Exhibit 4.2
Exhibit A
GLOBAL PHARMACEUTICAL CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Options
Global Pharmaceutical Corporation, a Delaware corporation (the
"Company"), hereby grants to ________________ (the "Optionee"), _____
Options (the "Options"), pursuant to the Company's 1995 Stock
Incentive Plan (the "Plan"), to purchase an aggregate of ______
shares of common stock, $.01 par value per share ("Common Stock"), of
the Company at a price of $_______ per share (the "Exercise Price Per
Share"), purchasable as set forth in and subject to the terms and
conditions of this Option Agreement and the Plan. All undefined
capitalized terms herein shall have the same meaning as set forth in
the Plan.
2. Incentive Stock Options
These Options are intended to qualify as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
3. Exercise of Options and Provisions for Termination
(a) Exercisability of Options. The Options shall become exercisable
and option shares may be purchased based on the number of full years of
service for the Company or a Subsidiary that have expired since the date of
grant (set forth on the signature page hereof), in accordance with the
following schedule:
Percentage of Option Shares
Number of Years of Service Available
Since Date of Grant for Purchase (Cumulative)
-------------------------- -------------------------
1 25%
2 50%
3 75%
4 100%
Notwithstanding the foregoing, the Options shall not be exercisable prior to
the initial public offering of the Company's Common Stock and unless such
exercise is in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), all other applicable laws and regulations (including state
securities laws) and the requirements of any securities exchange on which the
shares of Common Stock are listed.
A-1
(b) Expiration Date. Except as otherwise provided in this Option
Agreement or the Plan, the Options may not be exercised after the date
(hereinafter the "Expiration Date") that is the tenth anniversary of the date
of grant, or, if the Optionee is a 10% Stockholder as described in Section 6
of the Plan, the fifth anniversary of the date of grant.
(c) Effect of Termination of Employment. The Options may not be
exercised by an Optionee unless, at the time of such exercise, the Optionee
is, and continuously since the date of grant of his or her Options has been,
an employee of the Company or a Subsidiary, except that subject to the Options
vesting as of the date of termination of employment:
(i) If the Optionee ceases to be an employee of the Company
or a Subsidiary for any reason other than death or disability or a discharge
for "cause" (as defined in (iv) below), the right to exercise the Options
shall terminate three months after such cessation;
(ii) if the Optionee dies while an employee of the Company
or a Subsidiary, or within three months after the Optionee ceases to be such
an employee, the options may be exercised by the Administrator of the
Optionee's estate, or by the person to whom the options are transferred by
will or the laws of descent and distribution, within the period of one year
after the date of death, however, Options exercised more than three months
after the Optionee ceased to be an employee may not qualify for treatment as
Incentive Stock Options;
(iii) if the Optionee becomes disabled (within the meaning
of the Plan) while an employee of the Company or a Subsidiary, the Options may
be exercised within the period of one year after the date the Optionee ceases
to be an employee of the Company or Subsidiary because of such disability; and
(iv) if the Optionee, prior to the expiration date of the
Options, ceases his or her services as an employee of the Company or a
Subsidiary, because he or she is discharged for "cause" (as defined below),
the right to exercise the Options shall terminate immediately upon such
cessation of such services. "Cause" shall mean: willful misconduct in
connection with the Optionee's performance of services for the Company or
willful failure to perform his or her services in the best interest of the
Company, as determined by the Board of Directors, which determination shall be
conclusive;
provided, however, that in no event may the options be exercised after the
expiration date thereof.
(d) Exercise Procedure. Subject to the conditions set forth in this
Agreement and, if applicable, Section 6 of the Plan, the Options shall be
exercised by the Optionee's delivery of written notice of exercise to the
Secretary of the Company, specifying the number of shares to be purchased and
the Exercise Price Per Share to be paid therefor and accompanied by payment in
accordance with Section 4 hereof. The Optionee may purchase less than the
total number of shares covered hereby, provided that no exercise of less than
all the Options may be for less than 100 whole shares.
A-2
4. Payment of Purchase Price
Payment of the Exercise Price Per Share for shares purchased upon
exercise of an Option shall be made by delivery to the Company of the purchase
price, payable in cash (by check) or any other method of payment that is
permitted by the Plan and specifically authorized by the Committee on or
before the time of exercise.
5. Delivery of Shares
The Company shall, upon payment of the Exercise Price Per Share for
the number of shares purchased and paid for, make prompt delivery of such
shares to the Optionee. No shares shall be issued and delivered upon exercise
of an Option unless and until, in the opinion of counsel for the Company, any
applicable registration requirements of the Securities Act, any applicable
listing requirements of any national securities exchange on which stock of the
same class is then listed, and any other requirements of law, including state
securities laws, or of any regulatory bodies having jurisdiction over such
issuance and delivery, shall have been fully complied with.
6. Non-transferability of Options
Except as provided in Section 3(c)(ii) hereof, the Options are
personal and no rights granted hereunder may be transferred, assigned, pledged
or hypothecated in any way (whether by operation of law or otherwise), except
by will or the laws of descent and distribution, nor shall any such rights be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of an Option or of
such rights contrary to the provisions hereof, or upon the levy of any
attachment or similar process upon any Option or such rights, this Option
Agreement and such rights shall, at the election of the Company, become null
and void.
7. No Special Employment Rights
Nothing contained in the Plan or this Option Agreement shall be
construed or deemed by any person under any circumstances to bind the Company
to continue the services of the Optionee for the period within which the
Options may be exercised. However, during the period in which the Optionee is
rendering services, the Optionee shall render diligently and faithfully the
services which are assigned to him or her from time to time by the Board of
Directors or by the executive officers of the Company and shall at no time
take any action which directly or indirectly would be inconsistent with the
best interests of the Company.
8. Rights as a Stockholder
The Optionee shall have no rights as a stockholder with respect to
any shares which may be purchased by exercise of the Options unless and until
a certificate representing such shares is duly issued to the Optionee. Except
as otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date on
such stock certificate.
A-3
9. Recapitalization
In the event that the outstanding shares of Common Stock of the
Company are changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any recapitalization,
reclassification, stock split, stock dividend, combination or subdivision, an
appropriate and proportionate adjustment shall be made in the number and kind
of shares subject to the Plan and in the number, kind and per share exercise
price, of shares subject to unexercised Options or portions thereof granted
prior to such adjustment. Any such adjustment to an outstanding Option shall
be made without change in the total price applicable to the unexercised
portion of such Option as of the date of the adjustment. No such adjustment
shall be made with respect to an Option that would, within the meaning of any
applicable provisions of the Code, constitute a modification, extension or
renewal of any Option or a grant of additional benefits to the Optionee.
10. Reorganization
In the event the Company is merged or consolidated with another
entity and the Company is not a surviving entity, or in the event all or
substantially all of the assets or more than 20% of the outstanding voting
stock of the Company entitled to vote for directors is acquired by any other
entity or person other than an Affiliate or any entity or person or any
affiliate thereof owning 5% or more of the outstanding voting stock of the
Company prior to the effective date of the initial public offering of the
Company's Common Stock, or in the event of a reorganization or liquidation of
the Company, prior to the Expiration Date or termination of this Option
Agreement, the Optionee shall, with respect to the options or any unexercised
portion hereof, be entitled to the rights and benefits, and be subject to the
limitations, set forth in Section 14 of the Plan.
11. Withholding Taxes
The Company's obligation to deliver shares upon the exercise of an
Option shall be subject to the Optionee's satisfaction of all applicable
federal, state and local income and employment tax withholding requirements
("Withholding Taxes") with respect to the Option. The Optionee shall pay the
Withholding Taxes to the Company in cash prior to the issuance, or release
from escrow, of shares of Common Stock. In satisfaction of the Withholding
Taxes, the Committee may, in its discretion and subject to compliance with
applicable securities laws and regulations, withhold a portion of the shares
issuable to the Optionee upon exercise of the Option having an aggregate Fair
Value on the date preceding the date of such issuance equal to the Withholding
Taxes.
12. Optionee Representations; Legend
(a) Representations. The Optionee represents, warrants and covenants
that he or she has had such opportunity as he or she has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit the optionee to evaluate the merits and risks of his or her investment
in the Company. The Optionee understands that there may be
A-4
restrictions on his or her ability to resell any shares acquired on exercise
of an Option, including ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ laws and the Company's ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
policy, as well as other restrictions that will apply if the Optionee is an
"affiliate" of the Company. By making payment upon exercise of an Option, the
Optionee shall be deemed to have reaffirmed, as of the date of such payment,
the representations made in this Section 12.
(b) Legend on Stock Certificate. The Optionee understands that, any
shares of Common Stock acquired upon exercise of an Option may not have been
registered under the Securities Act, nor the securities laws of any state.
Accordingly, unless all such registrations are then in effect, all stock
certificates representing shares of Common Stock issued to the Optionee upon
exercise of an Option shall have affixed thereto a legend substantially in the
following form, in addition to any other legends required by applicable state
law:
"THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1993, AS AMENDED, NOR THE SECURITIES LAW OF ANY STATE. CONSEQUENTLY, THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS."
13. Limitation on Disposition of Incentive Stock Option Shares
It is understood and intended that these Options shall qualify as
Incentive Stock Options, as defined in Section 422 of the Code. Accordingly,
the Optionee understands that in order to obtain the benefits of an Incentive
Stock Option under Section 421 of the Code, no sale or other disposition may
be made of any shares acquired upon exercise of an Option within the one year
period beginning on the day after the day of the issuance of such shares to
him or her, nor within the two year period beginning on the day after the date
of grant of such Option. If the Optionee disposes of any such shares (whether
by sale, exchange, gift, transfer or otherwise) prior to the expiration of
either such period, he or she will notify the Company in writing within ten
days after such disposition.
Notwithstanding the foregoing, nothing herein shall be deemed to be
or interpreted as a representation, guarantee or other undertaking on the part
of the Company that these options are or will be determined to be Incentive
Stock Options within the meaning of Section 422 of the Code or any other Code
Section.
14. Miscellaneous
In the event that the Plan terminates prior to the expiration date of
the Options granted hereunder, this Option Agreement shall incorporate by
reference all applicable provisions of the Plan until the earlier of (i) the
close of business on the day the Option(s) granted hereunder expire, or (ii)
the date on which all shares available for issuance hereunder shall have been
issued pursuant to the exercise of Options granted hereunder.
All notices under this Option Agreement shall, unless otherwise
provided herein, be mailed or delivered by hand to the parties at their
respective addresses set forth beneath their
A-5
names below or at such other address as may be designated in writing by either
of the parties to the other.
This Option Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
This Option Agreement shall be binding upon and inure to the heirs,
successors and assigns of the Optionee (subject, however, to the limitations
set forth herein with respect to assignment of the Options or rights therein)
and the Company, and shall be construed in a manner that is consistent with
the provisions of the Plan.
Date of Grant: Global Pharmaceutical Corporation
By: ________________________________
Name:
Title:
Optionee
____________________________________