (10th) anniversary of the Effective Date (the "Term"); provided,
however, that all options outstanding as of that date shall remain or become
exercisable pursuant to their terms and the terms of the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Board of Directors
of the Company (the "Board"). Each non-employee member of the Board shall be
eligible to participate in the Plan; however, grants made to a non-employee
member of the Board must be approved by a majority of the full Board with such
member abstaining. Subject to the express provisions of the Plan, the Board
shall have discretionary authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, to determine the details and
provisions of each stock option agreement, and to make all the determinations
necessary or advisable in the administration of the Plan. The interpretation and
construction by the Board of any provisions of the Plan or of any option granted
pursuant to the Plan shall be final and binding upon the Company and any
optionee. No member of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any option granted pursuant
thereto.
4. STOCK AVAILABLE FOR OPTIONS. Subject to the adjustments as provided in
Subsection 7(f), the aggregate number of shares of Common Stock, no par value
per share, of the Company (the "Common Stock") reserved for purposes of the Plan
shall be 300,000 shares of authorized and unissued shares or issued shares
reacquired by the Company.
Determinations as to the number of shares that remain available for
issuance under the Plan shall be made in accordance with such rules and
procedures as the Board shall determine from time to time. If any outstanding
option under the Plan expires or is terminated for any reason before the end of
the Term of the Plan, the shares allocable to the unexercised portion of such
option shall
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become available for the grant of other options under the Plan. No shares
delivered to the Company in full or partial payment upon exercise of an option
pursuant to Subsection 7(c) or in full or partial payment of any withholding tax
liability permitted under Section 10 shall become available for the grant of
other options under the Plan.
5. PARTICIPATION. Subject to the limitations contained in this Section 5,
any director of the Company who is not a contractual nor common law employee of
the Company or any of its subsidiaries (a "Non-Employee Director") will be
eligible to be granted options to purchase shares of the issued or issuable
Common Stock in accordance and consistent with the terms and conditions of the
Plan. An optionee may hold more than one option, but only on the terms and
subject to the restrictions hereafter set forth. Except as provided herein,
terms and conditions of options granted to a director at any given time need not
be the same for any other grant of options.
6. OPTION GRANTS.
(a) Discretionary Grants. The Board shall determine from time to time
the directors (among the Non-Employee Directors) to be granted options, the
number of shares of Common Stock subject to such options, and the terms and
conditions of the options to be granted.
(b) Non-Statutory Stock Options. All options granted under the Plan
shall be non-statutory options not intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Each option granted
under the Plan shall provide that such option will not be treated as an
"incentive stock option," as that term is defined in Section 422(b)of the Code.
7. TERMS AND CONDITIONS OF OPTIONS OF THE PLAN. Options granted under this
Plan shall be evidenced by agreements in such form as the Board shall from time
to time approve, which agreements shall comply with and be subject to the
following conditions:
(a) Term of Options. The term of each option shall be for a period of
not greater than ten (10) years from the date of grant of the option.
(b) Option Price. The exercise price of each option shall be equal to
100% of the Fair Market Value of the shares of Common Stock on the date of the
grant of the option. If the shares are traded in the over-the-counter market,
the Fair Market Value per share shall be the closing price on the Nasdaq
National Market ("Nasdaq") on the day the option is granted or if no sale of
shares is reflected on Nasdaq on that day, on the next preceding day on which
there was a sale of shares reflected on Nasdaq. If the shares are not traded in
the over-the-counter market but are listed upon an established stock exchange or
exchanges, such Fair Market Value shall be deemed to be the closing price of the
shares on such stock exchange or exchanges on the day the option is granted or
if no sale of the shares shall have been made on any stock exchange on that day,
on the next preceding day on which there was a sale of the shares.
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(c) Medium of Payment. The option price shall be payable to the
Company either (i) in United States dollars in cash or by check, bank draft, or
money order payable to the order of the Company or (ii) if permitted by the
Board, through the delivery of shares of the Common Stock with a Fair Market
Value on the date of the exercise equal to the option price, provided such
shares are utilized as payment to acquire at least 100 shares of Common Stock,
or (iii) by a combination of (i) and (ii) above. Fair Market Value will be
determined in the manner specified in Subsection 7(b) except as to the date of
determination.
(d) Exercise of Options. Except as provided herein, the Board shall
have the authority to determine, at the time of grant of each option pursuant to
Subsection 6(a), the times at which an option may be exercised and any
conditions precedent to the exercise of an option. An option shall be
exercisable upon written notice to the Secretary or Assistant Secretary of the
Company, as to any or all shares covered by the option, until its termination or
expiration in accordance with its terms or the provisions of the Plan.
Notwithstanding the foregoing, an option shall not at any time be exercisable
with respect to less than 100 shares unless the remaining shares covered by an
option are less than 100 shares. The purchase price of the shares purchased
pursuant to an option shall be paid in full upon delivery to the optionee of
certificates for such shares. Exercise by an optionee's heir, personal
representative or permitted transferee shall be accompanied by evidence of his
or her authority to act, in a form reasonably satisfactory to the Company.
(e) Termination of Service as Director.
(i) Termination of Service for any Reason Other than Death or
Permanent Disability. In the event an optionee shall cease to serve the
Company as a director for any reason other than such optionee's death
or Permanent Disability, each option held by such optionee shall, to
the extent rights to purchase shares under the option have become
vested at the time such optionee ceases to serve as a director, remain
exercisable, in whole or in part, by the optionee, subject to prior
expiration according to its terms and other limitations imposed by the
Plan, for a period of one (1) year following the optionee's cessation
of service as a director of the Company. If the optionee dies after
such cessation of service, the optionee's options shall be exercisable
in accordance with Subsection 7(e)(ii) hereof.
(ii) Termination of Service for Death or Permanent Disability. If
an optionee ceases to be a director by reason of death or Permanent
Disability, each option held by such optionee shall immediately become
exercisable and shall remain exercisable, in whole or in part, by (in
the case of Permanent Disability) the optionee or the optionee's
guardian or attorney-in-fact or (in the case of death) the personal
representative of the optionee's estate or by any person or persons who
have acquired the option directly from the optionee during the shorter
of the following periods: (i) the term of the option, or (ii) a period
of two (2) years from the death or Permanent Disability of such
optionee. If an optionee dies or a Permanent Disability occurs during
the extended exercise period following cessation of service specified
in Subsection 7(e)(i) above, such option may be exercised any time
within the longer of such extended period or one (1) year after death
or Permanent Disability, subject to the prior
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expiration of the term of the option. For purposes of this Subsection
7(e)(ii), "Permanent Disability" shall mean a determination by the
Social Security Administration or any similar successor agency that an
optionee is "permanently disabled," and the date on which a Permanent
Disability is deemed to have occurred shall be the date on which such
determination by such agency shall have been made.
(f) Adjustment in Shares Covered by Option. The number of shares
covered by each outstanding option, and the purchase price per share thereof,
shall be proportionately adjusted for any increase or decrease in the number of
issued and outstanding shares resulting from a split in or combination of shares
or the payment of a stock dividend on the shares or any other increase or
decrease in the number of such shares effected without receipt of consideration
by the Company.
If the Company shall be the surviving corporation in any merger or
consolidation or if the Company is merged into a wholly-owned subsidiary solely
for purposes of changing the Company's state of incorporation, each outstanding
option shall pertain to and apply to the securities to which a holder of the
number of shares subject to the option would have been entitled to receive in
such transaction.
In the event of a Change in Control, only if provided in the option
agreement, any option awarded under this Plan to the extent not previously
exercisable shall immediately become fully exercisable. The Board in its sole
discretion may direct the Company to cash out all outstanding options on the
basis of the Change in Control Price as of the date a Change in Control occurs
or such other date as the Committee may determine prior to the Change in
Control. For purposes of this Plan, a "Change in Control" means the occurrence
of any of the following: (i) when any "person" as defined in Section 3(a)(9) of
the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d) of the Exchange Act but excluding the
Company and any subsidiary, any of the Company's existing shareholders prior to
the Effective Date and any employee benefit plan sponsored or maintained by the
Company or any subsidiary (including any trustee of such plan acting as
trustee), directly or indirectly, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act, as amended from time to time), after the
Effective Date, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities; (ii) when,
during any period of 24 consecutive months during the existence of the Plan, the
individuals who, at the beginning of such period, constitute the Board of
Directors of the Company (the "Incumbent Directors") cease for any reason other
than death to constitute at least a majority thereof; provided, however, that a
director who was not a director at the beginning of such 24-month period shall
be deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually (because they were directors at the
beginning of such 24 month period) or by prior operation of this provision; or
(iii) the approval by the shareholders of the Company of a transaction involving
the acquisition of the Company by an entity other than the Company or a
subsidiary through purchase of assets, by merger, or otherwise. For purposes of
this Plan, "Change in Control Price" means the highest price per share of Common
Stock paid in any transaction reported on Nasdaq or paid or
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offered in any bona fide transaction related to a Change in Control at any time
during the 60-day period immediately preceding the occurrence of the Change in
Control, in each case as determined by the Committee.
In the event of a change in the shares as presently constituted, which
is limited to a change of all of its authorized shares with par value into the
same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the shares within
the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Any such
adjustment may provide for the elimination of any fractional share which might
otherwise become subject to an option.
Except as expressly provided in this Subsection 7(f), the optionee
shall have no rights by reason of any split or combination of shares of stock of
any class or the payment of any stock dividend or any other increase or decrease
in the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spinoff of assets or stock of another
corporation, and any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(g) Rights of a Shareholder. An optionee shall have no rights as a
shareholder with respect to any shares covered by his or her option until the
date on which the optionee becomes the holder of record of such shares. No
adjustment shall be made for dividends, distributions, or other rights for which
the record date is prior to the date on which he or she shall have become the
holder of record thereof, except as provided in Subsection 7(f).
(h) Postponement of Delivery of Shares and Representations. The
Company, in its discretion, may postpone the issuance and/or delivery of shares
upon any exercise of an option until completion of the registration or other
qualification of such shares under any state and/or federal law, rule or
regulation as the Company may consider appropriate, and may require any person
exercising an option to make such representations, including a representation
that it is the optionee's intention to acquire shares for investment and not
with a view to distribution thereof, and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
in compliance with applicable laws, rules, and regulations. In such event no
shares shall be issued to such holder unless and until the Company is satisfied
with the accuracy of any such representations.
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(i) Transferability. All options shall be nontransferable except (i)
upon the optionee's death, by the optionee's will or the laws of descent and
distribution or (ii) on a case-by-case basis as may be approved by the Board in
its discretion, in accordance with the terms provided below. Each option
agreement shall provide the optionee may, during his or her lifetime and subject
to the prior approval of the Boar at the time of proposed transfer, transfer all
or part of the option to a Permitted Transferee (as defined below), provided
that such transfer is made by the optionee for estate and tax planning purposes
or donative purposes and no consideration (other than nominal consideration) is
received by the optionee therefor. The transfer of an option shall be subject to
such other terms and conditions as the Board may in its discretion impose from
time to time, including a condition that the portion of the option to be
transferred be vested and exercisable by the optionee at the time of the
transfer. Subsequent transfer of an option transferred under this Subsection
7(i) shall be prohibited other than by will or the laws of descent and
distribution upon the date of the transferee.
For purposes hereof, a "Permitted Transferee" shall be any member of
the optionee's immediate family or a charitable institution (each defined
below), or a trust for the exclusive benefit of such immediate family members
and/or charitable institution, or a partnership or limited liability company the
equity interests of which are owned exclusively by the optionee and/or one or
more members of his or her immediate family. For purposes of the preceding
definition, (i) the "immediate family" of the optionee shall mean and include
the optionee's spouse, any descendant of the optionee or his or her spouse
(including descendants by adoption), and any descendant of either parent of the
optionee (including descendants by adoption), and (ii) "charitable institution"
shall mean and include any organization described in each of section
170(b)(1)(A), 170(c), 2055(a) and 2522(a) of the Code, as well as any charitable
remainder trust created under section 664 of the Code, the income beneficiary of
which is a member of the optionee's immediate family or a trust or other entity
described above in this Subsection 7(i).
No transfer of an option by the optionee by will or by laws of descent
and distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and an authenticated copy of the
will and/or such other evidence as the Board may deem necessary to establish the
validity of the transfer. During the lifetime of an optionee, the option shall
be exercisable only by him, except that, in the case of an optionee who is
legally incapacitated, the option shall be exercisable by his guardian or legal
representative.
(j) Other Provisions. The option agreements authorized under the Plan
shall contain such other provisions, including, without limitation, restrictions
upon the exercise of the option, as the Board shall deem advisable.
8. ADJUSTMENTS IN SHARES AVAILABLE FOR OPTIONS. The adjustments in number
and kind of shares and the substitution of shares, affecting outstanding options
in accordance with Subsection 7(f) hereof, shall also apply to the number and
kind of shares issuable upon the exercise of options to be granted pursuant to
Section 6 and the number and kind of shares reserved for issuance pursuant to
the Plan, but not yet covered by options.
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9. AMENDMENT OF THE PLAN. The Board, insofar as permitted by law, shall
have the right from time to time, with respect to any shares at the time not
subject to options, to suspend or discontinue the Plan or revise or amend it in
any respect whatsoever. So long as the Common Stock is eligible for trading on
Nasdaq, the Board shall obtain shareholder approval for those revisions or
amendments of the Plan required to be so approved pursuant to the By-laws of the
National Association of Securities Dealers. If the Plan is amended so that the
exemption provided by Rule 16b-3 as a result of the Plan being approved by the
shareholders of the Company is no longer available for options granted under
Subsections 6(b) or 6(c) hereof, all options subsequently granted thereunder
must be approved by the Board prior to such grant.
10. 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 of Common Stock, payment by the optionee
of any federal, state, or local taxes required by law to be withheld. Unless
otherwise prohibited by the Board, an optionee may satisfy any such withholding
tax obligation by any of the following means or by a combination of such means:
(a) tendering a cash payment;
(b) authorizing the Company to withhold from the shares otherwise
issuable to the optionee a number of shares having a Fair Market Value
as of the "Tax Date," less than or equal to the amount of withholding
tax obligation; or
(c) delivering to the Company unencumbered shares owned by the optionee
having a Fair Market Value, as of the Tax Date, less than or equal to
the amount of the withholding tax obligation.
The "Tax Date" shall be the date that the amount of tax to be withheld
is determined. Fair Market Value shall be determined in the manner
specified in Subsection 7(b), except as to the date of determination.
An optionee's election to pay the withholding tax obligation by either
of (b) or (c) above shall be irrevocable, may be disapproved by the
Board, and must be made either six (6) months prior to the Tax Date or
during the period beginning on the third business day following the
date of release of the Company's quarterly or annual summary statement
of sales and earnings and ending on the twelfth business day following
such date.
11. RIGHT OF BOARD OF DIRECTORS OR SHAREHOLDERS TO TERMINATE DIRECTOR'S
SERVICE. Nothing in this Plan or in the grant of any option hereunder shall
inany way limit or affect the right of the Board of Directors or the
shareholders of the Company to remove any director or otherwise terminate his or
her service as a director, pursuant to the law, the Second Amended and Restated
Charter, or Amended and Restated By-laws of the Company.
12. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of stock pursuant to options will be used for general corporate purposes.
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13. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
impose no obligation on the optionee to exercise such option.
14. CONSTRUCTION. This Plan shall be construed under the laws of the State
of Tennessee.
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