<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CARACO PHARMACEUTICAL LABORATORIES, LTD
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CARACO PHARMACEUTICAL LABORATORIES, LTD
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
April 28, 1999
Dear Shareholder,
We invite you to attend our 1999 Annual Meeting of Shareholders at 10:00 a.m.,
Eastern Daylight Savings Time, on June 2, 1999 at The Hotel St. Regis, 3071 W.
Grand Blvd., Detroit, Michigan.
The annual report, which is enclosed, summarizes Caraco's major developments
during 1998 and includes the 1998 financial statements.
Whether or not you plan to attend the meeting, please complete and mail the
enclosed proxy card promptly so that your shares will be voted as you desire. IF
YOU WISH TO VOTE IN THE MANNER THE BOARD OF DIRECTORS RECOMMENDS, IT IS NOT
NECESSARY TO SPECIFY YOUR CHOICES ON THE PROXY CARD. SIMPLY SIGN, DATE AND
RETURN THE PROXY CARD.
Sincerely,
Dilip Shanghvi
Chairman of the
Board of Directors
<PAGE> 3
CARACO PHARMACEUTICAL LABORATORIES, LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 2, 1999
Date: June 2, 1999
Time: 10:00 a.m., Eastern Daylight Savings Time
Place: The Hotel St. Regis
Detroit, Michigan 48202
We invite you to attend the Caraco Pharmaceutical Laboratories, Ltd. Annual
Meeting of Shareholders to:
1. Elect two directors for three-year terms expiring in 2002 or
upon the election and qualification of their successors.
2. Approve and adopt The 1999 Equity Participation Plan and to
reserve for issuance thereunder 3,000,000 shares of Caraco's
common stock.
3. Transact any other business that is properly submitted before the
annual meeting or any adjournments of the meeting.
The record date for the meeting is April 19, 1999 (the "Record Date"). Only
shareholders of record at the close of business on that date can vote at the
annual meeting. Caraco is mailing this Notice of Annual Meeting to those
shareholders.
A proxy statement, proxy card, annual report, and Form 10-KSB are enclosed with
this Notice. Whether or not you plan to attend the meeting and whether you own a
few or many shares of stock, the board of directors urges you to vote promptly.
You may vote by signing, dating and returning the enclosed proxy card.
A list of shareholders who can vote at the annual meeting will be available for
inspection by shareholders at the meeting and for ten days prior to the meeting
during regular business hours at the offices of Caraco, 1150 Elijah McCoy Drive,
Detroit, MI 48202.
By Order of the board of directors,
Dilip Shanghvi
Chairman of the
Board of Directors
April 28, 1999
<PAGE> 4
TABLE OF CONTENTS
Page
Questions and answers................................................... 3
Proposals
Proposal 1: Election of Board of Directors........ 6
Proposal 2: Proposal to Approve the 1999 Equity
Participation Plan.................. 6
Information about nominees and incumbent directors...................... 11
Committees and meetings of directors.................................... 12
Compensation of directors............................................... 13
Security ownership of certain beneficial owners......................... 14
Security ownership of management and directors.......................... 14
Section 16(a) beneficial ownership reporting compliance................. 17
Transactions of directors and executive officers with Caraco............ 17
Executive officers...................................................... 18
Compensation of executive officers...................................... 18
Employment Agreements................................................... 20
Relationships with independent auditors................................. 21
2
<PAGE> 5
CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
1999 PROXY STATEMENT
QUESTIONS AND ANSWERS
1. Q: WHAT IS A PROXY?
A: A proxy is a document, also referred to as a proxy card
(which is enclosed), by which you authorize someone else
to vote for you in the way that you want to vote. Caraco's
board of directors is soliciting this proxy. You may also
abstain from voting.
2. Q: WHAT IS A PROXY STATEMENT?
A: A proxy statement is the document the United States
Securities and Exchange Commission (the "SEC") requires
to explain the matters on which you are asked to vote on
the proxy card.
3. Q: WHO CAN VOTE?
A: Only holders of Caraco's common stock at the close of
business on April 19, 1999, the Record Date, can vote at
the annual meeting. Each shareholder of record has one
vote for each share of common stock on each matter
presented for a vote at the meeting.
4. Q: WHAT WILL I VOTE ON AT THE MEETING?
A: At the annual meeting, shareholders will vote to:
(1) elect two directors for three-year terms expiring
in 2002 or upon the election and qualification of
their successors;
(2) approve the 1999 Equity Participation Plan; and
(3) transact any other business that is properly
submitted before the annual meeting or any
adjournments of the meeting.
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5. Q: HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THE
PROPOSAL?
A: The board of directors recommends a vote FOR each of the
proposals.
6. Q: HOW CAN I VOTE?
A: You can vote in person or by proxy. To vote by proxy,
sign, date and return the enclosed proxy card. If you
return your signed proxy card to American Stock Transfer
before the annual meeting, the persons named as proxies on
the card will vote your shares as you directed. You may
revoke a proxy at any time before the proxy is exercised
by:
(1) giving written notice of revocation to the
Assistant Corporate Secretary of Caraco at 1150
Elijah McCoy Drive, Detroit, MI 48202;
(2) submitting another proxy that is properly signed
and later dated;
(3) voting in person at the meeting (but only if the
shares are registered in Caraco's records in the
name of the shareholder and not in the name of a
broker, dealer, bank or other third party);
7. Q: IS MY VOTE CONFIDENTIAL?
A: Yes, your vote is confidential. Only the inspectors of
election and certain employees associated with processing
proxy cards and counting the vote have access to your
vote. All comments you direct to management (whether
written on the proxy card or elsewhere) will remain
confidential unless you ask that your name be disclosed.
8. Q: WHAT IS A QUORUM?
A: There were ____________ shares of Caraco's common stock
outstanding on the Record Date. A majority of the
outstanding shares, or ___________ shares, present or
represented by proxy, constitutes a quorum. A quorum must
exist to conduct business at the annual meeting.
9. Q: HOW DOES VOTING WORK?
A: If a quorum exists, each director must receive the
favorable vote of a majority of the shares voted,
excluding abstentions and broker non-votes. A broker
non-vote is a proxy a broker submits that does not
indicate a vote for some or all the proposals because the
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<PAGE> 7
broker does not have discretionary voting authority and
the broker did not receive instructions as to how to vote
on those proposals. The 1999 Equity Participation Plan
must receive the favorable vote of a majority of the
shares voted (with an abstention counted as a vote against
and a broker non-vote not counted).
Caraco will vote properly executed proxies it receives
prior to the meeting in the way you direct. If you do sign
the proxy card but do not specify instructions, the shares
represented by proxies will be voted FOR the nominees for
directors and FOR the approval of the stock option plan.
No other matters are currently scheduled to be presented
at the meeting.
An independent third party acts as the inspector of the
meeting and the tabulator of votes.
10. Q: WHO PAYS FOR THE COSTS OF THE MEETING?
A: Caraco pays the cost of preparing and printing the proxy
statement and soliciting proxies. Caraco will solicit
proxies primarily by mail, but may also solicit proxies
personally and by telephone. Caraco will reimburse banks,
brokerage houses and other custodians, nominees and
fiduciaries for their out-of-pocket expenses for
forwarding solicitation material to beneficial owners of
Caraco's common stock.
11. Q: WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
DUE?
A: All shareholder proposals to be considered for inclusion
in next year's proxy statement must be submitted in
writing to the Corporate Secretary, Caraco Pharmaceutical
Laboratories, 1150 Elijah McCoy Drive, Detroit, Michigan
48202, by December 30, 1999.
Additionally, under Caraco's bylaws, shareholders of
Caraco must provide advance notice to Caraco if they wish
to nominate persons for election as directors or propose
items of business at an annual meeting of Caraco's
shareholders. The shareholder must deliver this notice not
later than the close of business of the 90th day nor
earlier than the close of business on the 120th day prior
to the first anniversary of the immediately preceding
year's annual meeting of shareholders.
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<PAGE> 8
THE TWO PROPOSALS ON WHICH YOU ARE VOTING:
PROPOSAL 1: ELECTION OF BOARD OF DIRECTORS.
Caraco's board of directors is divided into three classes with each class of
directors elected to a three-year term of office. At each annual meeting of
shareholders, shareholders elect one class of directors for a three-year term to
succeed the class of directors whose term of office expires at that meeting.
This year you are voting on two candidate directors. Based on the recommendation
of the board of directors, the following individuals, each of whom is a current
director, are recommended for re-election: David W. Adamany and David A.
Hagelstein. Each of the nominees has consented to his nomination and has agreed
to serve as a director of Caraco if elected.
If any director is unable to stand for re-election, Caraco may vote the shares
to elect any substitute nominees recommended by the board of directors. If the
board of directors does not recommend any substitute nominees, the number of
directors to be elected at the annual meeting may be reduced by the number of
nominees who are unable to serve.
Further information regarding the board of directors and these nominees begins
on page 11 of this proxy statement.
Caraco's board of directors recommends a vote FOR these directors.
PROPOSAL 2: PROPOSAL TO APPROVE THE 1999 EQUITY PARTICIPATION PLAN.
GENERAL
On April 9, 1999, the board of directors adopted The 1999 Equity Participation
Plan (the "1999 Plan"), effective upon shareholder approval thereof, for Caraco
employees, consultants and non-employee directors, and reserved for issuance
thereunder 3,000,000 shares of common stock. As of April 19, 1999, no options to
purchase shares of the common stock and no restricted stock have been awarded
under the 1999 Plan.
At the annual meeting, the shareholders are being asked to approve the 1999 Plan
and the reservation of shares thereunder. The board of directors believes that
adopting the 1999 Plan will provide Caraco with equity award opportunities to
attract, retain and motivate the best available talent for the successful
conduct of its business. Currently, under Caraco's 1993 Stock Option Plan, there
are approximately only 50,249 shares available for grant. Caraco does not
believe that the number of remaining shares under the 1993 Stock Option Plan
will be sufficient to accomplish its purposes.
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SUMMARY OF THE 1999 PLAN.
The essential features of the 1999 Plan are outlined below.
PURPOSE. The purpose of the 1999 Plan is (i) to provide an incentive for
employees, consultants and non-employee directors to further the growth and
financial success of Caraco by personally benefiting through the ownership of
shares of common stock; and (ii) to obtain and retain the services of employees,
consultants and non-employee directors considered essential to the long-range
success of Caraco, by making available stock options and/or shares of restricted
stock.
ADMINISTRATION. The 1999 Plan will be administered by the Committee (defined
generally as the Compensation Committee or the board of directors). The
Committee has the power to interpret the 1999 Plan, the stock option agreements
issued thereunder and the agreements pursuant to which restricted stock awards
are granted. The Committee may adopt such rules for the administration,
interpretation and application of the 1999 Plan as are consistent with the 1999
Plan, and to interpret, amend or revoke any such rules. Caraco's Board of
Directors, acting by a majority of its members in office, shall administer the
1999 Plan with respect to options granted to non-employee directors.
ELIGIBILITY. Officers, consultants and other employees (including employee
directors) of Caraco and its subsidiaries and affiliates whom the Committee
believes have the potential to contribute to the future success of Caraco, and
those non-employee directors who the board of directors believes have the
potential to contribute to the future success of Caraco, shall be eligible to
receive awards under the 1999 Plan.
AWARD. The maximum number of shares of common stock which may be subject to a
stock option award and a restricted stock award under the 1999 Plan to any
individual in any calendar year shall not exceed 200,000 shares of common stock.
STOCK OPTIONS. The 1999 Plan permits the granting of non-transferable stock
options that are either intended to qualify as incentive stock options or not
intended to so qualify and are non-statutory stock options. The Committee or the
board of directors shall determine whether stock options are to be non-statutory
or incentive and whether such stock options are to qualify as performance-based
compensation as described in Section 162(m)(4)(c) (see reference below) of the
Internal Revenue Code of 1986. The option exercise price for each share covered
by the option may be
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less than the fair market value of a share of common stock on the date of grant;
however in the case of incentive stock options or in the case of a grant to the
chief executive officer and the four other highest compensated executive
officers, the price shall be no less than 100% of the fair market value of a
share of common stock at the time such option is granted. The term of an option
shall be determined by the Committee provided, however, that in the case of
incentive stock options, the term shall not be more than 10 years from the date
the incentive stop option is granted. The period during which the right to
exercise an option in whole or in part vests will be set by the Committee. Each
option shall be evidenced by a written stock option agreement which shall be
executed by the optionee. Upon exercise of an option, the optionee shall make
full cash payment to Caraco; however, the Committee may allow other types of
payment.
RESTRICTED STOCK. Restricted stock may be awarded to any participant whom the
Committee determines should receive such an award. The Committee may determine
the purchase price, if any, and other terms and conditions applicable to the
restricted stock. The Committee may impose such conditions on the issuance of
the restricted stock as deemed appropriate. The Committee shall determine
whether such stock options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code. Restricted stock shall be issued
only pursuant to a written restricted stock agreement. The shares of restricted
stock may be placed into escrow by the Committee and held until all the
restrictions imposed under the restricted stock agreement have been satisfied or
removed.
SECTION 162(M) OF THE CODE. Section 162(m) precludes a public corporation from
taking a tax deduction for individual compensation in excess of $1 Million
dollars for its chief executive officer and its four other highest-paid
officers. Section 162(m) also provides for certain exemptions to this
limitation, specifically compensation that is performance based within the
meaning of Section 162(m). The Committee, however, reserves the right to award
compensation to its executives in the future that may not qualify under Section
162(m) as deductible compensation. The Committee will, however, continue to
consider all elements of the cost to Caraco of providing such compensation,
including the potential impact of Section 162(m).
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS, AND CHANGES IN CONTROL. In the event
of a stock dividend, stock split, reorganization, merger, or similar corporate
transaction (other than a change in control), the Committee is authorized to
make appropriate adjustments to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the 1999 Plan or with
respect to an outstanding award. In addition, the Committee may provide for the
acceleration of the vesting period;
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<PAGE> 11
for the assumption by any successor or survivor corporation of the obligations
of Caraco with respect to an award; or for the removal of restrictions imposed
under a restricted stock agreement. In the event of a change in control as
defined in the 1999 Plan (which includes among other events, any person (other
than Sun Pharma and its affiliates) becoming the beneficial owner of a majority
of the combined voting power of Caraco or generally, over a period of 24 months
or less, the current members of the board of directors and any other individuals
who become directors of Caraco after that date who were approved by at least
two-thirds of the then current board of directors, ceasing for any reason to
constitute a majority of the board of directors), each option granted shall
become exercisable as to all shares covered thereby simultaneously with the
consummation of such change in control and any restricted stock awarded shall
become fully vested and generally the restrictions included in any restricted
stock granted shall be deemed rescinded and terminated.
AMENDMENT OR TERMINATION OF THE 1999 PLAN. The 1999 Plan may be wholly or
partially amended or modified, suspended or terminated at any time by the
Committee. However, without approval of Caraco's shareholders given within 12
months before or after the action by the Committee, no action of the Committee
may, except as otherwise provided in the 1999 Plan, increase the limits of the
maximum number of shares which may be issued under the 1999 Plan to any
individual and no action of the Committee may be taken that would otherwise
require shareholder approval as a matter of law, regulation or rule. No
amendment, suspension, or termination of the 1999 Plan shall, without the
consent of the participants, alter or impair any rights or obligations under any
award theretofore granted, unless the award itself expressly so provides.
FEDERAL INCOME TAX INFORMATION. The following is only a brief summary of the
effect of federal income taxation upon the recipient and Caraco under the 1999
Plan based upon the Code. This summary does not purport to be complete and does
not discuss the income tax laws of any municipality, state or country outside of
the United States in which a participant may reside.
If any option granted under the 1999 Plan is an incentive stock option, the
optionee will recognize no income upon grant of the incentive stock option and
will incur no tax liability due to the exercise unless the optionee is subject
to the alternative minimum tax. Caraco will not be allowed a deduction for
federal income tax purposes as a result of the exercise of an incentive stock
option regardless of the applicability of the alternative minimum tax. Upon the
sale or exchange of the shares at least two years after the date of grant and at
least one year after exercise of the option, any gain (or loss) will be treated
as a capital gain (or loss). If these holding periods are not satisfied, the
optionee will recognize ordinary income equal to the difference between the
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exercise price and the lower of the fair market value of the stock at the date
of the option exercise or the sale price of the stock. A different rule may
operate to postpone the recognition date of ordinary income upon such premature
disposition if the optionee is subject to Section 16 of the Securities Exchange
Act of 1934. Caraco will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
Options which do not qualify as incentive stock options are taxed as
non-statutory options. An optionee will not recognize any taxable income at the
time he is granted a non-statutory option. However, upon the exercise of a
non-statutory option, the optionee will recognize ordinary income measured by
the excess of the then fair market value of the shares over the exercise price.
In certain circumstances, where the shares are subject to a substantial risk of
forfeiture when acquired or where the optionee is subject to Section 16 of the
Securities Exchange Act of 1934, the date of taxation may be deferred unless the
optionee files an election with the Internal Revenue Service under Section 83(b)
of the Code. The income recognized by an optionee who is also an employee of
Caraco will be subject to tax withholding by Caraco by payment in cash or out of
the current earnings paid to the optionee. Upon sale of such shares by the
optionee, any difference between sales price and the fair market value on the
date of exercise, will be treated as capital gain (or loss). Caraco will be
entitled to a tax deduction in the same amount as the ordinary income recognized
by the optionee with respect to shares acquired upon exercise of an
non-statutory option.
The grant of restricted stock will generally be subject to the tax consequences
discussed above for non-statutory options. At such times as the restrictions on
the stock lapses or the stock is sold, such shareholders will recognize ordinary
income to the extent of the fair market value of such stock less the amount, if
any, which is paid for the stock. The income recognized by a shareholder who is
an employee will be subject to withholding by Caraco by payment in cash or out
of the current earnings paid to the employee. Caraco will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the
shareholder.
RECOMMENDATION.
The discussion of the 1999 Plan is qualified in its entirety by the actual terms
and conditions of the 1999 Plan, a copy of which is included as Appendix "A" to
this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND ADOPTION OF THE
1999 PLAN
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INFORMATION ABOUT NOMINEES AND INCUMBENT DIRECTORS
The following tables provide information about each nominee for election as a
director and for each of the directors whose term of office will continue after
the meeting.
NOMINEES FOR DIRECTORS - TERMS EXPIRING IN 2002
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS AND OTHER
DIRECTORSHIPS
DIRECTOR
AGE SINCE
NAME
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
David W. Adamany 62 Served as President of Wayne State University from 1982 until 1994
1997. He is presently President Emeritus and Distinguished
Professor of Law and Political Science at Wayne State
University.
David A. Hagelstein 57 Engaged in the management of his personal real estate and 1995
business investments for the past thirty years. [He is a
consultant to several companies in the pharmaceutical and
medical fields.] (See "Transactions of Directors and
Executive Officers with Caraco")
</TABLE>
INCUMBENT DIRECTORS - TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS DIRECTOR
NOMINEES AGE AND OTHER DIRECTORSHIPS SINCE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Narendra N. Borkar 58 Chief Executive Officer (since August 1997), director of 1997
Sun Pharmaceutical Industries, Ltd., an Indian specialty
pharmaceutical company ("Sun Pharma") since 1997, head of the
pharmaceutical business in India of Ciba Geigy, now Novartis,
a Swiss corporation, responsible for the overall performance
of the business unit including marketing, finance, technical,
medical and development. (See "Transactions of Directors and
Executive Officers with Caraco.")
Phyllis Harrison-Ross 62 Has served more than 25 years in the community mental health 1979
profession. She presents a remarkably diverse career as a
hospital administrator, researcher, academician, public
health consultant, forensic psychiatrist and public educator.
Dr. Harrison-Ross trained as an adult and child psychiatrist
as well as a pediatrician, and continues to lend her
administrative and clinical talents to serving the diverse,
hard to reach and underserved population of New York.
Sudhir Valia 42 Has worked for Sun Pharma as a full time director responsible 1997
for finance, commercial, operations, projects and quality
control. For more than the past five years Mr. Valia has been
a chartered accountant in private practice. (See "Transactions
of Directors and Executive Officers with Caraco.")
</TABLE>
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INCUMBENT DIRECTORS - TERMS EXPIRING IN 2000
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS DIRECTOR
EXPERIENCE DURING PAST 5 YEARS SINCE
NAME AGE AND OTHER DIRECTORSHIPS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Jay F. Joliat 42 For more than the past five years, has served as President, 1995
Chief Executive Officer and Chairman of the board of
directors of Joliat & Company. Joliat & Company is a private
investment company involved in general securities management,
venture capital, real estate, and business consulting. Mr.
Joliat is also Chairman of the Board, Chief Executive Officer
and Treasurer of Sign of the Beefcarver Restaurants, Inc.,
which owns and operates 13 cafeteria style family
restaurants, three casual dining/bar restaurants and one fine
dining restaurant in the Detroit metropolitan area. He is
also CEO of Bad Frog International, Inc., which is a
franchise company and worldwide licensee to all rights
associated with Bad Frog Taverns, a casual bar/restaurant
tavern concept; and is trustee and Chief Executive Officer of
several family-related trusts with widely diverse holdings
including foreign and domestic securities, venture capital
and real estate. (See "Transactions of Directors and
Executive Officers with Caraco.")
Dilip S. Shanghvi 43 Chairman of the board of directors since 1997. Co-founder of 1997
Sun Pharma and has been a Managing Director since 1992,
responsible for marketing, research and development and human
resource development. (See "Transactions of Directors and
Executive Officers with Caraco.")
</TABLE>
COMMITTEES AND MEETINGS OF DIRECTORS
The board of directors has four committees, as set forth in the following chart.
CURRENT MEMBERSHIP ROSTER
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION AUDIT FINANCE
NAME COMMITTEE COMMITTEE COMMITTEE COMMITTEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David W. Adamany *
Narendra N. Borkar X *
David A. Hagelstein X *
Phyllis Harrison-Ross X
Jay F. Joliat X X
Dilip Shanghvi * X
Sudhir Valia X X X
</TABLE>
*Chairman
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EXECUTIVE COMMITTEE. This committee did not meet during 1998. It exercises, in
the intervals between the meetings of the board of directors, the powers of the
board of directors, subject to the Michigan Business Corporation Act, as it
relates to the management of the business and affairs of Caraco.
COMPENSATION COMMITTEE. This committee did not meet in 1998. It makes
recommendations to the board of directors relating to the overall compensation
arrangements for officers and staff of Caraco. It also interprets Caraco's 1993
Stock Option Plan, as amended, and such other executive and employee stock
options as may, from time to time, be designated by the board of directors. In
doing so, it has the authority to designate officers, directors or key employees
eligible to participate, to prescribe the terms of any award of stock options,
and to make all other determinations in administering the Plan.
AUDIT COMMITTEE. This committee did not meet in 1998. It recommends to the board
of directors a firm of certified public accountants to conduct audits of the
accounts and affairs of Caraco, reviews accounting objectives and procedures of
Caraco and the findings and reports of the independent certified public
accountants, and makes such reports and recommendations to the board of
directors as it deems appropriate.
FINANCE COMMITTEE. This committee did not meet in 1998. It reviews Caraco's
financial structure, and makes recommendations to the board of directors on
financial, short and long term investments and business planning matters.
COMPENSATION OF DIRECTORS
Directors who are employees of Caraco do not receive additional compensation for
their service on the board of directors and its committees. Each non-employee
director of Caraco receives 100 shares of common stock of Caraco for each board
of directors or committee meeting in which he or she participates. Non-employee
directors are also reimbursed for out-of-pocket expenses incurred in connection
with attending board and committee meetings. In addition, non-employee directors
may also be awarded options for their service on the board of directors. No
director received an option for his or her services on the board of directors
during 1998.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The SEC requires that Caraco provide information about any shareholder who
beneficially owns more than 5% of Caraco's common stock. The following table
provides the required information about the shareholders (who are not officers
or directors) known to Caraco to be the beneficial owner of more than 5% of
Caraco's common stock. Caraco relied solely on information furnished by its
transfer agent to provide this information.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------- -------------------- -----
<S> <C> <C>
Cede & Co. 2,829,414 16.9%
PO Box 20
Bowling Green Station
New York, NY 10271
C. Arnold Curry 1,384,447(1) 8.3%
TTEE Clevius Arnold
Curry Living Trust
17815 Hamilton Road
Detroit, MI 48203
6,659,990(2) 39.8%
Sun Pharmaceutical
Industries Ltd.
Synergy House, Subhanpura
Baroda 390-007 India
</TABLE>
(1) Excludes 484,615 shares owned by his wife, Cara J. Curry, as to which
he disclaims beneficial ownership.
(2) Includes 90,657 shares owned by Sun Pharma Global Inc., an affiliate of
Sun Pharma. (See footnote 10 "Security Ownership of Management and
Directors")
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table contains information about the number of shares of Caraco's
common stock beneficially owned by incumbent directors, nominees and the
executive officers named in the Summary Compensation Table presented in this
Proxy Statement and by all incumbent directors, nominees and executive officers
as a group. The number of shares beneficially owned by each individual includes
shares over which the person shares voting power or investment power and also
any shares which the individual can acquire by May 31, 1999, through the
exercise of any stock option or other right. Unless indicated otherwise, each
individual has sole investment and voting power (or shares those powers with his
or her spouse) with respect to the shares listed in the table.
14
<PAGE> 17
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL BENEFICIAL PERCENTAGE OF
OWNER OWNERSHIP CLASS*
- ------------------ --------- -------------
<S> <C> <C>
David W. Adamany(9) 24,400(1) *
Narendra N. Borkar(9) 50,000(2) *
David A. Hagelstein(9)(10) 1,742,159(3) 10.4%
Phyllis Harrison-Ross(9) 3,900(4) *
Jay F. Joliat(9)(10) 2,413,314(5) 14.4%
John R. Morris(9) 139,270(6) *
Dilip S. Shanghvi(11) (2) *
Sudhir Valia(11) (2) *
Sherman N. Ginn(9) 16,000(7) *
Robert Kurkiewicz(9) 25,241(8) *
All executive officers and
directors as a group 4,414,284 26.4%
(10 persons)
</TABLE>
- -------------------------
* Less than 1.0% of the outstanding shares
(1) Includes stock options that are currently exercisable to purchase 4,800
shares of common stock.
(2) Sun Pharma owns 6,569,333 shares of common stock and Sun Pharma's
affiliate, Sun Pharma Global, Inc., owns 90,657 shares of common stock.
(See "Transactions of Directors and Executive Officers with Caraco.")
Messrs. D. Shanghvi, Borkar and Valia are principals of Sun Pharma,
and, therefore, may be deemed to share investment control over the
shares of Common Stock held by Sun Pharma and Sun Pharma Global, Inc.
Each of Messrs. D. Shanghvi, Borkar and Valia disclaims beneficial
ownership of the shares of Common Stock owned by Sun Pharma and Sun
Pharma Global, Inc.
(3) The majority of shares are held in trust (the "Hagelstein Trust").
Includes stock options that are currently exercisable to purchase
577,758 shares of common stock. (See "Transactions of Directors and
Executive Officers with Caraco.")
(4) Includes stock options that are currently exercisable to purchase 2,400
shares of common stock.
(5) The majority of shares are held in trust (the "Joliat Trust"). Includes
285,714 Series A Preferred Stock convertible to Common Stock; and stock
options that are currently exercisable to purchase 880,226 shares of
common stock. (See "Transactions of Directors and Executive Officers
with Caraco.")
15
<PAGE> 18
(6) Includes stock options that are currently exercisable to purchase 2,400
shares of common stock.
(7) Includes stock options that are currently exercisable to purchase
16,000 shares of common stock.
(8) Includes stock options that are currently exercisable to purchase
21,328 shares of common stock.
(9) The mailing address of each of these holders is 1150 Elijah McCoy
Drive, Detroit, Michigan 48202.
(10) The Joliat Trust, the Hagelstein Trust and Sun Pharma have entered into
a Voting Agreement dated August 1997 pursuant to which, among other
things, Sun Pharma may designate a majority of the directors of the
board of directors of the Company and the Joliat Trust and the
Hagelstein Trust may each designate one director. The Voting Agreement
also provides that the Executive Committee shall consist of three
directors, two selected by Sun Pharma and one selected by the Joliat
Trust and the Hagelstein Trust. In addition, the Joliat Trust and the
Hagelstein Trust have also agreed that they will respectively vote
their shares in accordance with Sun Pharma's directions with respect to
any matter relating to the investment, merger, alliance, share
dilution, appointment of key executives, major restructuring or
reorganizing, bank borrowing, funding or giving credit. If Sun Pharma
sells within a period of four years shares of Caraco Common Stock so
that Sun Pharma's ownership falls below 30% of the then outstanding
shares of Caraco or Sun Pharma defaults in its payment for the Caraco
Common Stock, then the board of directors will be reconstituted in
accordance with the proportionate share holdings of each of the parties
to the Voting Agreement and the Executive Committee shall be
reconstituted so that it consists of one director selected by Sun
Pharma and two directors selected by the Joliat Trust and the
Hagelstein Trust. In the event that Sun Pharma owns 10% or less of the
outstanding shares of Caraco, the Voting Agreement shall terminate. In
addition, the Voting Agreement shall terminate after the fourth
anniversary thereof. The Joliat Trust and the Hagelstein Trust have
also agreed not to dispose of their shares for a period of four years
without the consent of Sun Pharma, and thereafter for a period of three
years, to give Sun Pharma a right of first refusal on the sale of their
respective shares. The restriction on disposition of their respective
shares for the four-year period terminates in the event of (i) any sale
of shares by Sun Pharma to anyone other than an affiliate; (ii)
approval by the board of directors of Caraco of a merger,
consolidation, or sale of substantially all of the assets of Caraco to
another entity; or (iii) a tender offer for the shares.
(11) The mailing address of Sun Pharma, D. Shanghvi and S. Valia is Synergy
House Subhanpura, Gorwa Road, Baroda, 390-007, India.
16
<PAGE> 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that Caraco's
directors, executive officers and persons who own more than ten percent of a
registered class of Caraco's equity securities file reports of stock ownership
and any subsequent changes in stock ownership with the SEC not later than
specified deadlines. During 1998, all of the required reports were filed by the
specified deadlines. In making this disclosure, Caraco relied on the directors'
and executive officers' written representations and a review of copies of the
reports filed with the SEC.
TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS WITH CARACO
The following discloses transactions between Caraco and several of the incumbent
directors, director nominees and executive officers of Caraco during 1998.
In August 1997, Caraco and Sun Pharma completed an agreement whereby in exchange
for 5,300,000 shares of Caraco common stock, Sun Pharma agreed to invest $7.5
million into Caraco over a period of approximately two years or four
installments. Caraco received the final installment in 1998.
In August 1997, Sun Pharma also agreed, during a five year period, to provide
Caraco with 25 generic pharmaceutical products (consisting of ANDAs (abbreviated
new drug applications) which count as one product and DESIs (drug efficiency
study implementation products) which count as 1/3 of a product) in exchange for
544,000 shares of Caraco common stock for each product (181,333 shares for each
DESI product). In March 1999, Caraco issued Sun Pharma 1,269,333 shares of its
common stock for two ANDAs and one DESI product.
Sun Pharma has agreed to lend Caraco up to $5.3 million as an unsecured loan on
an as needed basis at an annual interest rate of 10%. As of March 31, 1999, Sun
Pharma has loaned Caraco $750,000 of the $5.3 million.
In connection with the purchase by Sun Pharma in August 1997 of the 5,300,000
shares of Caraco common stock, in July 1998 Jay F. Joliat forgave a loan to
Caraco in the amount of $150,000. Also, in July 1998, Jay F. Joliat and David A.
Hagelstein surrendered to Caraco 100,000 and 250,000 shares of Caraco common
stock, respectively.
On January 20, 1999, the Board of Directors granted David A. Hagelstein a
non-qualified stock option for 250,000 shares of Caraco's common stock at an
exercise price of $1.50 per share and a non-qualified stock option for 100,000
shares of Caraco's common stock at an exercise price of $.88 per share. Both
options are exercisable until January 20, 2005. The Board of Directors also
granted to Jay F. Joliat on January 20, 1999, a non-qualified stock option for
100,000 shares of Caraco's common stock at an exercise price of $1.50 per share.
The options are exercisable until January 20, 2005.
In December 1998, Caraco commenced a private placement of its common stock to
raise up to $5 million. Pursuant to such private placement through March 31,
1999, Jay F. Joliat has purchased 400,000 shares of Caraco's common stock and
David A. Hagelstein has purchased 79,090 of Caraco's common stock at prices
ranging between $.88 and $1.00 per share.
17
<PAGE> 20
EXECUTIVE OFFICERS
The following table provides information about Caraco's executive officers who
are not directors.
<TABLE>
<CAPTION>
AGE
NAME AS OF EXECTIVE
MARCH 31, 1999 FIVE-YEAR OFFICER
BUSINESS EXPERIENCE SINCE
---------- -------------- --------------------- --------
<S> <C> <C>
Sherman N. Ginn 59 Vice President - Sales and Marketing (since December 1994
1994), director of Sales and Marketing (August to
December 1994). From February 1994 until August 1994,
Mr. Ginn was employed by Global Source as Vice
President, Sales.
Robert Kurkiewicz 48 Commenced employment with Caraco as its Vice President - 1993
Quality Assurance in November 1993 and was promoted to
Senior Vice President - Technical, October, 1998.
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation of the two most highly
compensated executive officers of Caraco (the "named executive officer"), whose
compensation exceeded $100,000 during the year ended December 31, 1997 and
December 31, 1998, as applicable:
<TABLE>
<CAPTION>
Long Term Compensation
------------------------
Awards Payouts
------ -------
Annual Compensation Restricted Securities
Name and ------------------------------ Other Annual Stock Underlying LTIP All Other
Principal Position Year Salary($) Bonus($) Compensation Award(s) Options Payouts Compensation
- ------------------ ---- --------- -------- $ $ # $ $
------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Narendra N. Borkar(1) 1998 $120,000 0 0 $37,500 150,000(3) 0 $4,560(4)
Chief Executive Officer 1997 $ 45,592 0 0 0 0 0 0
Robert Kurkiewicz 1998 $120,000 0 0 0 65,000(5) 0 0
Sr. Vice President-
Technical 1997 $ 92,000 0 0 0 0 0 0
1996 $123,000 0 0 0 0 0 0
</TABLE>
(1) Mr. Borkar began his employment with Caraco August 1997.
(2) 50,000 shares of restricted stock were awarded by Caraco on September 22,
1998 (with a fair market value of $.75 per share on such date) as part of
Mr. Borkar's employment agreement dated September 22, 1998.
(3) A stock option of 150,000 shares was awarded to Mr. Borkar as part of his
employment agreement dated September 22, 1998. (See "Executive
Compensation - "Employment Agreements" and "Option Grants in Last Fiscal
Year.")
(4) $380.00 per month is given for car allowance.
(5) A stock option of 65,000 shares was awarded to Mr. Kurkiewicz on June 1,
1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on stock options granted in 1998 to the
named executive officers:
18
<PAGE> 21
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS
----------
(a) (b) (c) (d) (e)
NUMBER OF PERCENT OF
SECURITIES UNDERLYING TOTAL OPTIONS
OPTIONS GRANTED TO ALL EXERCISE PRICE
NAME GRANTED EMPLOYEES PER EXPIRATION DATE
IN FISCAL YEAR SHARE
<S> <C> <C> <C> <C>
Narendra N. Borkar 150,000 33.9% $.75 9/20/04
Robert Kurkiewicz 65,000 14.7% $.94 6/1/04
</TABLE>
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTIONS
VALUES
The following table sets forth information for the named executive officers with
regard to the aggregate stock options exercised during the year ended December
31, 1998, and the stock options held as of December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
FY-End(#) FY-End($)(1)
Shares Acquired Value Realized
Name on Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- -------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Narendra N. Borkar 0 0 0/150,000 0/0
Sherman N. Ginn 0 0 16,000/14,000 0/0
Robert Kurkiewicz 0 0 21,328/65,886 0/0
</TABLE>
(1) Value based on the difference between the closing bid price of the
Corporation's Common Stock on December 31, 1998 and the exercise price.
The options held by the named executive officers have exercise prices
which are higher than the closing bid price of the Corporation's Common
Stock on December 31, 1998.
EMPLOYMENT AGREEMENTS
NARENDRA N. BORKAR, the Chief Executive Officer of Caraco, entered into an
employment agreement dated September 22, 1998. The employment agreement provides
Mr. Borkar with a salary at the rate of $120,000 annually, a cash bonus in an
amount up to 25% of the base salary contingent upon achievement of corporate
objectives, a stock bonus of 50,000 shares of Caraco common stock and a stock
option of 150,000 shares. Caraco also agreed to pay Mr. Borkar his tax
liability arising from the grant of the restricted stock.
20
<PAGE> 22
The employment agreement is for a term of five years, however, the agreement
automatically renews for successive one year periods unless terminated by Caraco
or Mr. Borkar upon ninety (90) days notice. In the event Caraco terminates Mr.
Borkar without cause, he will receive base salary payments, his bonus and his
benefits for six (6) months from the date of termination. In the event of a
change in control of ownership of Caraco and a significant change in Mr.
Borkar's duties, then Mr. Borkar may terminate and receive a lump sum amount
equal to his base salary for six (6) months. Mr. Borkar would also be entitled
to immediate vesting of any stock option which would have been exercised at the
close of the year during the change in control.
ROBERT KURKIEWICZ, the Senior Vice President - Technical, entered into a
five-year employment agreement on November 22, 1993 which was amended on January
1, 1999 to extend the term until January 1, 2003. The amendment also increases
Mr. Kurkiewicz' salary to $120,000 per year and provide a car allowance of
$380.00 per month. The agreement is renewable for successive one-year terms. In
the event that Caraco terminates the agreement without cause, Mr. Kurkiewicz is
entitled to receive monthly base salary payments for six (6) months from the
date of termination together with premium benefits for such period. In addition,
any stock options that would become available for exercise at the end of the
year during which such termination occurred shall immediately vest.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors on June 1, 1998 selected Rehmann Robson, independent
accountants, to audit the financial statements for the year ended December 31,
1998. A representative of Rehmann Robson is expected to be present at the
meeting with the opportunity to make a statement if such representative decides
to do so is expected to be available to respond to appropriate questions.
Narendra N. Borkar
Chief Executive Officer
21
<PAGE> 23
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CARACO PHARMACEUTICAL LABORATORIES, LTD.
The undersigned shareholder hereby appoints Jennifer Evans and Robert
Kurkiewicz, and each of them, with full power of substitution, as true and
lawful attorneys and proxies of the undersigned to represent and vote the shares
of common stock owned by the undersigned in Caraco Pharmaceutical Laboratories,
Ltd. at the Annual Meeting of Shareholders to be held on June 2, 1999 at 10:00
a.m., local time, at the Hotel St. Regis, 3071 W. Grand Blvd., Detroit, MI
48202, and at any adjournment thereof, with like effect and as if the
undersigned was personally present and voting, upon all business that may
properly come before the meeting, including the business identified (and in the
manner indicated) on this proxy and described in the Notice of Meeting and Proxy
Statement furnished herewith (the receipt of which is hereby acknowledged).
The undersigned hereby revokes any proxy or proxies heretofore given by
the undersigned to any person or persons with respect to such common shares and
ratifies any and all actions taken by the above-named proxies hereunder.
Set forth on the reverse side are the number of common shares held of
record by the undersigned as of April 19, 1999. You are asked to vote on the
business identified on the reverse.
(TO BE SIGNED AND DATED ON THE REVERSE SIDE)
<PAGE> 24
Please date, sign and mail your
proxy card back as soon as possible
Annual Meeting of Stockholders
CARACO PHARMACEUTICAL LABORATORIES, LTD.
June 2, 1999
<TABLE>
<CAPTION>
<S><C>
- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED -
- ------------------------------------------------------------------------------------------------------------------------------------
/X/ Indicate your
vote by marking
an (X) in the
appropriate
boxes below.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
EACH OF THE FOLLOWING MATTERS
FOR WITHHOLD
AUTHORITY FOR AGAINST ABSTAIN
1. ELECTION OF / / / / DAVID W. ADAMANY 2. APPROVE AND ADOPT THE 1999 / / / / / /
DIRECTORS / / / / DAVID A. HAGELSTEIN EQUITY PARTICIPATION PLAN
AND RESERVE COMMON STOCK.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED.
IF NO SPECIFICATION IS MADE, THE SHARES SHALL BE VOTED FOR
EACH OF THE PROPOSALS, AND FOR OR AGAINST ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
_______________________________________DATE________________, 1999 _______________________________________DATE________________, 1999
SIGNATURE OF SHAREHOLDER SIGNATURE(S) OF JOINT OWNER(S)
Please sign exactly as your name(s) is imprinted on this proxy. If your shares are held in a joint account, each joint owner should
sign. If you are signing for a corporation or partnership or as agent, attorney, executor, administrator, trustee, guardian or
other fiduciary, indicate the capacity in which you are signing.
</TABLE>
<PAGE> 25
APPENDIX A
THE 1999 EQUITY PARTICIPATION PLAN
OF
CARACO PHARMACEUTICAL LABORATORIES, LTD.
Caraco Pharmaceutical Laboratories, Ltd., a Michigan corporation, has
adopted The Equity Participation Plan of Caraco Pharmaceutical
Laboratories, Ltd. (the "Plan"), effective upon shareholder approval thereof,
for the benefit of its Employees (as such term is defined below), Consultants
(as such term is defined below) and Non-Employee Directors (as such term is
defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for Employees, Consultants and
Non-Employee Directors to further the growth, development and financial success
of the Company by personally benefiting through the ownership of Company stock.
(2) To enable the Company to obtain and retain the services of
directors, Employees, Consultants and Non-Employee Directors considered
essential to the long range success of the Company by offering them an
opportunity to own stock in the Company.
ARTICLE I.
DEFINITIONS
Section 1.1. General
Wherever the following terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise.
Section 1.2. Definitions
"Acquiring Person" means any Person other than Sun Pharmaceutical
Industries Ltd. & its affiliates, the Company, any of the Company's
Subsidiaries, any employee benefit plan of the Company or of a Subsidiary of the
Company or any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or of a Subsidiary of the Company.
Section 1.3. Affiliate
"Affiliate" shall mean (a) with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person, and (b) with respect to the Company, also any entity designated by
the Board of Directors of the Company in which the
1
<PAGE> 26
Company or one of its Affiliates has an interest. For purposes of the Plan,
"control" shall have the meaning given such term under Rule 405 of the
Securities Act of 1933.
Section 1.4. Award
"Award" shall mean a grant of an Option or Restricted Stock under this
Plan.
Section 1.5. Award Limit
"Award Limit" shall mean 200,000 shares of Common Stock, during a
calendar period.
Section 1.6. Board
"Board" shall mean the Board of Directors of the Company.
Section 1.7. Change in Control
"Change in Control" means the event that is deemed to have occurred if:
(a) any Acquiring Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing a
majority of the combined voting power of the then outstanding
Voting Securities of the Company; or
(b) over a period of twenty-four months or less, members of the
Incumbent Board cease for any reason to constitute at least a
majority of the Board of Directors; or
(c) a public announcement is made of a tender or exchange offer by
any Acquiring Person for fifty percent or more of the
outstanding Voting Securities of the Company, and the Board of
Directors approves or fails to oppose that tender or exchange
offer in its statements in Schedule 14D-9 under the Exchange
Act; or its statements in Schedule 14D-9 under the Exchange
Act; or
(d) the stockholders of the Company approve a merger or
consolidation of the Company or any Subsidiary with any other
corporation or entity (or, if no such approval is required,
the consummation of such a merger or consolidation of the
Company), other than a merger or consolidation that would
result in the Voting Securities of the Company outstanding
immediately before the consummation thereof continuing to
represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity or of
a parent of the surviving entity) a majority of
2
<PAGE> 27
the combined voting power of the Voting Securities of the
surviving entity (or its parent) outstanding immediately after
that merger or consolidation; or
(e) 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 (or, if no such approval is required, the
consummation of such a liquidation, sale, or disposition in
one transaction or series of related transactions) other than
a liquidation, sale or disposition of all or substantially all
the Company's assets in one transaction or a series of related
transactions to a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
Section 1.8. Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.9. Committee
"Committee" shall mean the Compensation Committee of the Board, or the
full Board or another committee of the Board, appointed as provided in Section
7.1.
Section 1.10. Common Stock
"Common Stock" shall mean the common stock of the Company, no par
value, and any equity security of the Company issued or authorized to be issued
in the future, but excluding any preferred stock and any warrants, options or
other rights to purchase Common Stock. Debt securities of the Company
convertible into Common Stock shall be deemed equity securities of the Company.
Section 1.11. Company
"Company" shall mean Caraco Pharmaceutical Laboratories, Ltd., a
Michigan corporation.
Section 1.12. Consultant
"Consultant" shall mean an individual who is engaged to perform
services for the Company or any Subsidiary or Affiliate who is not an Employee
or Non-Employee Director and who is designated as a Consultant by the Committee.
Section 1.13. Director
"Director" shall mean a member of the Board.
3
<PAGE> 28
Section 1.14. Employee
"Employee" shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) and including employee directors of
the Company, or of any corporation which is a Subsidiary or Affiliate.
Section 1.15. Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.16. Fair Market Value
"Fair Market Value" of a share of Common Stock as of a given date shall
be (i) the closing price of a share of Common Stock on the Nasdaq National
Market or on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares were
not traded on the trading day previous to such date, then on the next preceding
date on which a trade occurred, or (ii) if Common Stock is not traded on an
exchange but is quoted on the Nasdaq OTC Market or a successor quotation system
or the OTC Bulletin Board, the mean between the closing representative bid and
asked prices for the Common Stock on the trading day previous to such date as
reported by the Nasdaq OTC Market or such successor quotation system or the OTC
Bulletin Board; or (iii) if Common Stock is not publicly traded on the Nasdaq
National Market or an exchange and not quoted on the Nasdaq OTC Market or a
successor quotation system or the OTC Bulletin Board, the Fair Market Value of a
share of Common Stock as established by the Committee (or the Board, in the case
of Options granted to Non-Employee Directors) acting in good faith.
Section 1.17. Group
"Group" shall mean two or more Persons acting together as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of securities of the Company.
Section 1.18. Incentive Stock Option
"Incentive Stock Option" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee.
Section 1.19. Incumbent Board
"Incumbent Board" means the individuals who, as of the date on which
the Plan is approved by the stockholders of the Company, constitute the Board of
Directors and any other individual who becomes a director of the Company after
that date and whose election or appointment by the Board
4
<PAGE> 29
of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then comprising the
Incumbent Board.
Section 1.20. Non-Employee Director
"Non-Employee Director" shall mean a member of the Board who is not an
Employee of the Company.
Section 1.21. Non-Qualified Stock Option
"Non-Qualified Stock Option" shall mean an Option which is designated
as such at the time of grant or which is not designated as an Incentive Stock
Option by the Committee.
Section 1.22. Option
"Option" shall mean a stock option granted under Article III of this
Plan. An Option granted under this Plan shall, as determined by the Committee,
be either a Non-Qualified Stock Option or an Incentive Stock Option; provided,
however, that Options granted to Non-Employee Directors and Consultants shall be
Non-Qualified Stock Options.
Section 1.23. Optionee
"Optionee" shall mean an Employee, Consultant or Non-Employee Director
granted an Option under this Plan.
Section 1.24. Participant
"Participant" shall mean an individual who is an Optionee or Restricted
Stockholder.
Section 1.25. Person
"Person" shall mean an individual, partnership, corporation, business
trust, limited liability company, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
Section 1.26. Plan
"Plan" shall mean The 1999 Equity Participation Plan of Caraco
Pharmaceutical Laboratories, Ltd.
5
<PAGE> 30
Section 1.27. QDRO
"QDRO" shall mean a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
Section 1.28. Restricted Stock
"Restricted Stock" shall mean Common Stock awarded under Article VI of
this Plan.
Section 1.29. Restricted Stockholder
"Restricted Stockholder" shall mean an Employee, Consultant or
Non-Employee Director granted an award of Restricted Stock under Article VI of
this Plan.
Section 1.30. Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended from time to time.
Section 1.31. Section 162(m) Participant
"Section 162(m) Participant" shall mean any Employee designated by the
Committee as an Employee whose compensation for the fiscal year in which the
Employee is so designated or a future fiscal year may be subject to the limit on
deductible compensation imposed by Section 162(m) of the Code.
Section 1.32. Stockholder's Agreement
"Stockholder's Agreement" shall mean the Stockholder's Agreement
between the Company and any Participant applicable to any grant or award to such
Participant.
Section 1.33. Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
Section 1.34. Termination of Consultancy
"Termination of Consultancy" shall mean the time when the engagement of
a Participant as a Consultant to the Company or a Subsidiary is terminated for
any reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its sole discretion, shall determine the effect of
all matters and
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questions relating to Termination of Consultancy, including, but not by way of
limitation, the question of whether a Termination of Consultancy resulted from a
discharge for good cause, and all questions of whether a particular leave of
absence constitutes a Termination of Consultancy. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a Consultant's service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
Section 1.35. Termination of Directorship
"Termination of Directorship" shall mean the time when a Participant
who is a Non-Employee Director ceases to be a Director for any reason,
including, but not by way of limitation, a termination by resignation, failure
to be elected, death or retirement. The Board, in its sole discretion, shall
determine the effect of all matters and questions relating to Termination of
Directorship with respect to Non-Employee Directors.
Section 1.36. Termination of Employment
"Termination of Employment" shall mean the time when the
employee-employer relationship between a Participant and the Company or any
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (i) terminations where there is a
simultaneous reemployment or continuing employment of a Participant by the
Company or any Subsidiary, (ii) at the discretion of the Committee, terminations
which result in a temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its sole discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Employment; provided, however, that, with respect to Incentive Stock Options
unless otherwise determined by the Committee in its discretion, a leave of
absence, change in status from an employee to an independent contractor or other
change in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in status
or other change interrupts employment for the purposes of Section 422(a)(2) of
the Code and the then applicable regulations and revenue rulings under said
Section. Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in writing.
Section 1.37. Voting Securities
"Voting Securities" means any securities that are entitled to vote
generally in the election of directors.
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ARTICLE II.
SHARES SUBJECT TO PLAN
Section 2.1. Shares Subject to Plan
(a) The shares of stock subject to Awards shall be Common Stock,
initially shares of the Company's Common Stock, no value per
share. The aggregate number of such shares which may be issued
upon the exercise of Awards under the Plan shall not exceed
three million (3,000,000). The shares of Common Stock issuable
upon the exercise of such Awards may be either previously
authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Awards
granted under the Plan to any individual in any calendar year
shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Options which
are canceled continue to be counted against the Award Limit
and if, after grant of an Option, the price of shares subject
to such Option is reduced, the transaction will be treated as
a cancellation of the Option and a grant of a new Option and
both the Option deemed to be canceled and the Option deemed to
be granted will be counted against the Award Limit.
Section 2.2. Add-back of Options and Other Rights
If any Option expires or is canceled without having been fully
exercised, or is exercised in whole or in part for cash as permitted by this
Plan, the number of shares subject to such Option but as to which such Option
was not exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Options or other awards which are
adjusted pursuant to Section 8.3 and become exercisable with respect to shares
of stock of another corporation shall be considered canceled and may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Shares of Common Stock which are delivered by the Optionee or withheld by
the Company upon the exercise of any Option or other award under this Plan, in
payment of the exercise price thereof, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. If any share of Restricted
Stock is forfeited by the Grantee or repurchased by the Company pursuant to
Section 6.7 hereof, such share may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. Notwithstanding the
provisions of this Section 2.2, no shares of Common Stock may again be optioned,
granted or awarded if such action would cause an Incentive Stock Option to fail
to qualify as an Incentive Stock Option under Section 422 of the Code unless the
Committee determines that such Option is no longer intended to so qualify.
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ARTICLE III.
GRANTING OF OPTIONS
Section 3.1. Eligibility
Any Employee or Consultant selected by the Committee pursuant to
Section 3.4(a)(i) and each Non-Employee Director selected by the Board pursuant
to Section 3.4(d) shall be eligible to be granted an Option.
Section 3.2. Disqualification for Stock Ownership
No person may be granted an Incentive Stock Option under this Plan if
such person, at the time the Incentive Stock Option is granted, owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any then existing Subsidiary or parent
corporation (within the meaning of Section 422 of the Code) unless such
Incentive Stock Option conforms to the applicable provisions of Section 422 of
the Code.
Section 3.3. Qualification of Incentive Stock Options
No Incentive Stock Option shall be granted to any person who is not an
Employee.
Section 3.4. Granting of Options
(a) The Committee shall from time to time, in its sole discretion,
and subject to applicable limitations of this Plan:
(i) Select from among the Employees and Consultants
(including Employees or Consultants who have
previously received Options or other awards under
this Plan) those who in its opinion should be granted
Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the
selected Employees or Consultants;
(iii) Subject to Section 3.3, determine whether such
Options are to be Incentive Stock Options or
Non-Qualified Stock Options and whether such Options
are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that
the terms and conditions of Options intended to
qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and
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conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code.
(b) Upon the selection of an Employee or Consultant to be granted
an Option, the Committee shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on
the grant of the Option as it deems appropriate. Without
limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option
to an Employee or Consultant that the Employee or Consultant
surrender for cancellation some or all of the unexercised
Options, Awards or other rights which have been previously
granted to him under this Plan or otherwise. An Option, the
grant of which is conditioned upon such surrender, may have an
Option price lower (or higher) than the exercise price of such
surrendered Option, Award or other right, may cover the same
(or a lesser or greater) number of shares as such surrendered
Option, Award or other right, may contain such other terms as
the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition
of such surrendered Option, Award or other right.
(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such Option from
treatment as an "incentive stock option" under Section 422 of
the Code.
(d) During the term of the Plan, the Board shall from time to
time, in its sole direction, and subject to applicable
limitations of this Plan:
(i) Select from among the Non-Employee Directors such of
them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the
selected Non-Employee Directors; and
(iii) Determine the terms and conditions of such Options.
ARTICLE IV.
TERMS OF OPTIONS
Section 4.1. Option Agreement
Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized officer of the Company
and which shall contain such terms and conditions as the Committee (or the
Board, in the case of Options granted to Non-Employee Directors) shall
determine, consistent with this Plan. As deemed necessary or
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advisable, Stock Option Agreements evidencing Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Stock Option Agreements
evidencing Incentive Stock Options shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 422 of the Code.
Section 4.2. Option Price
The price per share of the shares subject to each Option shall be set
by the Committee or with respect to Non-Employee Directors, by the Board;
provided, however, (i) in the case of Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code,
such price shall not be less than 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted; (ii) in the case of Incentive
Stock Options, such price shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date the Option is granted (or the date the
Option is modified, extended or renewed for purposes of Section 424(h) of the
Code); and (iii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code) such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted (or the date the Option
is modified, extended or renewed for purposes of Section 424(h) of the Code).
Section 4.3. Option Term
The term of an Option shall be set by the Committee or by the Board in
the case of Non-Employee Directors in their respective discretion; provided,
however, that, in the case of Incentive Stock Options, the term shall not be
more than ten (10) years from the date the Incentive Stock Option is granted, or
five (5) years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of Section 422 of
the Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee may extend the term of any outstanding Option in
connection with any Termination of Employment or Termination of Consultancy of
the Optionee, or amend any other term or condition of such Option relating to
such a termination.
Section 4.4. Option Vesting
(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the
Committee or by the Board in the case of Non-Employee
Directors, and the Committee or the Board, as applicable, may
determine that an Option may not be exercised in whole or in
part for a specified period after
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it is granted. At any time after grant of an Option, the
Committee or the Board, as applicable, may, in their
respective sole discretion, accelerate the period during which
an Option vests.
(b) No portion of an Option which is unexercisable at Termination
of Employment, Termination of Directorship or Termination of
Consultancy, as applicable, shall thereafter become
exercisable, except as may be otherwise provided by the
Committee or the Board, as applicable, either in the Stock
Option Agreement or by action of the Committee or the Board,
as applicable, following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the
meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code) are exercisable for the first time
by an Optionee during any calendar year (under the Plan and
all other incentive stock option plans of the Company and any
parent or subsidiary corporation (within the meaning of
Section 422 of the Code of the Company) exceeds $100,000, such
Options shall be treated as Non-Qualified Options to the
extent required by Section 422 of the Code. The rule set forth
in the preceding sentence shall be applied by taking Options
into account in the order in which they were granted. For
purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with
respect to such stock is granted.
Section 4.5. Consideration
In consideration of the granting of an Option, the Optionee shall
agree, in the written Stock Option Agreement, to render faithful and efficient
service to the Company or any Subsidiary. Nothing in this Plan or in any Stock
Option Agreement hereunder shall confer upon any Optionee any right to continue
in the employ of, or as a Consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.
ARTICLE V.
EXERCISE OF OPTIONS
Section 5.1. Partial Exercise
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the
Committee (or the Board, in the case of Options granted to Non-Employee
Directors) may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of shares.
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Section 5.2. Manner of Exercise
All or a portion of an exercisable Option shall be deemed exercised
upon delivery of all of the following to the Secretary of the Company or his
office:
(a) A written notice complying with the applicable rules
established by the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) stating that the
Option, or a portion thereof, is exercised. The notice shall
be signed by the Optionee or other person then entitled to
exercise the Option or such portion of the Option;
(b) Such representations and documents as the Committee (or the
Board, in the case of Options granted to Non-Employee
Directors), in its sole discretion, deems necessary or
advisable to effect compliance with all applicable provisions
of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee
or Board may, in its sole discretion, also take whatever
additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents
and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to
exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof,
is exercised. However, the Committee (or the Board, in the
case of Options granted to Non-Employee Directors), may in its
discretion (i) allow a delay in payment up to thirty (30) days
from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery
of shares of Common Stock owned by the Optionee, duly endorsed
for transfer to the Company with a Fair Market Value on the
date of delivery equal to the aggregate exercise price of the
Option or exercised portion thereof; (iii) allow payment, in
whole or in part, through the surrender of shares of Common
Stock then issuable upon exercise of the Option having a Fair
Market Value on the date of Option exercise equal to the
aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the
delivery of property of any kind which constitutes good and
valuable consideration; (v) allow payment, in whole or in
part, through the delivery of a full recourse promissory note
bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee
or the Board; (vi) allow payment, in whole or in part, through
the delivery of a notice that the Optionee has placed a market
sell order with a broker with respect to shares of Common
Stock then issuable upon exercise of the Option, and that the
broker has been directed to pay a sufficient
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<PAGE> 38
portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow
payment through any combination of the consideration provided
in the foregoing subparagraphs (ii), (iii), (iv), (v) and
(vi). In the case of a promissory note, the Committee (or the
Board, in the case of Options granted to Non-Employee
Directors) may also prescribe the form of such note and the
security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other
extension of credit is prohibited by law.
Section 5.3. Conditions to Issuance of Stock Certificates
The Company shall not be required to issue or deliver any certificate
or certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the
rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body which the
Committee or Board shall, in its sole discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee (or
Board, in the case of Options granted to Non-Employee
Directors) shall, in its sole discretion, determine to be
necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case
of Options granted to Non-Employee Directors) may establish
from time to time for reasons of administrative convenience;
and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
Section 5.4. Rights as Stockholders
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
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Section 5.5. Ownership and Transfer Restrictions
The Committee (or Board, in the case of Options granted to Non-Employee
Directors), in its sole discretion, may impose such restrictions on the
ownership and transferability of the shares purchasable upon the exercise of an
Option as it deems appropriate. Any such restriction shall be set forth in the
respective Stock Option Agreement or Stockholder's Agreement or other written
agreement between the Company and the Optionee and may be referred to on the
certificates evidencing such shares. The Committee may require the Employee to
give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (i) two years from the
date of grant (including the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code) or (ii) one year after the transfer
of such shares to such Employee. The Committee may direct that the certificates
evidencing shares acquired by exercise of an Option refer to such requirement.
ARTICLE VI.
AWARD OF RESTRICTED STOCK
Section 6.1. Eligibility
Subject to the Award Limit, Restricted Stock may be awarded to any
Employee or any Consultant whom the Committee determines should receive such an
award. In addition, each Non-Employee Director shall be eligible to receive an
award of Restricted Stock if so determined by the Board.
Section 6.2. Award of Restricted Stock
(a) The Committee or the Board in the case of Non-Employee
Directors, may from time to time, in their respective sole
discretion:
(i) Select from among the Employees and Consultants or
Non-Employee Directors such of them as in its opinion
should be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock,
consistent with this Plan.
(b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock. In all cases, legal
consideration shall be required for each issuance of
Restricted Stock.
(c) Upon the selection of a Participant to be awarded Restricted
Stock, the Committee or the Board, as applicable, shall
instruct the Secretary of the Company to issue such
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Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.
Section 6.3. Restricted Stock Agreement
Restricted Stock shall be issued only pursuant to a written Restricted
Stock Agreement, which shall be executed by the selected Employee, Consultant or
Non-Employee Director and an authorized officer of the Company and which shall
contain such terms and conditions as the Committee or the Board, as applicable,
shall determine, consistent with this Plan.
Section 6.4. Consideration
As consideration for the issuance of Restricted Stock, in addition to
payment of any purchase price, the Restricted Stockholder shall agree, in the
written Restricted Stock Agreement, to render faithful and efficient service to
the Company or any Subsidiary. Nothing in this Plan or in any Restricted Stock
Agreement hereunder shall confer on any Restricted Stockholder any right to
continue in the employ of, as a Consultant for, or as a Non-Employee Director of
the Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Restricted Stockholder at any time for any reason whatsoever,
with or without good cause.
Section 6.5. Rights as Stockholders
Subject to Section 6.6, upon delivery of the shares of Restricted Stock
to the escrow holder pursuant to Section 6.8, the Restricted Stockholder shall
have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided, however,
that in the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 6.6.
Section 6.6. Restriction
All shares of Restricted Stock issued under this Plan (including any
shares received by holders thereof with respect to shares of Restricted Stock as
a result of stock dividends, stock splits or any other form of recapitalization)
shall, in the terms of each individual Restricted Stock Agreement, be subject to
such restrictions, if any, as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however,
that, except with respect to shares of Restricted Stock granted pursuant to
Section 6.10, by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the
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restrictions imposed by the terms of the Restricted Stock Agreement. Restricted
Stock may not be sold or encumbered until all restrictions are terminated or
expire; provided, however, that, except with respect to shares of Restricted
Stock granted pursuant to Section 6.10, by action taken after the Restricted
Stock is issued, the Committee may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the restrictions imposed by
the terms of the Restricted Stock Agreement. Restricted Stock may not be sold or
encumbered until all restrictions are terminated or expire.
Section 6.7. Repurchase of Restricted Stock
The Committee or the Board, as applicable, shall provide in the terms
of each individual Restricted Stock Agreement that the Company shall have the
right to repurchase from the Restricted Stockholder the Restricted Stock then
subject to restrictions under the Restricted Stock Agreement immediately upon
Termination of Employment, Termination of Consultancy or Termination of
Directorship, where such termination is determined by the Committee to be a
discharge for good cause, as applicable between the Restricted Stockholder and
the Company, at a cash price per share equal to the price paid by the Restricted
Stockholder for such Restricted Stock; provided, however, that no such right of
repurchase shall exist in the event of a Change in Control of the Company or
because of the Restricted Stockholder's death or disability.
Section 6.8. Escrow
The Secretary of the Company or such other escrow holder as the
Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions that may have been
imposed under the Restricted Stock Agreement with respect to the shares
evidenced by such certificate expire or shall have been removed.
Section 6.9. Legend
In order to enforce the restrictions that may be imposed upon shares of
Restricted Stock hereunder, the Committee or the Board, as applicable, shall
cause a legend or legends to be placed on certificates representing all shares
of Restricted Stock that are still subject to any such restrictions under
Restricted Stock Agreements, which legend or legends shall make appropriate
reference to the conditions imposed thereby.
Section 6.10. Provisions Applicable to Section 162(m) Participants.
(a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant Restricted Stock to a Section 162(m)
Participant the restrictions with respect to which lapse upon
the attainment of performance goals for the Company which are
related to one or more of the following business criteria: (i)
pre-tax income, (ii) operating income, (iii) cash flow, (iv)
earnings per share, (v) return on equity, (vi) return on
invested capital or assets, (vii) cost reductions or savings,
(viii) funds from operations, (ix) appreciation in the fair
market value of Common Stock and (x)
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earnings before any one or more of the following items:
interest, taxes, depreciation or amortization.
(b) To the extent deemed necessary or advisable to comply with the
performance-based compensation requirements of Section
162(m)(4)(C) of the Code, with respect to Restricted Stock
which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the
commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other
time as may be required or permitted by Section 162(m) of the
Code), the Committee shall, in writing, (i) designate one or
more Section 162(m) Participants, (ii) select the performance
goal or goals applicable to the fiscal year or other
designated fiscal period or period of service, (iii) establish
the various targets and amounts of Restricted Stock which may
be earned for such fiscal year or other designated fiscal
period or period of service and (iv) specify the relationship
between performance goals and targets and the amounts of
Restricted Stock to be earned by each Section 162(m)
Participant for such fiscal year or other designated fiscal
period or period of service. To the extent deemed necessary or
advisable to comply with the performance-based compensation
requirements of Section 162(m)(4)(C) of the Code, following
the completion of each fiscal year or other designated fiscal
period or period of service, and determining the amount earned
by a Section 162(m) Participant, the Committee shall certify
in writing whether the applicable performance targets have
been achieved for such fiscal year or other designated fiscal
period or period of service, and determining the amount earned
by a Section 162(m) Participant, the Committee shall have the
right to reduce (but not to increase) the amount payable at a
given level of performance to take into account additional
factors that the Committee may deem relevant to the assessment
of individual or corporate performance for the fiscal year or
other designated fiscal period or period of service.
ARTICLE VII.
ADMINISTRATION
Section 7.1. Compensation Committee; Subcommittee
(a) The Compensation Committee shall consist of two or more
Directors, appointed by and holding office at the pleasure of
the Board, none of whom shall be an Employee. Appointment of
Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
(b) A Subcommittee consisting of two or more Committee members,
appointed by and serving office at the pleasure of the Board,
each of whom is both a "non-employee director" as defined by
Rule 16b-3 and an "outside director" for purposes of Section
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162(m) of the Code may be appointed at any time during which
(i) two or more Board members qualify as both "non-employee
directors" and "outside directors" and (ii) any other member
of the Committee does not qualify as both a "non-employee
director" and an "outside director."
Section 7.2. Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee and
the Subcommittee shall have the power to interpret this Plan, the Stockholders'
Agreements and the agreements pursuant to which Awards are granted and to adopt
such rules for the administration, interpretation and application of this Plan
as are consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan (i) with
respect to Options granted to Non-Employee Directors and (ii) at any time when
there is no Subcommittee as described in Section 7.1(b) and not all of the
Committee members are "non-employee directors" as defined by Rule 16b-3, with
respect to any person who is subject to Section 16 of the Exchange Act at the
time such person is granted an Option. Any such grant or award under this Plan
need not be the same with respect to each Participant. Any such interpretations
and rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code. In its sole discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the
Committee under this Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code (as each may be applicable), or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee (or the Subcommittee, as applicable).
Section 7.3. Majority Rule
The Committee and the Subcommittee shall each act by a majority of its
members in attendance at a meeting where quorum is present or by a memorandum or
other written instrument signed by all members of the Committee.
Section 7.4. Compensation; Professional Assistance; Good Faith Actions
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee and the
Subcommittee may, with the approval of the Board, employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the Company
and the Company's officers and Directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee, the Board or the
Subcommittee in good faith shall be final and binding upon all
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Participants, the Company and all other interested persons. No members of the
Committee or the Board shall be personally liable for any action, determination
or interpretation made in good faith with respect to this Plan or any Award, and
all members of the Committee and the Board shall be fully protected by the
Company in respect of any such action, determination or interpretation.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
Section 8.1. Not Transferable
Awards under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution or pursuant to a QDRO, unless and until such rights or awards have
been exercised, or the shares underlying such rights or awards have been issued,
and all restrictions applicable to such shares have lapsed. No Award or interest
therein shall be liable for the debts, contracts or engagements of the
Participant or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
During the lifetime of the Participant, only he may exercise an Award
(or any portion thereof) granted to him under the Plan, unless it has been
disposed of pursuant to a QDRO. After the death of the Participant, any
exercisable portion of an Award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement or other
agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Participant's will or under the then
applicable laws of descent and distribution.
Section 8.2. Amendment, Suspension or Termination of this Plan
Except as otherwise provided in this Section 8.2, this Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board or the Committee. However, without
approval of the Company's stockholders given within twelve months before or
after the action by the Board or the Committee, no action of the Board or the
Committee may, except as provided in Section 8.3, increase the limits imposed in
Section 2.1 on the maximum number of shares which may be issued under this Plan,
and no action of the Board or the Committee may be taken that would otherwise
require stockholder approval as a matter of applicable law, regulation or rule.
The Award Limit may be increased by the Board or the Committee at any time and
from time to time, and Awards may be granted with respect to a number of shares
not in excess of such increased Award Limit; provided, however, that no such
increase of the Award Limit shall be effective unless and until such increase is
approved by the Company's stockholders and if such approval is not obtained all
Awards granted with respect to a number of shares in excess of the Award Limit
in effect prior to such increase shall be canceled and shall become null and
void.
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No amendment, suspension or termination of this Plan shall, without the consent
of the Participant alter or impair any rights or obligations under any Awards
theretofore granted, unless the Award itself otherwise expressly so provides. No
Award may be granted during any period of suspension or after termination of
this Plan, and in no event may any Incentive Stock Option be granted under this
Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted
by the Board; or
(b) The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 8.4.
Section 8.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events
(a) Subject to Section 8.3(d), in the event that the Committee (or
the Board, in the case of Options granted to Non-Employee
Directors) determines that any of the following events (other
than those constituting a Change in Control, which will be
governed by Section 8.3(e)): a dividend or other distribution
(whether in the form of cash, Common Stock, other securities,
or other property), recapitalization, reclassification, stock
split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase,
liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the
Company, or exchange of Common Stock or other securities of
the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other
similar corporate transaction or event, in the Committee's
sole discretion (or in the case of Options granted to
Non-Employee Directors, the Board's sole discretion), affects
the Common Stock such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to
be made available under the Plan or with respect to an Award,
then the Committee (or the Board, in the case of Options
granted to Non-Employee Directors) shall, in such manner as it
may deem equitable, adjust any or all of:
(i) the number and kind of shares of Common Stock (or
other securities or property) with respect to which
Awards may be granted (including, but not limited to,
adjustments of the limitations in Section 2.1 on the
maximum number and kind of shares which may be issued
and adjustments of the Award Limit);
(ii) the number and kind of shares of Common Stock (or
other securities or property) subject to outstanding
Awards; and
(iii) the grant or exercise price with respect to any
Option.
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(b) Subject to Section 8.3(d) and Section 8.3(e), in the event of
any transaction or event described in Section 8.3(a) or in the
event of a Change in Control or any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of
the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board, in the
case of Options granted to Non-Employee Directors) in its
discretion is hereby authorized to take any one or more of the
following actions whenever the Committee (or the Board, in the
case of Options granted to Non-Employee Directors) determines
that such action is appropriate in order to prevent dilution
or enlargement of the benefits or potential benefits intended
to be made available under the Plan or with respect to any
Option, other award under this Plan, to facilitate such
transactions or events or to give effect to such changes in
laws, regulations or principles:
(i) In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to
Non-Employee Directors) may provide, either by the
terms of the agreement or by action taken prior to
the occurrence of such transaction or event and
either automatically or upon the request of the
Participant, for either the purchase of any such
Award for an amount of cash equal to the amount that
could have been attained upon the exercise of such
Award had such Award been currently exercisable or
payable or fully vested or the replacement of such
Award with other rights or property selected by the
Committee (or the Board, in the case of Options
granted to Non-Employee Directors) in its sole
discretion;
(ii) In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to
Non-Employee Directors) may provide, either by the
terms of such Award or by action taken prior to the
occurrence of such transaction or event, that for a
specified period of time prior to such transaction or
event, such Award shall be exercisable as to all
shares covered thereby, notwithstanding anything to
the contrary in (A) Section 4.4 or (B) the provisions
of such Award;
(iii) In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to
Non-Employee Directors) may provide, either by the
terms of such Award or by action taken prior to the
occurrence of such transaction or event, that upon
such event, such Award be assumed by the successor or
survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar
Awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the
number and kind of shares and prices; and
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(iv) In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to
Non-Employee Directors) may make adjustments in the
number and type of shares of Common Stock (or other
securities or property) subject to outstanding Awards
and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included
in, Awards which may be granted in the future.
(v) In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee may
provide by the terms of a Restricted Stock award or
by action taken prior to the occurrence of such event
that, for a specified period of time prior to such
event, the restrictions imposed under a Restricted
Stock Agreement upon some or all shares of Restricted
Stock may be terminated.
(c) Subject to Section 8.3(d) and 8.8, the Committee (or the
Board, in the case of Options granted to Non-Employee
Directors) may, in its discretion, include such further
provisions and limitations in any Award agreement or
certificate, as it may deem equitable and in the best
interests of the Company.
(d) To the extent deemed necessary or advisable by the Committee,
with respect to any Award granted to any Section 162(m)
Participant that is intended to qualify as performance-based
compensation under Section 162(m)(4)(C), no adjustment or
action described in this Section 8.3(a)-(d) shall be
authorized to the extent that such adjustment or action would
cause such Award to fail to so qualify under Section
162(m)(4)(C) or any successor provision thereto. The Committee
reserves the right to make an Award to the executives of the
Company that may not qualify under Section 162(m) as
deductible compensation. Furthermore, no such adjustment or
action shall be authorized to the extent such adjustment or
action would result in short-swing profits liability under
Section 16 or violate the exemptive conditions of Rule 16b-3
unless the Committee (or the Board, in the case of Options
granted to Non-Employee Directors) determines that the Option
or other award is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to
any Award shall always be rounded to the next whole number.
(e) Notwithstanding any other provision of this Plan, in addition
to whatever actions are taken by the Committee or by the
Board, as applicable under Section 8.3(b) which are not
inconsistent with the following, in the event of a Change in
Control:
(i) Except as otherwise specifically provided in a Stock
Option Agreement, each Option granted or awarded
hereunder shall automatically become exercisable as
to all shares covered thereby simultaneously with the
consummation of
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such Change in Control, notwithstanding anything to
the contrary in Section 4.4, and
(ii) Except as otherwise specifically provided in a
Restricted Stock Agreement, the Restricted Stock
shall become fully vested and the restrictions
included in any Restricted Stock granted or awarded
hereunder shall be deemed rescinded, terminated and
all of such Restricted Stock shall be immediately
released without restriction, except as to applicable
payment therefor, simultaneously with the
consummation of such Change in Control
notwithstanding anything to the contrary in Article
VI.
However, any Award granted to any individual who is then
subject to Section 16 of the Exchange Act, shall be subject to
any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including
any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive Rule. To
the extent permitted by applicable law, an Award granted
hereunder shall be deemed amended to the extent necessary to
conform to such applicable exemptive Rule.
Section 8.4. Approval of Plan by Stockholders
This Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial adoption
of this Plan. Awards may be granted prior to such stockholder approval, provided
that such Awards shall not vest or be exercisable prior to the time when this
Plan is approved by the stockholders, and provided further that if such approval
has not been obtained at the end of said twelve-month period all Awards
previously granted under this Plan shall thereupon be canceled and become null
and void.
Section 8.5. Tax Withholding
The Company shall be entitled to require payment in cash or deduction
from other compensation payable to each Participant of any sums required by
federal, state or local tax law to be withheld with respect to the issuance,
vesting, exercise or payment of any Award. The Committee (or the Board, in the
case of Options granted to Non-Employee Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Participant to elect to
have the Company withhold shares of Common Stock otherwise issuable under such
Award (or allow the return of shares of Common Stock) having a Fair Market Value
equal to the sums required to be withheld.
Section 8.6. Loans
The Committee may, in its discretion, extend one or more loans to
Employees in connection with the exercise or receipt of an Award granted under
this Plan. The terms and conditions of any such loan shall be set by the
Committee.
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Section 8.7. Forfeiture Provisions
Pursuant to its general authority to determine the terms and conditions
applicable to awards under the Plan, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) shall have the right (to the extent
consistent with the applicable exemptive conditions of Rule 16b-3) to provide,
in the terms of Options or other awards made under the Plan, or to require the
recipient to agree by separate written instrument, that (i) any proceeds, gains
or other economic benefit actually or constructively received by the recipient
upon any receipt or exercise of the award, or upon the receipt or resale of any
Common Stock underlying such award, must be paid to the Company, and (ii) the
award shall terminate and any unexercised portion of such award (whether or not
vested) shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs at any time, prior to a
specified date, or within a specified time period following receipt or exercise
of the award, or (b) the recipient at any time, or during a specified time
period, engages in any activity in competition with the Company, or which is
inimical, contrary or harmful to the interests of the Company, as further
defined by the Committee (or the Board, as applicable).
Section 8.8. Limitations Applicable to Section 16 Persons and Performance-Based
Compensation
Notwithstanding any other provision of this Plan (other than Section
8.3(e)), to the extent necessary or deemed advisable by the Committee, this Plan
and any Award granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Awards granted hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan (other than Section 8.3(e)), to
the extent deemed necessary or advisable by the Committee, any Option or
Restricted Stock which is granted to a Section 162(m) Participant and is
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.
Section 8.9. Effect of Plan Upon Options and Compensation Plans.
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company (i) to establish any
other forms of incentives or compensation for Employees, Directors or
Consultants of the Company or any Subsidiary or (ii) to grant or assume Options
or other rights or awards otherwise than under this Plan in connection with any
proper corporate purpose including but not by way of limitation, the grant or
assumption of Options in connection with the acquisition
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by purchase, lease, merger, consolidation or otherwise, of the business, stock
or assets of any corporation, partnership, limited liability company, firm or
association.
Section 8.10. Compliance with Laws
This Plan, the granting and vesting of Awards under this Plan and the
issuance and delivery of shares of Common Stock and the payment of money under
this Plan or under Awards granted hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin requirements) and
to such approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be subject
to such restrictions, and the person acquiring such securities shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements. To the extent permitted by applicable law,
the Plan, or Awards granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
Section 8.11 Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Plan.
Section 8.12. Governing Law
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of Michigan
without regard to conflicts of laws thereof.
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