<PAGE> 1
As filed with the Securities and Exchange Commission on August 13, 1999
Registration No. 333-_____________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------------
DRUG EMPORIUM, INC.
-------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 31-1064888
-------------- ----------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
155 Hidden Ravines Drive
Powell, Ohio 43065
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(ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)
Drug Emporium, Inc. 1999 Stock Incentive Plan
---------------------------------------------
(FULL TITLE OF THE PLAN)
David L. Kriegel, President
Drug Emporium, Inc.
155 Hidden Ravines Drive
Powell, Ohio 43065
(740) 548-7080
- -------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
John R. Thomas, Esq.
Kegler, Brown, Hill & Ritter Co., L.P.A.
65 East State Street, Suite 1800
Columbus, Ohio 43215
(614) 462-5400
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
TITLE OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF REGISTRATION
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE FEE
REGISTERED REGISTERED (1) PER SHARE OFFERING PRICE
- ------------------------------- ---------------------- ---------------------- ---------------------- ------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.10
per share (2) 1,320,000 shares(3) $7.50(4) $9,900,000(4) $2,752.20
- ------------------------------- ---------------------- ---------------------- ---------------------- ------------------------------
Common Stock, par value
$.10 per share (2) 180,000 shares(5) $7.75(6) $1,395,000(6) $ 387.81
- ------------------------------- ---------------------- ---------------------- ---------------------- ------------------------------
Total 1,500,000 shares $11,295,000 $3,140.01
===================================================================================================================================
</TABLE>
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(1) This Registration Statement also covers such additional number of
shares of Common Stock, par value $.10 per share, and other securities
of Drug Emporium, Inc. as may be offered or issued pursuant to the
anti-dilution provisions of the above-referenced Drug Emporium, Inc.
1999 Stock Incentive Plan (the "Plan").
(2) Includes Series A Preferred Stock Purchase Rights to purchase shares of
Series A Preferred Stock, par value $1.00 per share, of Drug Emporium,
Inc. No separate consideration will be received for the Preferred Share
Purchase Rights which, prior to the occurrence of certain prescribed
events, are not exercisable, will be evidenced by the certificates for
Common Stock and will be transferable along with and only with the
Common Stock.
(3) Represents the number of shares of Common Stock available for grant
under the Plan as of August 11, 1999.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to paragraphs (c) and (h)(1) of Rule 457 under the Securities
Act of 1933, as amended, upon the basis of the average of the high and
low sales price of the Common Stock as reported on the Nasdaq National
Market on August 11, 1999.
(5) Represents the number of shares of Common Stock subject to options
outstanding under the Plan as of August 11, 1999.
(6) Pursuant to paragraph (h)(1) of Rule 457, the amounts are calculated
based upon the weighted average exercise price of such outstanding
options.
<PAGE> 3
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with Rule
428 under the Securities Act of 1933, as amended (the "Securities Act"), and the
Note to Part I of Form S-8.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, which previously have been filed by Drug
Emporium, Inc., a Delaware corporation (the "Registrant"), with the Securities
and Exchange Commission (the "Commission"), are hereby incorporated by reference
in this Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended February 27, 1999;
(b) The Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended May 29, 1999; and
(c) The description of the Common Stock, par value $.10 per share
("Common Stock"), of the Registrant, including the description of the Company's
Series A Preferred Stock Purchase Rights, contained in the Registrant's
Registration Statement on Form 8-A filed with the Commission on June 15, 1988
("Form 8-A"), as amended by the Registrant's Form 8-A/A Amendment No. 1 filed
with the Commission on June 30, 1998, including any amendment or report filed
with the Commission for the purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities 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 of such documents.
For purposes of this Registration Statement, any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded to the extent that a
statement contained herein or in any subsequently filed document which is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware provides in
regard to indemnification of directors and officers as follows:
Section 145. Indemnification of Officers, Directors, Employees and
Agents; Insurance.
(a) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendre or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably
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believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer
of a corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct set
forth in subsections (a) and (b) of this section. Such determination shall be
made, with respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if any, as
the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify such person against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
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(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement, vote
of stockholders or disinterested directors, or otherwise. The Court of Chancery
may summarily determine a corporation's obligation to advance expenses
(including attorneys' fees).
In accordance with Section 102(b)(7) of the General Corporation Law of
the State of Delaware, the Registrant's Restated Certificate of Incorporation,
as amended, contains a provision eliminating the personal liability of a
director of the Registrant to the Registrant and its stockholders for monetary
damages for breach of fiduciary duty as a director, except for the liability of
a director for (i) any breach of the director's duty of loyalty to the
Registrant or its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
unlawful payment of dividends or unlawful stock purchases or redemptions; or
(iv) any transaction for which the director derived an improper personal
benefit.
Article Ninth of the Registrant's Restated Certificate of
Incorporation, as amended, provides in regard to indemnification of directors
and officers as follows:
A. The corporation may indemnify or agree to indemnify any person who
was or is a party or is threatened to be made a party, to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of the
corporation, by reason of the fact he is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, or agent of another
corporation (including a subsidiary of this corporation), domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other enterprise,
against expenses, including attorneys' fees, judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
B. The corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee, or
agent of another corporation (including a subsidiary of this corporation),
domestic or foreign, nonprofit or for profit, partnership, joint venture, trust,
or other enterprise against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interest of the corporation, except that no
indemnification shall be made in respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery, or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the Court of Chancery or other such court shall deem proper.
C. To the extent that a director, trustee, officer, employee, or agent
has been successful on the merits or otherwise in defense of any
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action, suit, or proceeding referred to in sections A. and B. of this article,
or in defense of any claim, issue, or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection therewith.
D. Any indemnification under sections A. and B. of this article, unless
ordered by a court, shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
trustee, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in sections A. and B. of
this article. Such determination shall be made (1) by a majority vote of a
quorum consisting of directors of the indemnifying corporation who were not and
are not parties to or threatened with any such action, suit, or proceeding, or
(2) if such a quorum is not obtainable or if a majority vote of a quorum of
disinterested directors so directs, in a written opinion by independent legal
counsel other than an attorney, or a firm having associated with it an attorney,
who has been retained by or who has performed services for the corporation, or
any person to be indemnified within the past five (5) years, or (3) by the
stockholders, or (4) by the court of Common Pleas or the court in which such
action, suit, or proceeding was brought. Any determination made by the
disinterested directors under section D.(1) or by independent legal counsel
under section D.(2) of this article shall be promptly communicated to the person
who threatened or brought the action or suit by or in the right of the
corporation under section B. of this article, and within ten (10) days after
receipt of such notification, such person shall have the right to petition the
Court of Chancery or the court in which such action or suit was brought to
review the reasonableness of such determination.
E. No director of the corporation shall be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (1) for any breach of the director's duty of
loyalty to the corporation or its stockholders; (2) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of law;
(3) under Section 174 of the Delaware General Corporation Law; or (4) for any
transaction from which the director derived an improper personal benefit.
F. Expenses, including attorneys' fees, incurred in any action, suit,
or proceeding referred to in sections A. and B. of this article, may be paid by
the corporation in advance of the final disposition of such action, suit, or
proceeding upon receipt of a written undertaking by or on behalf of the
director, trustee, officer, employee, or agent to repay such amount, if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this article. If a majority vote of a quorum of
disinterested directors so directs by resolution, said written undertaking need
not be submitted to the corporation. Such a determination that a written
undertaking need not be submitted to the corporation shall in no way affect the
entitlement of indemnification as authorized by this article.
G. The indemnification and advancement of expenses provided in this
article shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under the Restated
Certificate or the Bylaws or any agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
H. The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation
or is or was serving at the request of the corporation as a director, trustee,
officer, employee, or agent of another corporation (including a subsidiary of
this corporation), domestic or foreign, nonprofit or for profit, partnership,
joint venture, trust, or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such whether or not the corporation would have the power to indemnify him
against such liability under this section.
I. For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence has continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee, or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, shall stand in the same
position under the provisions of this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
J. For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee, or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an
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employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
K. The indemnification and advancement of expenses provided by, or
granted pursuant to, this article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
In addition, the Registrant maintains a directors' and officers'
liability insurance policy covering its directors and officers against certain
losses, including liabilities under the Securities Act, incurred by such persons
while acting in such capacities, to the extent such losses are not indemnified
by the Registrant.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
4.1 Restated Certificate of Incorporation of Drug Emporium, Inc.,
as amended (Incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1, Registration
No. 21755).
4.2 By-Laws of Drug Emporium, Inc., as amended.
4.3 Specimen Common Stock Certificate (Incorporated by reference
to Exhibit 4.1 to the Registrant's Registration Statement on
Form S-1, Registration No. 21755).
4.4 Rights Agreement, dated as of July 1, 1988, as amended and
restated as of June 30, 1998, between Drug Emporium, Inc. and
The Huntington National Bank. (Incorporated by reference to
Exhibit 4.1 to the Registrant's Form 8-A/A, Amendment No. 1
filed June 30, 1998).
5.1 Opinion of Kegler, Brown, Hill & Ritter Co., L.P.A. on the
legality of the securities being registered.
23.1 Consent of Kegler, Brown, Hill & Ritter Co., L.P.A. (included
in Exhibit 5.1).
23.2 Consent of Ernst & Young, LLP.
24.1 Powers of Attorney (included on the Signature Page of this
Registration Statement).
99.1 Drug Emporium, Inc. 1999 Stock Incentive Plan.
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ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (a) (1) (i) and (a) (1)
(ii) of this Section do not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the Company pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) 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.
(3) 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.
(b) 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 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.
(c) Insofar as the 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 Securities Act of 1933 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 a successful defense of any action, suit
or proceeding) is asserted by such directors, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the question has already been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 the City of Powell, State of Ohio on the 11th day of August,
1999.
DRUG EMPORIUM, INC.
By: /s/ David L. Kriegel
-----------------------------------
David L. Kriegel, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints David L. Kriegel and John R.
Thomas, and each of them, with full power to act without the joinder of others,
as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or it might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or, his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-8 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ David L. Kriegel President, Chief Executive Officer August 11, 1999
- ------------------------------------ and Director (Principal executive
David L. Kriegel officer)
/s/ Michael P. Leach Chief Financial Officer and Treasurer August 11, 1999
- ------------------------------------ (Principal financial and accounting
Michael P. Leach officer)
/s/ Donald B. Hayes Director August 11, 1999
- ------------------------------------
Donald B. Hayes
/s/ John J. Havlicek Director August 11, 1999
- ------------------------------------
John J. Havlicek
/s/ Robert W. McCurdy Director August 11, 1999
- ------------------------------------
Robert W. McCurdy
/s/ Walter E. Sinterman Director August 11, 1999
- ------------------------------------
Walter E. Sinterman
/s/ William L. Sweet, Jr. Director August 11, 1999
- ------------------------------------
William L. Sweet, Jr.
/s/ Wesley C. Wright Director August 11, 1999
- ------------------------------------
Wesley C. Wright
</TABLE>
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DRUG EMPORIUM, INC.
1999 STOCK INCENTIVE PLAN
FORM S-8
EXHIBIT INDEX
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
4.1 Restated Certificate of Incorporation of Drug Emporium, Inc.,
as amended (Incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1, Registration
No. 21755).
4.2 By-Laws of Drug Emporium, Inc., as amended.
4.3 Specimen Common Stock Certificate (Incorporated by reference
to Exhibit 3.4 to the Registrant's Registration Statement on
Form S-1, Registration No. 21755.
4.4 Rights Agreement, dated as of July 1, 1988, as amended and
restated as of June 30, 1998, between Drug Emporium, Inc. and
The Huntington National Bank. (Incorporated by reference to
Exhibit 4.1 to the Registrant's Form 8-A/A, Amendment No. 1
filed June 30, 1998).
5.1 Opinion of Kegler, Brown, Hill & Ritter Co., L.P.A. on the
legality of the securities being registered.
23.1 Consent of Kegler, Brown, Hill & Ritter Co., L.P.A. (included
in Exhibit 5.1).
23.2 Consent of Ernst & Young, LLP.
24.1 Powers of Attorney (included on the Signature Page of this
Registration Statement).
99.1 Drug Emporium, Inc. 1999 Stock Incentive Plan.
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<PAGE> 1
EXHIBIT 4.2
BY-LAWS
OF
DRUG EMPORIUM, INC.
AMENDED AS OF APRIL 16, 1998
ARTICLE I - SHAREHOLDERS
1.1 Annual Meetings
An annual meeting of the shareholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place on such
date, and at such time during the months of June or July as the Board of
Directors shall each year fix, or if the Board of Directors fails to fix a date
and time for the meeting any year, at 10:30 A.M. the third Tuesday of June of
each year if not a legal holiday, but if that day is a legal holiday under Ohio
law, the annual meeting shall be held on the first succeeding day which is not a
Sunday or legal holiday. If for any reason the election of directors is not held
at the annual meeting or any adjournment thereof, the Board of Directors shall
cause the election to be held at a special shareholders' meeting as soon
thereafter as is convenient. At such special meeting, the shareholders may elect
directors and transact any other business with the same effect as at an annual
meeting.
1.2 Special Meetings
Special meetings of the shareholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by a majority of the
Board of Directors or the chief executive officer. Upon delivery to the
president or secretary of a request in writing for a shareholders' meeting by
any persons entitled to call such meeting, it shall be the duty of the officer
to whom the request was delivered to give notice to the shareholders of such
meeting. Said request shall specify the objects or purposes and the date and
hour for such meeting. The date shall be at least ten and not more than sixty
days after delivery of the request. If, upon a request, such officer does not
within five days call the meeting, the persons making such request may call it
by giving notice as provided in Section 1.3 of these by-laws, or by causing it
to be given by any designated representative.
1.3 Notice of Meetings
Written notice of the place, date, and time of all meetings of the
shareholders shall be given, not less than ten nor more than sixty days before
the date on which the meeting is to be held, to each shareholder entitled to
vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the General
Corporation Law of the State of Delaware or the certificate of incorporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date, and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
1.4 Quorum
At any meeting of the shareholders, the holders of one-third of all of
the shares of the stock entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law.
<PAGE> 2
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of the stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
If a notice of any adjourned special meeting of share-holders is sent
to all shareholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
1.5 Organization
Such person as the Board of Directors may have designated or, in the
absence of such a person, the highest ranking officer of the corporation who is
present shall call to order any meeting of the shareholders and act as chairman
of the meeting. In the absence of the Secretary of the corporation, the
secretary of the meeting shall be such person as the chairman appoints.
1.6 Conduct of Business
The chairman of any meeting of shareholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him in order.
1.7 Proxies and Voting
At any meeting of the shareholders, every shareholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
Each shareholder shall have one vote for every share of stock entitled
to vote which is registered in his name on the record date for the meeting,
except as otherwise provided herein or required by law.
All voting, except where otherwise required by law, may be by a voice
vote; provided, however, that upon demand therefore by a shareholder entitled to
vote or his proxy, a stock vote shall be taken. Every stock vote shall be taken
by ballots, each of which shall state the name of the shareholder or proxy
voting and such other information as may be required under the procedure
established for the meeting. Every vote taken by ballots shall be counted by an
inspector or inspectors appointed by the chairman of the meeting.
All elections of directors shall be determined by a plurality of the
votes cast, and except as otherwise required by law, all other matters shall be
determined by a majority of the votes cast.
1.8 Stock List
A complete list of shareholders entitled to vote at any meeting of
shareholders, arranged in alphabetical order and showing the address of each
such shareholder and the number of shares registered in his name, shall be open
to the examination of any such shareholder, for any purpose germane to the
meeting, during ordinary business hours for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or if not
so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
shareholder who is present. This list shall presumptively determine the identity
of the shareholders entitled to vote at the meeting and the number of shares
held by each of them.
1.9 Procedures for Nomination of Directors
Unless nominated by a majority for the Board of Directors, no
nomination of any candidate for election by stockholders as a director shall be
eligible for consideration unless a written statement setting forth such
candidate's name, qualifications and background is delivered to the Board of
Directors not less than sixty (60) days prior to the annual or special meeting
at which such business is to occur.
<PAGE> 3
1.10 Procedures for Proposing Consideration of Business
Unless proposed by a majority of the Board of Directors, no business
shall be eligible for consideration at annual or special meetings of
stockholders unless a written statement setting forth the business and the
purpose therefor is delivered to the Board of Directors not less than sixty (60)
days prior to the annual or special meeting at which such business is to occur.
ARTICLE II - BOARD OF DIRECTORS
2.1 Number and Term of Office
The number of directors who shall constitute the whole board shall be
such number not less than three nor more than fifteen as the Board of Directors
shall at the time have designated. Unless otherwise fixed by the Board of
Directors, the number of directors who shall constitute the whole board shall be
seven (7).
Whenever the authorized number of directors is increased between annual
meetings of the shareholders, a majority of the directors then in office shall
have the power to elect such new directors for the balance of a term and until
their successors are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the expiration of the term
of the directors then in office unless, at the time of such decrease, there
shall be vacancies on the board which are being eliminated by the decrease.
2.2 Vacancies
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term.
2.3 Regular Meetings
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
2.4 Special Meetings
Special meetings of the Board of Directors may be called by one-third
of the directors then in office or by the chief executive officer and shall be
held at the principal office of the Company or such other place as approved by a
majority of the directors, on such date, and at such time as they or he shall
fix. Notice of the place, date, and time of each such special meeting shall be
given each director by whom it is not waived by mailing written notice not less
than three days before the meeting or by giving notice by telephone, telecopy,
facsimile, E-mail, telegram or other similar method not less than eighteen hours
before the meeting. Unless otherwise indicated in the notice thereof, any and
all business may be transacted at a special meeting.
2.5 Quorum
At any meeting of the Board of Directors, one-third of the total number
of the whole board, but not less than two, shall constitute a quorum for all
purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
2.6 Participation in Meetings by Conference Telephone
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such board or committee by means of conference
telephone or similar communications equipment that enables all persons
participating in the meeting to hear each other. Such participation shall
constitute presence in person at such meeting.
<PAGE> 4
2.7 Conduct of Business
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
2.8 Powers
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon
any other person for the time being;
(5) To confer upon any officer of the corporation the power to appoint,
remove and suspend subordinate officers and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers and agents of
the corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers and agents of the corporation and
its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with these
by-laws, for the management of the corporation's business and affairs.
2.9 Compensation of Directors
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
directors.
2.10 Resignation of Directors
Any director may resign by giving written notice to the president or
secretary of the corporation. Such resignation shall be effective at the time
specified therein. Unless otherwise specified therein, the acceptance of a
resignation shall not be necessary to make it effective.
<PAGE> 5
ARTICLE III - COMMITTEES
3.1 Committees of the Board of Directors
The Board of Directors, by a vote of a majority of the whole board, may
from time to time designate committees of the board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternative members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so designated
may exercise the power and authority of the Board of Directors to declare a
dividend or to authorize the issuance of stock if the resolution which
designates the committee or a supplemental resolution of the Board of Directors
shall so provide. In the absence or disqualification of any member of any
committee and any alternate member in his place, the member or members of the
committee present at the meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may by unanimous vote appoint another member
of the Board of Directors to act at the meeting in the place of the absent or
disqualified member.
3.2 Conduct of Business
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the members shall constitute
a quorum unless the committee shall consist of one or two members, in which
event one member shall constitute a quorum; and all matters shall be determined
by a majority vote of the members present. Action may be taken by any committee
without a meeting if all members thereof consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of such
committee.
ARTICLE IV - OFFICERS
4.1 Generally
The officers of the corporation shall consist of a chief executive
officer, president, one or more vice-presidents, a secretary, a treasurer and
such other subordinate officers as may from time to time be appointed by the
Board of Directors. There may, in addition, be a chairman of the board, at any
times during which the Board of Directors shall see fit to cause such office to
be filled. Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every annual meeting of
shareholders. Each officer shall hold his/her office until his/her successor is
elected and qualified or until his/her earlier resignation or removal. Any
number of offices may be held by the same person. The Board of Directors shall
fix the compensation of each officer, if any.
4.2 The Chairman of the Board
The Chairman of the Board, if and while there be an incumbent of the
office, shall preside at all meetings of the shareholders and of the directors
at which he/she is present. He/she shall see that all orders and resolutions of
the Board of Directors are carried into effect. He/she shall from time to time
report to the Board of Directors all matters within his/her knowledge which the
interest of the corporation may require to be brought to the notice of the
Board.
4.3 The Chief Executive Officer
The Chief Executive Officer of the corporation, subject to the
provisions of these by-laws and to the direction of the Board of Directors,
shall have the responsibility for the general management and control of the
affairs and business of the corporation and shall perform all duties and have
all powers which are commonly incident to the office of Chief Executive or which
are delegated to him/her by the Board of Directors. He/she shall have general
supervision and direction of all of the other officers and agents of the
corporation. He/she shall have power to sign all stock certificates, contracts
and other instruments of the corporation which are authorized. Provided,
however, that when there is no incumbent of this office the President shall be
Chief Executive Officer.
<PAGE> 6
4.4 President
The President shall be the Chief Operating Officer of the corporation.
He/she shall have responsibility for general operation and supervision of the
affairs and business of the corporation and shall perform all additional duties
and have all additional powers which are delegated to him/her by the Chief
Executive Officer. He/she shall have power to sign all stock certificates,
contracts and other instruments of the corporation which are authorized.
4.5 Vice Presidents
Each vice-president shall perform such duties as the Board of Directors
shall prescribe. In the absence or disability of the president, the
vice-president who has served in such capacity for the longest time shall
perform the duties and exercise the powers of the president.
4.6 Treasurer
The treasurer shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He/she shall make such
disbursements of the funds of the corporation as are proper and shall render
from time to time an account of all such transactions and of the financial
conditions of the corporation.
4.7 Secretary
The secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the shareholders and the Board of Directors. He/she
shall have charge of the corporate books.
4.8 Delegation of Authority
The Board of Directors may form time to time delegate the powers or
duties of any officer to any other officers or agents, notwithstanding any
provision hereof.
4.9 Removal
Any officer of the corporation may be removed at any time, with or
without cause, by the Board of Directors.
4.10 Action with Respect to Securities of Other Corporations
Unless otherwise directed by the Board of Directors, the Chief
Executive Officer or the President shall have the power to vote and otherwise
act on behalf of the corporation, in person or by proxy, at any meeting of
shareholders of or with respect to any action of shareholders of any other
corporation in which this corporation may hold securities and otherwise to
exercise any and all rights and powers which this corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
5.1 Certificates of Stock
Each shareholder shall be entitled to a certificate signed by, or in
the name of the corporation by, the chief executive officer the president or a
vice-president, and by the secretary or an assistant secretary, or the treasurer
or an assistant treasurer, certifying the number of shares owned by him. Any of
or all the signatures on the certificate may be facsimile.
5.2 Transfers of Stock
Transfers of stock shall be made only upon the transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is
<PAGE> 7
issued in accordance with 5.4 of these by-laws, an outstanding certificate for
the number of shares involved shall be surrendered for cancellation before a new
certificate is issued therefor.
5.3 Record Date
The Board of Directors may fix a record date, which shall not be more
than sixty nor less than ten days before the date of any meeting of
shareholders, nor more than sixty days prior to the time for the other action
hereinafter described, as of which there shall be determined the shareholders
who are entitled: to notice of or to vote at any meeting of shareholders or any
adjournment thereof, to express consent to corporate action in writing without a
meeting; to receive payment of any dividend or other distribution or allotment
of any rights; or to exercise any rights with respect to any change, conversion
or exchange of stock or with respect to any other lawful action.
5.4 Lost, Stolen or Destroyed Certificates
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
5.5 Regulations
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
6.1 Notices
Whenever notice is required to be given to any shareholder, director,
officer, or agent, such requirement shall not be construed to mean personal
notice. Such notice may in every instance be effectively given by depositing a
writing in a post office or letter box, in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram, addressed to such shareholder, director, officer
or agent at his or her address as the same appears on the books of the
corporation. The time when such notice is dispatched shall be the time of the
giving of the notice.
6.2 Waivers
A written waiver of any notice, signed by a shareholder, director,
officer, or agent whether before or after the time of the event for which notice
is to be given, shall be deemed equivalent to the notice required to be given to
such shareholder, director officer or agent. Neither the business nor the
purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
7.1 Facsimile Signatures
In addition to the provisions for the use of facsimile signatures
elsewhere specifically authorized in these by-laws, facsimile signatures of any
officer or officers of the corporation may be used whenever and as authorized by
the Board of Directors or committee thereof.
7.2 Corporate Seal
The Board of Directors may provide a suitable seal, containing the name
of the corporation, which seal shall be in charge of the secretary. If and when
so directed by the Board of Directors or a committee thereof, duplicates of the
seal may be kept and used by the treasurer or by any assistant secretary or
assistant treasurer.
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7.3 Reliance upon Books, Reports and Records
Each director, each member of any committee designated by the Board of
Directors, and each officer of the corporation shall, in the performance of his
duties be fully protected in relying in good faith upon the books of account or
other records of the corporation, including reports made to the corporation by
its officers, by an independent certified public accountant, or by an appraiser
selected with reasonable care.
7.4 Fiscal Year
The fiscal year of the corporation shall be fixed by the Board of
Directors.
7.5 Time Period
In applying any provision of these by-laws which require that an act be
done or not done a specified number of days prior to an event or that an act be
done during a period of a specified number of days prior to an event, calendar
days shall be used, the day of the doing of the act shall be excluded and the
day of the event shall be included.
ARTICLE VIII - AMENDMENTS
8.1 Amendments
These by-laws may be amended or added to, or repealed and superseded by
new by-laws by the directors of the Company or as provided in the Restated
Certificate of Incorporation.
<PAGE> 1
EXHIBIT 5.1
KEGLER, BROWN, HILL & RITTER CO., L.P.A.
65 E. STATE STREET, SUITE 1800, CAPITOL SQUARE
COLUMBUS, OHIO 43215-4294
(614) 462-5400
August 11, 1999
Drug Emporium, Inc.
155 Hidden Ravines Drive
Powell, Ohio 43065
Re: Registration Statement on Form S-8 covering the
Drug Emporium, Inc. 1999 Stock Incentive Plan
Gentlemen:
We have acted as counsel to Drug Emporium, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of the captioned
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
registration of 1,500,000 shares of Common Stock, par value $.10 per share (the
"Plan Shares"), of the Company issuable pursuant to the Drug Emporium, Inc. 1999
Stock Incentive Plan (the "Plan").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Company's
Restated Certificate of Incorporation, as amended, (ii) the Company's Bylaws, as
amended, (iii) the Registration Statement, (iv) the Plan, (v) a specimen
certificate evidencing the Plan Shares, (vi) resolutions adopted by the Board of
Directors of the Company relating to, among other things, the Plan and the Plan
Shares, and (vii) such other documents and certificates as we have deemed
necessary or appropriate for the purpose of rendering the opinion below. We have
also examined such authorities of law as we have deemed relevant as a basis for
this opinion.
In our examination of the documents referred to above, we have assumed
the legal capacity of all natural persons, the genuineness of all signatures,
the authenticity and completeness of all documents submitted to us as certified,
conformed, photostatic or facsimile copies, and the authenticity and
completeness of the originals of such latter documents. As to any facts material
to the opinion expressed herein which we did not independently establish or
verify, we have relied upon written or oral certificates, statements,
representations and other documentation furnished to us by officers, employees
and representatives of the Company, public officials and others without
independent verification of the facts set forth therein.
Based upon and subject to the foregoing and the further qualifications
and limitations set forth below, we are of the opinion that the Plan Shares have
been duly authorized for issuance and, when issued and sold by the Company
against receipt of consideration (not less than the par value thereof) in full
therefor and otherwise in accordance with the terms and conditions of the Plan,
will be legally and validly issued, fully paid and nonassessable.
In rendering the opinion above, we have assumed that (i) the
certificates representing the Plan Shares will conform to the specimen thereof
examined by us, (ii) upon issuance of the Plan Shares pursuant to the Plan, the
Company will have a sufficient number of authorized but unissued shares of
Common Stock not restricted for other purposes to permit the issuance of the
Plan Shares, and (iii) no changes occur in the applicable law or pertinent
facts, and (iv) the Company will comply with all applicable state securities
laws.
We are admitted to practice law in the State of Ohio. This opinion is
limited to the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware in effect as of the date hereof. This
opinion is furnished by us solely for the benefit of the Company in connection
with the issuance of the Plan Shares and the filing of the Registration
Statement and any amendments thereto. This opinion may not be furnished to or
relied upon by any other person or entity for any purpose or assigned, quoted or
otherwise used without our prior written consent. Please note that we are
opining only as to the matters expressly set forth herein, and no opinion should
be inferred as to any other matters.
<PAGE> 2
We express no opinion herein with respect to the meaning,
interpretation, validity, binding nature or enforceability of the Plan or any
contract, agreement, instrument or other document entered into pursuant to the
Plan.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and the use of
our name wherever appearing in the Registration Statement. In giving such
consent, however, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
/s/ Kegler, Brown, Hill & Ritter Co., L.P.A.
KEGLER, BROWN, HILL & RITTER CO., L.P.A.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) of Drug Emporium, Inc. pertaining to the registration of 1,500,000 shares
of its Common Stock for the Drug Emporium, Inc. 1999 Stock Incentive Plan of our
report dated April 15, 1999, with respect to the consolidated financial
statements of Drug Emporium, Inc. and subsidiaries incorporated by reference in
its Annual Report (Form 10-K) for the year ended February 27, 1999, filed with
the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Columbus, Ohio
August 9, 1999
<PAGE> 1
EXHIBIT 99.1
DRUG EMPORIUM, INC.
1999 STOCK INCENTIVE PLAN
JUNE 23, 1999
SECTION 1. PURPOSES. The purposes of the Drug Emporium, Inc. 1999 Stock
Incentive Plan (the "Plan") are to promote the long-term interests of Drug
Emporium, Inc. and its Subsidiaries by (i) attracting, retaining and rewarding
high-quality executives and other key employees and directors of, and advisor
and consultants to, the Company and its Subsidiaries, (ii) motivating such
persons by enabling them to acquire or increase a proprietary interest in the
Company in order to align the interests of such person with the Company's
stockholders, and (iii) providing such persons with incentives to pursue and
participate in the long-term growth, profitability and financial success of the
Company.
SECTION 2. DEFINITIONS. In addition to the terms defined elsewhere in
the Plan, the following terms as used in the Plan shall have the meanings set
forth below:
(a) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Performance Award, Dividend Equivalent or Other Stock-Based Award,
together with any other right or interest granted to a Participant under the
Plan.
(b) "Award Agreement" means any written agreement, contract or other
instrument or document evidencing any Award which may, but need not, be executed
or acknowledged by a Participant.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" has the meaning given to such term in Section
9(b)(i) of the Plan.
(e) "Change in Control Price" has the meaning given to such term in
Section 9(b)(ii) of the Plan.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, together with the rules, regulations and interpretations
promulgated thereunder, and any successor provisions, rules, regulations and
interpretations.
(g) "Committee" means a committee of directors designated by the Board,
in its discretion, to administer the Plan; provided, however, that, unless
otherwise determined by the Board, the Committee shall consist of two or more
directors, each of whom shall be (i) a "non-employee director" within the
meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan
by "non-employee directors" is not then required in order for exemptions under
Rule 16b-3 to apply to transactions under the Plan, and (ii) an "outside
director" as defined under Section 162(m) of the Code, unless administration of
the Plan by "outside directors" is not then required in order to qualify for tax
deductibility under Section 162(m) of the Code.
(h) "Company" means Drug Emporium, Inc., a Delaware corporation,
together with any successor thereto.
(i) "Covered Employee" means any individual who is or, in the
determination of the Board, is likely to be a "covered employee" within the
meaning of Section 162(m) of the Code.
(j) "Director" means any individual who is a member of the Board.
(k) "Dividend Equivalent" means a right granted to a Participant under
Section 6(f) hereof to receive cash, Shares, other Awards or other property
equal in value to dividends paid with respect to a specific number of Shares, or
other periodic payments.
(l) "Effective Date" means June 23, 1999.
(m) "Eligible Person" means an officer, employee or director of, or an
advisor or consultant to, the Company or a Subsidiary.
<PAGE> 2
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, together with the rules, regulations and
interpretations promulgated thereunder, and any successor provisions, rules,
regulations and interpretations.
(o) "Fair Market Value" means the fair market value of the property or
other item being valued, as determined by the Board in its sole discretion or by
procedures established by the Board; provided, however, that the fair market
value of Shares as of any date means the closing sale price of the Shares on
such date or, if there are no sales on such date, then the closing sale price of
the Shares on the most recent date prior to such date on which there was a sale
of Shares, as reported on the Nasdaq Stock Market, on any other quotation system
approved by the National Association of Securities Dealers, Inc. or on any
national securities exchange on which Shares are then listed or quoted, which
constitutes the primary trading market for the Shares.
(p) "Incentive Stock Option" or "ISO" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor provision
thereto and is expressly designated as an Incentive Stock Option.
(q) "Limited SAR" means a right granted to a Participant under Section
6(c)(ii) hereof.
(r) "Non-Employee Director" means a Director who is not an officer or
employee of the Company or any of its Subsidiaries on the applicable date.
(s) "Non-Qualified Stock Option" or "NQSO" means an Option that is not
intended to be an Incentive Stock Option.
(t) "Option" means a right granted under Section 6(b) hereof to
purchase Shares or other Awards at a specific price during a specific time.
(u) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(g) hereof.
(v) "Participant" means any Eligible Person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.
(w) "Performance Award" means a right granted under Section 8 hereof to
receive Awards based upon performance criteria specified by the Board.
(x) "Person" means any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
organization, government or political subdivision thereof or other entity.
(y) "Plan" means the Drug Emporium, Inc. 1999 Stock Incentive Plan, as
amended from time to time in accordance with the provisions hereof.
(z) "Restricted Stock" means any Shares granted under Section 6(d)
hereof.
(aa) "Related Party" has the meaning given to such term in Section
9(b)(iii) hereof.
(bb) "Rule 16b-3" means Rule 16b-3 as from time to time in effect and
applicable to the Plan and the Participants, as promulgated and interpreted by
the SEC under Section 16 of the Exchange Act, including any successor rule
thereto.
(cc) "SEC" means the Securities and Exchange Commission or any
successor thereto and shall include the staff thereof.
(dd) "Shares" means shares of common stock, par value $.01 per share,
of the Company, or such other securities of the Company as may be designated by
the Board from time to time.
(ee) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Section 6(c) hereof, to be paid an amount measured by the
appreciation in the Fair Market Value of Shares from the date of grant to the
date of exercise.
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(ff) "Subsidiary" means any corporation (whether now or hereafter
existing) which, on the date of determination, qualifies as a subsidiary
corporation of the Company under Section 425(f) of the Code, and any successor
thereto.
(gg) "Voting Securities" has the meaning given to such term in Section
9(b)(iv) hereof.
SECTION 3. ADMINISTRATION.
(a) Authority of the Board. The Plan shall be administered by
the Board. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Board by the Plan,
the Board shall have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to an Eligible Person;
(iii) determine the number of Awards to be granted, the number of Shares or
amount of cash or other property to which an Award will relate, the terms and
conditions of any Award (including, but not limited to, any exercise price,
grant price or purchase price, any exercise or vesting periods, any limitation
or restriction, any schedule for lapse of limitations, forfeiture restrictions
or restrictions on exercisability or transferability, and any accelerations or
waivers thereof, based in each case on such considerations as the Board shall
determine), and all other matters to be determined in connection with an Award;
(iv) determine whether, to what extent and under what circumstances Awards may
be settled or exercised in cash, Shares, other securities, other Awards or other
property, or Awards may be accumulated, vested, exchanged, surrendered,
canceled, forfeited or suspended; (v) determine whether, to what extent and
under what circumstances cash, Shares, other securities, other Awards, other
property and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the Participant or of the Committee;
(vi) interpret and administer the Plan and any instrument or agreement relating
to, or Award made under, the Plan; (vii) prescribe the form of each Award
Agreement, which need not be identical for each Participant; (viii) adopt,
amend, suspend, waive or rescind such rules and regulations and appoint such
agents as it shall deem necessary or desirable for the administration of the
Plan; (ix) correct any defect or supply any omission or reconcile any
inconsistency, and to construe and interpret the Plan, the rules and
regulations, any Award Agreement or other instrument entered into or Award made
under the Plan; and (x) make any other determinations and decisions and take any
other action that the Board deems necessary or desirable for the administration
of the Plan.
(b) Exercise of Authority. Unless otherwise expressly provided
in the Plan, all designations, determinations, interpretations and other
decisions under or with respect to the Plan or any Award shall be within the
sole discretion of the Board, may be made at any time and shall be final,
conclusive and binding upon all Persons, including the Company, its
Subsidiaries, Eligible Persons, Participants, holders or beneficiaries of
Awards, and stockholders. The express grant of any specific power to the Board,
and the taking of any action by the Board, shall not be construed as limiting
any power or authority of the Board. The Board may delegate to officers or
managers of the Company or any Subsidiary, or committees thereof, the authority,
subject to such terms as the Board shall determine, to perform such functions,
including administrative functions, as the Board may determine, to the extent
that such delegation will not result in the loss of an exemption under Rule
16b-3 for Awards granted to Participants subject to Section 16 of the Exchange
Act in respect of the Company and will not cause Awards intended to qualify as
"performance-based compensation" under Section 162(m) of the Code of the Code to
fail to so qualify. The Board may appoint agents to assist it in administering
the Plan.
(c) Delegation to a Committee. Notwithstanding anything to the
contrary contained herein, the Board may at any time, or from time to time,
appoint a Committee and delegate to such Committee the authority of the Board to
administer the Plan, including to the extent provided by the Board, the power to
further delegate such authority. Upon such appointment and delegation, any such
Committee shall have all the powers, privileges and duties of the Board in the
administration of the Plan to the extent provided in such delegation, except for
the power to appoint members of the Committee and to terminate, modify or amend
the Plan. The Board may from time to time appoint members of any such Committee
in substitution for or in addition to members previously appointed, may fill
vacancies in such Committee and may discharge such Committee. Any such Committee
shall hold its meetings at such times and places as it shall deem advisable. A
majority of members shall constitute a quorum and all determinations shall be
made by a majority of such quorum. Any determination reduced to writing and
signed by all of the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held.
(d) Limitation of Liability. The Board, the Committee, if any,
and each member of each shall be entitled to, in good faith, rely or act upon
any report or other information furnished to him or her by any executive
officer,
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other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, legal counsel, other consultants or any other agents
assisting in the administration of the Plan. Members of the Board and of the
Committee, if any, and any officer or employee of the Company or a Subsidiary
acting at the direction or on behalf of the Board and of the Committee, if any,
shall not be personally liable for any action or determination taken or made in
good faith with respect to the Plan, and shall, to the extent permitted by law,
be fully indemnified and protected by the Company with respect to any such
action or determination.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in
Section 4(b) hereof, the total number of Shares with respect to which Awards may
be granted under the Plan shall be 1,500,000. If any Shares covered by an Award
granted under the Plan, or to which such an Award relates, are forfeited, or if
an Award otherwise terminates or is canceled without the delivery of Shares, or
if payment is made to the Participant in the form of cash or other property
other than Shares, then the Shares covered by such Award, or to which such Award
relates, or the number of Shares otherwise counted against the aggregate number
of Shares with respect to which Awards may be granted, to the extent of any such
settlement, forfeiture, termination or cancellation, shall again be, or shall
become, Shares with respect to which Awards may be granted, to the extent
permissible under Rule 16b-3. In the event that any Option or other Award
granted hereunder is exercised through the delivery of Shares, the number of
Shares available for Awards under the Plan shall be increased by the number of
Shares surrendered, to the extent permissible under Rule 16b-3. For purposes of
this Section 4(a), the number of Shares to which an Award relates shall be
counted against the number of Shares reserved and available under the Plan at
the time of grant of the Award, unless such number of Shares cannot be
determined at that time, in which case the number of Shares actually distributed
pursuant to the Award shall be counted against the number of Shares reserved and
available under the Plan at the time of distribution; provided, however, that
Awards related to or retroactively added to, or granted in tandem with,
substituted for or converted into, other Awards shall be counted or not counted
against the number of Shares reserved and available under the Plan in accordance
with procedures adopted by the Board so as to ensure appropriate counting but
avoid double counting; and provided, further, that the number of Shares deemed
to be issued under the Plan upon exercise of an Option or an Other Stock-Based
Award in the nature of a stock purchase right shall be reduced by the number of
Shares surrendered by the Participant in payment of the exercise or purchase
price of the Award.
(b) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), recapitalization, forward or reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, exchange of Shares or other securities of the Company, or other
similar corporate transaction or event affects the Shares such that an
adjustment is necessary or determined by the Board to be appropriate in order to
prevent dilution or enlargement of the Participants' rights under the Plan, then
the Board shall proportionately adjust any or all of (i) the number and kind of
Shares or other securities of the Company (or number and kind of other
securities or property) which may thereafter be issued in connection with
Awards; (ii) the number and kind of Shares or other securities of the Company
(or number and kind of other securities or property) issued or issuable with
respect to outstanding Awards; and (iii) the grant, exercise or purchase price
with respect to any Award; provided, in each case, that with respect to Awards
of Incentive Stock Options, no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422(b)(1) of the
Code, as from time to time amended.
(c) Sources of Shares. Any Shares delivered pursuant to an
Award may consist, in whole or in part, of authorized and unissued Shares or of
treasury Shares, including Shares repurchased by the Company for purposes of the
Plan.
(d) Annual Limits on Awards. Subject to adjustment as provided
in Section 4(b) hereof the maximum number of Shares subject to Awards in any
combination that may be granted during any one fiscal year of the Company to any
one Participant shall be limited to 100,000.
SECTION 5. ELIGIBILITY. Awards may be granted under the Plan only to
Eligible Persons, except that (a) only Eligible Persons who are employees of the
Company or a Subsidiary shall be eligible for the grant of Incentive Stock
Options.
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<PAGE> 5
SECTION 6. SPECIFIC TERMS OF AWARDS.
(a) General. Subject to the provisions of the Plan and any
applicable Award Agreement, Awards may be granted as set forth in this Section
6. In addition, the Board may impose on any Award or the exercise thereof, at
the date of grant or thereafter (subject to the terms of Section 10 hereof),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Board shall determine, including terms requiring forfeiture of
Awards in the event of termination of employment by the Participant and terms
permitting a Participant to make elections pertaining to his Award. Subject to
the provisions of the Plan, the Board shall have the right to accelerate the
vesting or exercising of any Award granted under the Plan. Except as provided in
Section 7(a) hereof, or as required by applicable law, Awards shall be granted
for no consideration other than prior and future services.
(b) Options. Subject to the provisions of the Plan, the Board
is authorized to grant Options to Eligible Persons on the following terms and
conditions:
(i) Exercise Price. The exercise price per Share of
an Option shall be determined by the Board; provided, however, that,
except as provided in Section 7(a), such exercise price shall not be
less than the Fair Market Value of a Share on the date of grant of such
Option.
(ii) Option Term. The term of each Option shall be
determined by the Board.
(iii) Methods of Exercise. The Board shall determine
the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or service requirements), the methods by which
such exercise price may be paid or deemed to be paid, and the form of
such payment, including, without limitation, cash, Shares, other
outstanding Awards or other property (including notes or other
contractual obligations of Participants to make payment on a deferred
bases, to the extent permitted by law) or any combination thereof,
having a Fair Market Value equal to the exercise price.
(iv) Incentive Stock Options. The terms of any
Incentive Stock Option granted under the Plan shall comply in all
material respects with the provisions of Section 422 of the Code or any
successor provision thereto. Incentive Stock Options may only be issued
to employees of the Company or a Subsidiary. Anything in the Plan to
the contrary notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted, amended
or altered, nor shall any discretion or authority granted under the
Plan be exercised, so as to disqualify either the Plan or any ISO under
Section 422, unless the Participant has first requested the change that
will result in such disqualification.
(c) Stock Appreciation Rights. The Board is authorized to
grant Stock Appreciation Rights to Eligible Persons on the following terms and
conditions:
(i) Right to Payment. A Stock Appreciation Right
shall confer on the Participant to whom it is granted a right to
receive, upon exercise thereof, the excess of (A) the Fair Market Value
of a Share on the date of exercise (or, in the case of a Limited SAR,
the Fair Market Value determined by reference to the Change in Control
Price), or, if the Board shall so determine in the case of any such
right other than one related to any Incentive Stock Option, at any time
during a specified period before or after the date of exercise, over
(B) the grant price of the Stock Appreciation Right as determined by
the Board as of the date of grant of the Stock Appreciation Right,
which, except as provided in Section 7(a) hereof, shall not be less
than the Fair Market Value of a Share on the date of grant.
(ii) Other Terms. The term, methods of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be determined by the Board. Limited SARs that
may only be exercised in connection with a Change in Control or other
event as specified by the Board may be granted on such terms, not
inconsistent with this Section 6(c), as the Board may determine. SARs
and Limited SARs may be awarded either on a free-standing basis or in
tandem with other Awards.
(d) Restricted Stock. The Board is authorized to grant
Restricted Stock to Eligible Persons on the following terms and conditions:
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(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of forfeiture and
other restrictions as the Board may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the
right to receive dividends thereon), which restrictions may lapse
separately or in combination at such times, under such circumstances
(including based on the achievement of performance goals and/or future
service requirements), in such installments, or otherwise, as the Board
shall determine at the time of grant or thereafter. Except to the
extent restricted under the terms of the Plan and any Award Agreement
relating to the Restricted Stock, a Participant granted Restricted
Stock shall have all of the rights of a stockholder, including the
right to vote the Restricted Stock and the right to receive dividends
thereon (subject to any mandatory reinvestment or other requirement
imposed by the Board). During the restricted period applicable to the
Restricted Stock, subject to Section 11 hereof, the Restricted Stock
may not be sold, transferred, pledged, hypothecated, margined or
otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by
the Committee at the time of grant or thereafter, upon termination of
employment or service on the Board (as determined under criteria
established by the Board) during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided, however, that
restrictions on Restricted Stock shall be waived in whole or in part in
the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions on
or the forfeiture of Restricted Stock.
(iii) Certificates for Shares. Restricted Stock
granted under the Plan may be evidenced in such manner as the Board
shall determine, including, without limitation, issuance of
certificates representing Shares. Certificates representing Shares of
Restricted Stock shall be registered in the name of the Participant and
shall bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, and the Board may
require that the Company retain physical possession of the
Certificates, and that the Participant deliver a stock power to the
Company, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the
grant of an Award of Restricted Stock, the Board may require that any
cash dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Board, Shares distributed in connection with a stock
split or stock dividend, and other property distributed as a dividend,
shall be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Shares or
other property has been distributed.
(e) Bonus Shares and Awards in Lieu of Obligations. The Board
is authorized to grant Shares or other Awards as a bonus to Eligible Persons or
in lieu of obligations to pay cash or deliver other property under the Plan or
under other plans or compensatory arrangements (including salary requirements),
provided that, in the case of Participants subject to Section 16 of the Exchange
Act, the amount of such grants remains within the discretion of the Board to the
extent necessary to ensure that acquisitions of Shares or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Shares or Awards
granted hereunder shall be subject to such other terms as shall be determined by
the Board.
(f) Dividend Equivalents. The Board is authorized to grant
Dividend Equivalents to a Participant. Dividend Equivalents shall confer upon
the Participant rights to receive, currently or on a deferred basis, cash,
Shares, other Awards or other property equal in value to dividends paid with
respect to a specified number of Shares, or otherwise, as determined by the
Board. The Board may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Shares or Awards or other investment vehicles, and subject to such
restrictions on transferability and risk of forfeiture, as the Board may
specify. Dividend Equivalents may be awarded on a free-standing basis or with
another Award.
(g) Other Stock-Based Awards. The Board is authorized, subject
to limitations under applicable law, to grant to Participants such other Awards
that are denominated or payable in, valued in whole or in part by reference to,
or otherwise based on, or related to, Shares, as deemed by the Board to be
consistent with the purposes of the Plan, including, without limitation,
purchase rights for Shares, Shares awarded which are not subject to any
restrictions or conditions, convertible or exchangeable debt securities or other
rights convertible or exchangeable into Shares, Awards with value and payment
contingent upon performance of the Company or any other factors designated by
the Board, and Awards valued by reference to the book value of Shares or the
value of securities of or the performance of specified Subsidiaries as the Board
determines. The Board shall determine the terms and conditions of such awards.
Except as
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provided in Section 7(a) hereof, Shares or securities delivered pursuant to an
Award in the nature of a purchase right granted under this Section 6(h) shall be
purchased for such consideration, paid for at such times, by such methods and in
such forms, including, without limitation, cash, Shares, other outstanding
Awards or other property or any combination thereof, as the Board shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
(h) Exchange Provisions. The Board may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Shares,
another Award or other property, based on such terms and conditions as the Board
shall determine and communicate to the Participant at the time that such offer
is made.
SECTION 7. GENERAL TERMS OF AWARDS.
(a) Stand-Alone, Additional, Tandem and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Board, be granted
either alone or in addition to, in tandem with or in substitution or exchange
for, any other Award granted under the Plan or any award granted under any other
plan of the Company or any Subsidiary (subject to the terms of Section 10
hereof), or any other right of a Participant to receive payment from the Company
or any Subsidiary. Such additional, tandem, substitute or exchange Awards may be
granted at any time. If an Award is granted in substitution or exchange for
another Award or award, the Board shall require the surrender of such other
Award or award in consideration for the grant of the new Award. The exercise
price of any Option, the grant price of any Stock Appreciation Right or the
purchase price of any other Award conferring a right to purchase Shares
retroactively granted in tandem with an outstanding Award or award shall be
either not less than the Fair Market Value of Shares at the date of grant of the
later Award or equal to the Fair Market Value of Shares at the date of grant of
the earlier Award or award. Notwithstanding the foregoing, the exercise price of
any Option, grant price of any Stock Appreciation Right or purchase price of any
other Award conferring a right to purchase Shares which is granted in exchange
or substitution for an option, stock appreciation right or other award granted
by the Company (other than in connection with a transaction described in Section
9(a) hereof) shall not be less than the exercise price, grant price or purchase
price of the exchanged or substituted Option, Stock Appreciation Right or other
Award, and outstanding Awards shall not be amended (other than in connection
with a transaction described in Section 4(b) hereof to reduce the exercise
price, grant price or purchase price of any such Award.
(b) Decisions Required to be Made by the Board. Other
provisions of the Plan and any Award Agreement notwithstanding, if any decision
regarding an Award or the exercise of any right by a Participant, at any time
such Participant is subject to Section 16 of the Exchange Act or is a Covered
Employee under Section 162(m) of the Code, is required to be made or approved by
the Board in order that a grant to or transaction by such Participant will be
exempt under Rule 16b-3 or qualify as "qualified performance-based compensation"
for purposes of Section 162(m) of the Code then the Board shall retain full and
exclusive power and authority to make such decision or to approve or disapprove
any such decision by the Participant.
(c) Term of Awards. The term of each Award shall be for such
period as may be determined by the Board; provided, however, that in no event
shall the term of any Incentive Stock Option, or a Stock Appreciation Right
granted in tandem therewith, exceed a period of ten years from the date of its
grant.
(d) Form and Timing of Payment of Awards. Subject to the terms
of the Plan and any applicable Award Agreement payments or substitutions to be
made by the Company or a Subsidiary upon the grant, exercise or settlement of an
Award may be made in such forms as the Board shall determine at the time of
grant or thereafter (subject to the terms of Section 10 hereof), including,
without limitation, cash, Shares, other Awards or other property or any
combination thereof, and may be made in a single payment or substitution, in
installments or on a deferred basis, in each case in accordance with rules and
procedures established by the Board. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments. The
settlement of any Award may be accelerated, and cash paid in lieu of Shares in
connection with such settlement, in the discretion of the Board or upon
occurrence of one or more specified events (in addition to a Change in Control).
(e) Exemptions from Section 16(b) Liability. It is the intent
of the Company that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
under Rule 16b-3 (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any
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provision of the Plan or any Award Agreement does not comply with the
requirements of Rule 16b-3 as then applicable to any such transaction, such
provision shall be construed or deemed amended to the extent necessary to
conform to the applicable requirements of Rule 16b-3 so that such Participant
shall avoid liability under Section 16(b).
(f) Share Certificates. All certificates for Shares delivered
under the terms of the Plan shall be subject to such stop-transfer orders and
other restrictions as the Board may deem advisable under federal or state
securities laws, rules and regulations thereunder, and the rules of any national
securities exchange, the Nasdaq Stock Market or any other automated quotation
system on which Shares are listed or quoted. The Board may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions or any other restrictions or limitations that may be
applicable to Shares. In addition, during any period in which Awards or Shares
are subject to restrictions or limitations under the terms of the Plan or any
Award Agreement, or during any period during which delivery or receipt of an
Award or Shares has been deferred by the Board or a Participant, the Board may
require any Participant to enter into an agreement providing that certificates
representing Shares issuable or issued pursuant to an Award shall remain in the
physical custody of the Company or such other Person as the Board may designate.
SECTION 8. PERFORMANCE AWARDS.
(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the Board.
The Board may use such business criteria and other measures of performance as it
may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
Award subject to performance conditions, except as limited under Section 8(b)
hereof in the case of a Performance Award intended to qualify under Section
162(m) of the Code.
(b) Performance Awards Granted to Designated Covered
Employees. If the Board determines that a Performance Award to be granted to an
Eligible Person who is designated by the Board as likely to be a Covered
Employee should qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code, the Board shall comply with the pre-established
performance goals and other terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to
each of such criteria, as specified by the Board consistent with this
Section 8(b). Performance goals shall be objective and shall otherwise
meet the requirements of Section 162(m) of the Code, including the
requirement that the level or levels of performance targeted by the
Board result in the achievement of performance goals being
"substantially uncertain." The Board may determine that such
achievement of performance be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise
and/or settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Participant or to
different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis, and/or for
specified Subsidiaries or business units of the Company (except with
respect to the total stockholder return and earnings per share
criteria), shall be used by the Board in establishing performance goals
for such Performance Awards: (1) earnings per share; (2) revenues; (3)
cash flow; (4) return on investment; (5) return on net assets, assets,
capital or equity; (6) economic value added; (7) operating margin; (8)
net income; (9) pretax earnings; (10) pretax earnings before interest,
depreciation and amortization; (11) pretax operating earnings after
interest expense and before extraordinary or special items; (12)
operating earnings; (13) total stockholder return; (14) price of the
Shares (and changes thereof); and (15) any of the above goals as
compared to the performance of a published or special index deemed
applicable by the Board including, but not limited to, the Standard &
Poor's 500 Stock Index or a group of comparable companies.
(iii) Performance Period; Timing for Establishing
Performance Goals. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up to
10 years, as specified by the Board. Performance goals shall be
established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards or at such
other date as may be required or permitted for "performance-based
compensation" under Section 162(m) of the Code.
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(iv) Performance Award Pool. The Board may
establish a Performance Award pool, which shall be an unfunded pool for
purposes of measuring performance of the Company in connection with
Performance Awards. The amount of such Performance Award pool shall be
based upon the achievement of a performance goal or goals based on one
or more of the business criteria set forth in Section 8(b)(ii) hereof
during the given performance period, as specified by the Board in
accordance with Section 8(b)(iii) hereof. The Board may specify the
amount of the Performance Award pool as a percentage of any such
business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(v) Settlement of Performance Awards; Other
Terms. Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the Board. The
Board may, in its discretion, reduce the amount of a settlement
otherwise to be made in connection with such Performance Awards, but
may not exercise discretion to increase any such amount payable to a
Covered Employee in respect of a Performance Award subject to this
Section 8(b). The Board shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.
(c) Written Determinations. All determinations by the Board as
to the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b) hereof shall
be made in writing in the case of any Award intended to qualify under Section
162(m) of the Code. The Board may not delegate any responsibility relating to
such Performance Awards.
(d) Status of Section 8(b) Awards under Section 162(m) of the
Code. It is the intent of the Company that Performance Awards under Section 8(b)
granted to persons who are designated by the Board as likely to be Covered
Employees within the meaning of Section 162(m) of the Code and the regulations
thereunder shall, if so designated by the Board, constitute "performance-based
compensation" within the meaning of Section 162(m) of the Code of the Code and
the regulations thereunder. The foregoing notwithstanding, because the Board
cannot determine with certainty whether a given participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Board, at the time of grant of Performance Awards or an Annual Incentive Award,
as likely to be a Covered Employee with respect to that fiscal year. If any
provision of the Plan as in effect on the date of adoption or any agreements
relating to performance Awards or Annual Incentive Awards that are designated as
intended to comply with Section 162(m) of the Code does not comply or is
inconsistent with the requirements of Section 162(m) of the Code, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements.
SECTION 9. CHANGE IN CONTROL.
(a) Acceleration of Exercisability and Lapse of Restrictions
and Cash-Out of Awards upon "Change in Control". In the event of a Change in
Control, subject only to the applicable restrictions set forth in Section 11(d)
hereof, the following provisions shall apply unless otherwise provided in the
Award Agreement:
(i) All outstanding Awards, pursuant to which the
Participant may have a right to exercise which were not previously exercisable
and vested, shall become fully exercisable and vested as of the time of the
Change in Control and shall remain exercisable and vested for the balance of the
stated term of such Award without regard to any termination of employment or
services by the Participant.
(ii) Unless the right to lapse of restrictions or
limitations is waived or deferred by a Participant prior to such lapse, all
restrictions (including risks of forfeiture and deferrals) on outstanding Awards
subject to restrictions or limitations under the Plan shall lapse and such
Awards shall be deemed fully vested as of the time of the Change in Control.
(iii) All performance criteria, goals and other
conditions to payment of Awards under which payments of cash, Shares or other
property are subject to conditions shall be deemed to be achieved or fulfilled
as of the time of the Change in Control.
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(iv) For a period of 60 days following a Change in
Control, each Participant may elect to surrender any outstanding Award and to
receive, in full satisfaction therefor, a cash payment equal to the value of
such Award calculated on the basis of the Change in Control Price of any Shares
or the Fair Market Value of any property other than Shares relating to such
Award; provided, however, that in the case of an Incentive Stock Option, or a
Stock Appreciation Right granted in tandem therewith, the payment shall be based
upon the Fair Market Value of Shares on the date which the Change in Control
occurred; provided further, however, that in the case of a Change in Control
described in Section 9(b)(i)(C) or (D) hereof, the payment described in this
sentence shall not necessarily be made in cash but instead shall be made in the
same form (i.e., cash, Shares, other securities or combination thereof) as
holders of Shares receive in exchange for their Shares in the transaction that
results in the Change in Control. In the event that an Award is granted in
tandem with another Award such that the Participant's right to payment for such
Award is an alternative to payment of another Award, the Participant electing to
surrender any such tandem Award shall surrender all alternative Awards related
thereto and receive payment for the Award which produces the highest payment to
the Participant.
(b) Definition of Certain Terms. For purposes of this Section
9, the following definitions, in addition to those set forth in Section 2, shall
apply:
(i) "Change in Control" means and shall be deemed to
have occurred if:
(A) any Person, other than the Company or a
Related Party, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act, except that a Person shall be deemed to be the
beneficial owner of all Shares that such Person has the right to acquire
pursuant to any agreement or arrangement or upon exercise, conversation rights,
warrants, options or otherwise, without regard to the 60 day period referred to
in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting
Securities representing 25% or more of the total voting power of all the then
outstanding Voting Securities, except that there shall be excluded from the
number of Voting Securities deemed to be beneficially owned by a Person a number
of Voting Securities representing not more than 10 percent of the then
outstanding voting power if such Person is (1) eligible to file a Schedule 13G
pursuant to Rule 13d-1(b)(1) under the Exchange Act with respect to Voting
Securities or (2) an underwriter who becomes the beneficial owner of more than
25% of the then outstanding Voting Securities pursuant to a firm commitment
underwriting agreement with the Company; or
(B) the individuals who, as of the effective
date of the Plan, constitute the members of the Board together with those
directors who are first elected subsequent to such date and whose election by
the Board or nomination for election by the Company's stockholders was approved
by a vote of at least a majority of the members of the Board then still in
office who were either directors as of the effective date of the Plan or whose
election or nomination for election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute at least a majority of the
members of the Board; or
(C) the consummation of a merger,
consolidation, recapitalization or reorganization of the Company, reverse split
of any class of Voting Securities, or any acquisition of securities or assets by
the Company, other than (1) any such transaction which would result in at least
75% of the total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
beneficially owned by at least 75% of the holders of outstanding Voting
Securities immediately prior to the transaction, with the voting power of each
such continuing holder relative to other such continuing holders not
substantially altered in the transaction, or (2) any such transaction which
would result in a Related Party beneficially owning more than 50% of the voting
securities of the surviving entity outstanding immediately after such
transaction; or
(D) the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
other than (1) any such transaction which would result in a Related Party owning
or acquiring more than 50 percent of the assets owned by the Company immediately
prior to the transaction, or (2) a sale or disposition immediately after which
such assets will be owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the Shares
of the Company immediately prior to such sale or disposition.
(E) any other event occurs which the Board
determines, in its discretion, would materially alter the structure of the
Company or its ownership.
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(ii) "Change in Control Price" means, with respect to
a Share, the higher of (A) the highest Fair Market Value of the Shares at any
time during the 60 calendar days preceding and the 60 days following the Change
in Control; or (B) the highest price paid per Share in a transaction which
either (1) results in a Change in Control or (2) would be consummated but for
another transaction which results in a Change in Control and, if it were
consummated, would result in a Change in Control. With respect to clause (B) in
the preceding sentence, the "price paid" will be equal to the sum of (1) the
face amount of any portion of the consideration consisting of cash or cash
equivalents and (2) the Fair Market Value of any portion of the consideration
consisting of real or personal property other than cash or cash equivalents, as
established by an independent appraiser selected by the Board.
(iii) "Related Party" means (A) a Subsidiary of the
Company; or (B) an employee or group of employees of the Company or any
majority-owned Subsidiary of the Company; or (C) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
majority-owned Subsidiary of the Company; or (D) an entity owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of Voting Securities.
(iv) "Voting Securities or Security" means any
securities of the Company which carry the right to vote generally in the
election of directors.
SECTION 10. AMENDMENTS TO AND TERMINATION OF THE PLAN AND AWARDS. The
Board may amend, alter, suspend, discontinue or terminate the Plan or the
Board's authority to grant Awards under the Plan without the consent of
stockholders or Participants, except that any amendment, alteration, suspension,
discontinuation or termination shall be subject to approval of the Company's
stockholders not later than the annual meeting next following such Board action
if stockholder approval is required by any federal or state law or regulation or
the rules of the Nasdaq Stock Market or any national securities exchange, stock
market or automated quotation system on which the Shares are then listed, traded
or quoted, or if the Board in its discretion determines that obtaining such
stockholder approval is for any reason advisable; provided, however, that,
without the consent of the Participant, no amendment, alteration, suspension,
discontinuation or termination of the Plan may materially and adversely affect
the rights of such Participant under any Award theretofore granted to him. The
Board may waive any conditions or rights under, amend any terms of, or amend,
alter, suspend, discontinue or terminate, any Award theretofore granted,
prospectively or retrospectively; provided, however, that, without the consent
of the Participant, no amendment, alteration, suspension, discontinuation or
termination of any Award may materially and adversely affect the rights of such
Participant under any Award theretofore granted to him.
SECTION 11. GENERAL PROVISIONS.
(a) Compliance with Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Board, postpone the
issuance or delivery of Shares or payment of other benefits under any Award
until completion of such registration or qualification of such Shares or other
required action under any federal or state law, rule or regulation, listing or
other required action with respect to the Nasdaq Stock Market or any national
securities exchange, automated quotation system or any other stock exchange or
stock market upon which the Shares or other securities of the Company are listed
or quoted, or compliance with any other obligation of the Company, as the Board
may consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Shares or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
shall take or cause to be taken no action, and shall undertake or permit to
arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Shares or payment of benefits under
any Award or the imposition of any other conditions on such issuance, delivery
or payment, to the extent that such postponement of other condition would
represent a greater burden on a Participant than existed on the 90th day
preceding the Change in Control.
(b) Transferability. No Award granted under the Plan, nor any
other rights acquired by a Participant under the Plan, shall be assignable or
transferable by a Participant, other than by a will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Board of Retirement Income Security Act of
1974, and each such Award or right shall be exercisable during the Participant's
lifetime only by the Participant or, if admissible under applicable law, by the
Participant's guardian or legal representative or a
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transferee receiving such Award pursuant to a qualified domestic relations
order; provided, however, that the Board may, in its sole discretion, authorize
all or a portion of an Award to be transferable by the Participant, but only to
(i) any immediate family members of the Participant, (ii) any trust or trusts
for the exclusive benefit of such immediate family members, or (iii) a
partnership or limited liability company in which such immediate family members
are the only partners or members, provided that (A) there may be no
consideration for any such transfer, other than an interest in a transferee's
partnership, limited liability company or other similar entity, (B) the Award
Agreement related to the Award must expressly provide for such transferability
in a manner consistent with this Section 11(b), (C) the Board, in granting an
Award, may impose additional restrictions on transfer or prohibit such transfer
entirely, (D) following any transfer, any such Award shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of the Plan, any reference to a Participant
shall be deemed to refer to the transferee, (E) in the event of a transferee's
death, an Award may be exercised by the personal representative of the
transferee's estate or, if no personal representative has been appointed, by the
successor or successors in interest determined under the transferee's will or
under the applicable laws of descent and distribution. Following any such
transfer, any transferee shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided for
purposes of Section 11(b) hereof, the term "Participant" shall be deemed to
refer to the transferee, and any event of termination of employment of the
Participant as set forth in the Award Agreement or in this Plan shall continue
to be applied with respect to the original Participant, following which the
Award shall be exercisable by the transferee only to the extent, and for the
period specified by, the Award Agreements.
(c) No Rights to Awards; No Stockholder Rights. Nothing in the
Plan shall be construed as giving any Participant, Eligible Person or other
Person any right or claim to be granted any Award under the Plan, or to be
treated uniformly with other Participants and Eligible Persons. No Award shall
confer on any Participant any of the rights of a stockholder of the Company
unless and until Shares are in fact issued to such Participant in connection
with the terms of such Award. Notwithstanding the foregoing, in connection with
each grant of Restricted Stock hereunder, the applicable Award shall specify if
and to what extent the Participant shall not be entitled to the rights of a
stockholder in respect of such Restricted Stock.
(d) Withholding. The Company or any Subsidiary is authorized
to withhold from any Award granted or any payment due under the Plan, including
from a distribution of Shares, amounts of withholding and other taxes due with
respect to an Award, its exercise or any payment thereunder, and to take such
other action as the Board may deem necessary or advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Awards. This authority shall include
authority to withhold or receive Shares, Awards or other property and to make
cash payments in respect thereof in satisfaction of such tax obligations.
(e) No Right to Employment. Nothing contained in the Plan or
any Award Agreement shall confer, and no grant of an Award shall be construed
as, (i) conferring, upon any Participant or any Eligible Person, any right to
continue in the employ or service of the Company or any Subsidiary or (ii)
interfering in any way with the right of the Company or any Subsidiary to (A)
terminate any Participant's or Eligible Person's employment or service at any
time or (B) increase or decrease the compensation of any Participant or Eligible
Person from the rate in existence at the time of granting of an Award, except as
may be expressly provided in any Award Agreement or other compensation
arrangement.
(f) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to Participant pursuant
to an Award, nothing contained in the Plan or any Award shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company; provided, however, that the Board may authorize the
creation of trusts or make other arrangements to meet the Company's obligations
under the Plan to deliver cash, Shares or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Board otherwise determines.
(g) No Limit on Other Compensatory Arrangements Nothing
contained in the Plan shall prevent the Company or any Subsidiary from adopting
or continuing in effect other or additional compensation arrangements (which may
include, without limitation, employment agreements with executives and
arrangements which relate to Awards under the Plan), and such arrangements may
be either generally applicable or applicable only in specific cases.
(h) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award. The Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
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(i) Governing Law. The validity, interpretation, construction
and effect of the Plan, any rules and regulations relating to the Plan and any
Award Agreement shall be governed by the laws of the State of Delaware (without
regard to provisions governing conflicts of laws) and applicable federal law.
(j) Severability.
(i) If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or as to any Person or Award, or would disqualify the Plan or any Award under
any law the provision shall be deemed amended to conform to applicable laws or,
if it cannot be construed or deemed amended without, in the determination of the
Board, materially altering the intent of the Plan, it shall be deleted and the
remainder of the Plan shall remain in full force and effect; provided, however,
that, unless otherwise determined by the Board, the provision shall not be
construed or deemed amended or deleted with respect to any Participant whose
rights and obligations under the Plan are not subject to the law of such
jurisdiction or the law deemed applicable by the Board.
(ii) If any of the terms or provisions of the Plan
conflict with the requirements of applicable law or applicable rules and
regulations thereunder, including the requirements of Section 162(m) and/or
Section 422A of the Code, then such terms or provisions shall be deemed
inoperative to the extent necessary to avoid the conflict with applicable law,
or applicable rules and regulations, without invalidating the remaining
provisions hereof. With respect to ISOs, if the Plan does not contain any
provision required to be included herein under Section 422A of the Code, such
provisions shall be deemed to be incorporated herein with the same force and
effect as if such provision had been set out at length herein; provided,
further, that to the extent any Option which is intended to qualify as an ISO
cannot so qualify, such Option, to that extent, shall be deemed to be a
Nonqualified Stock Option for all purposes of the Plan.
(k) Rule 16b-3 Compliance. With respect to persons subject to
Section 16 of the Exchange Act, transactions under the Plan are intended to
comply with all applicable terms and conditions of Rule 16b-3 and any successor
provisions. To the extent that any provision of the Plan or action by the Board
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Board.
(l) Headings. Headings are given to the sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
(m) Award Agreements. Each Award hereunder shall be evidenced
by an Award Agreement which shall be delivered to the Participant and shall
specify the terms and conditions of the Award and any rules applicable thereto.
Such terms may include, but are not limited to, the effect on such Award of the
death, retirement or other termination of employment of a Participant and the
effect, if any, of a Change in Control of the Company.
(n) Indemnification. Each person who is or shall have been a
member of the Committee, if any, or of the Board shall be indemnified and held
harmless by the Company against and from any loss, cost, liability or expense
that may be imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit or proceeding to which he may be made a
party or in which he may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in satisfaction
of any judgment in any such action, suit or proceeding against him, provided he
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or By-laws, by
contract, as a matter of law, or otherwise.
(o) Construction. For purposes of the Plan, the following
rules of construction shall apply: (i) the word "or" is disjunctive but not
necessarily exclusive; (ii) words in the singular include the plural; words in
the plural include the singular; and words in the neuter gender include the
masculine and feminine genders; and (iii) words in the masculine or feminine
gender include the other and neuter genders.
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SECTION 12. EFFECTIVE DATE AND TERMINATION.
(a) The Plan shall become effective as of June 23, 1999, the
date the Plan was adopted and approved by the stockholders of the Company. Any
Awards granted under the Plan prior to such approval of stockholders shall be
effective when made (unless otherwise specified by the Board at the time of
grant) but shall be conditioned upon and subject to such approval of the Plan by
stockholders.
(b) Awards may not be granted under the Plan after June 23,
2009. Unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted hereunder may, and the authority of the Board to
amend, alter, adjust, suspend, discontinue or terminate any such Award or to
waive any conditions or rights under any such Award shall, continue after June
23, 2009.
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