-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PyRwFkQCA1VRkk1KvxrE6iBU/5oksZBh6BWxYmDNaU8e3CcuRgGO7N/+6rcjzw5F 4vvbviMHpO++Dfs1dX699A== 0000950152-98-006636.txt : 19980813 0000950152-98-006636.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950152-98-006636 CONFORMED SUBMISSION TYPE: S-8 POS PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19980812 EFFECTIVENESS DATE: 19980812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL HEALTH INC CENTRAL INDEX KEY: 0000721371 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 310958666 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-8 POS SEC ACT: SEC FILE NUMBER: 333-56655 FILM NUMBER: 98684269 BUSINESS ADDRESS: STREET 1: 5555 GLENDON COURT CITY: DUBLIN STATE: OH ZIP: 43016 BUSINESS PHONE: 6147175000 MAIL ADDRESS: STREET 1: 5555 GLEDNON COURT CITY: DUBLIN STATE: OH ZIP: 43016 FORMER COMPANY: FORMER CONFORMED NAME: CARDINAL DISTRIBUTION INC DATE OF NAME CHANGE: 19920703 S-8 POS 1 CARDINAL HEALTH, INC. AMENDEMENT #1 TO S-8 POS 1 As filed with the Securities and Exchange Commission on August 12, 1998 Registration No. 333-56655 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-8 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933* --------------- Cardinal Health, Inc. --------------------- (Exact name of registrant as specified in its charter) Ohio 31-0958666 ---- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 5555 Glendon Court, Dublin, Ohio 43016 -------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) --------------- R.P. Scherer Corporation 1990 Nonqualified Stock Option Plan, as amended R.P. Scherer Corporation 1990 Nonqualified Performance Stock Option Plan A, as amended R.P. Scherer Corporation 1990 Nonqualified Performance Stock Option Plan B, as amended R.P. Scherer Corporation 1992 Stock Option Plan, as amended July, 1995 R.P. Scherer Corporation 1997 Stock Option Plan R.P. Scherer Corporation Director Stock Options ----------------------------------------------- (Full title of the plans) --------------- George H. Bennett, Jr., Executive Vice President, Secretary and General Counsel Cardinal Health, Inc. 5555 Glendon Court Dublin, Ohio 43016 (Name and address of agent for service) (614) 717-5000 (Telephone number, including area code, of agent for service) ---------------
CALCULATION OF REGISTRATION FEE ========================================================================================================================== Title of Amount Proposed Proposed Amount of securities to to be maximum offering maximum aggregate registration be registered registered(1) price per share(1) offering price fee - ------------------------------------------------------------------------------------------------------------------------- Common Shares, without par value 2,371,167 (2) (2) (2) ========================================================================================================================== (1) Also includes an indeterminable number of additional shares that may become issuable pursuant to the anti-dilution provisions of the Plans. (2) Not applicable. All filing fees payable in connection with the registration of the issuance of these securities were paid in connection with the filing of the Registrant's Form S-4 Registration Statement (333-56655) on June 12, 1998. * Filed as a Post-Effective Amendment on Form S-8 to such Form S-4 Registration Statement pursuant to the procedure described in Part II under "Introductory Statement."
2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT INTRODUCTORY STATEMENT Cardinal Health, Inc. (the "Company" or the "Registrant") hereby amends its Registration Statement on Form S-4 (No. 333-56655) (the "Form S-4") by filing this Post-Effective Amendment No. 1 on Form S-8 ("Amendment No. 1") with respect to up to 2,371,167 of the Registrant's Common Shares, without par value ("Common Shares"), issuable in connection with the following plans (collectively, the "Plans") and option agreements ("Option Agreements") of R.P. Scherer Corporation ("Scherer"): 1990 Nonqualified Stock Option Plan, as amended, 1990 Nonqualified Performance Stock Option Plan A, as amended, 1990 Nonqualified Performance Stock Option Plan B, as amended, 1992 Stock Option Plan, as amended July 1995, 1997 Stock Option Plan and Director Stock Options. All such Common Shares were previously included in the Form S-4. On August 7, 1998, GEL Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Registrant ("Merger Sub"), was merged with and into Scherer (the "Merger") pursuant to an Agreement and Plan of Merger dated as of May 17, 1998 (the "Merger Agreement"), among the Registrant, Merger Sub and Scherer. As a result of the Merger, each outstanding share of Scherer Common Stock (with certain specified exceptions) was converted into .95 Common Shares of the Registrant (the "Exchange Ratio"). Also as a result of the Merger, shares of Scherer Common Stock are no longer issuable upon the exercise of options to purchase Scherer Common Stock ("Scherer Options") pursuant to the Plans or Option Agreements. Instead, participants in the Plans and holders of Director Stock Options will receive in lieu of Scherer Common Stock that number of Common Shares of the Registrant equal to the number of shares of Scherer Common Stock issuable immediately prior to the effective time of the Merger upon exercise of a Scherer Option multiplied by the Exchange Ratio of .95, with an exercise price for such option equal to the exercise price which existed under the corresponding Scherer Option divided by the Exchange Ratio of .95. The designation of Amendment No. 1 as Registration No. 333-56655-01 denotes that Amendment No. 1 relates only to the Common Shares issuable pursuant to the Plans and Option Agreements and that this is the first Post-Effective Amendment to the S-4 filed with respect to such shares. ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. The documents listed below are incorporated by reference in the registration statement. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), subsequent to the date of the filing of this registration statement and prior to the filing of a post-effective amendment that indicates that all securities registered hereunder have been sold, or that de-registers all securities then remaining unsold, shall be deemed to be incorporated by reference in the registration statement and to be a part hereof from the date of the filing of such documents. (a) The Annual Report on Form 10-K of the Company for the fiscal year ended June 30, 1997 filed with the Commission on September 29, 1997, as amended by Form 10-K/A (Amendment No. 1) filed with the Commission on January 7, 1998; (b) The information contained in the Company's Proxy Statement dated October 13, 1997 for its Annual Meeting of Shareholders held on November 5, 1997 that was filed with the Commission on Schedule 14A on October 13, 1997, other than the information contained therein under the captions "Report of the Committee on Executive Compensation" and "Performance Graphs;" (c) The Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 1997 filed with the Commission on November 14, 1997, as amended by Form 10-Q/A filed with the Commission on January 7, 1998; (d) The Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended December 31, 1997 filed with the Commission on February 11, 1998; 3 (e) The Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended March 31, 1998 filed with the Commission on May 13, 1998; (f) The Current Report on Form 8-K of the Company filed with the Commission on August 10, 1998 in connection with the mutual termination of the Agreement and Plan of Merger, dated as of August 23, 1997, by and among the Company, Bruin Merger Corp., a New Jersey corporation and wholly owned subsidiary of the Company ("Bruin"), and Bergen Brunswig Corporation, a New Jersey corporation ("Bergen"), as amended by the First Amendment, dated as of March 16, 1998, by and among the Company, Bruin and Bergen. (g) The description of the Company's Common Shares contained in the Company's Registration Statement on Form 8-A dated August 19, 1994, pursuant to Section 12 of the Exchange Act. ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL. The legality of the Common Shares offered hereby has been passed upon for the Company by Paul S. Williams, Assistant General Counsel of the Company. Mr. Williams holds vested and unvested options to purchase Common Shares of the Company. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 1701.13(E) of the Ohio Revised Code sets forth conditions and limitations governing the indemnification of officers, directors, and other persons. Article 6 of the Company's Restated Code of Regulations ("Code of Regulations"), as amended, contains certain indemnification provisions adopted pursuant to authority contained in Section 1701.13(E) of the Ohio Revised Code. The Company's Code of Regulations provides for the indemnification of its officers, directors, employees, and agents against all expenses with respect to any judgments, fines, and amounts paid in settlement, or with respect to any threatened, pending, or completed action, suit, or proceeding to which they were or are parties or are threatened to be made parties by reason of acting in such capacities, provided that it is determined, either by a majority vote of a quorum of disinterested directors of the Company or the shareholders of the Company or otherwise as provided in Section 1701.13(E) of the Ohio Revised Code, that (a) they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interest of the Company; (b) in any action, suit, or proceeding by or in the right of the Company, they were not, and have not been adjudicated to have been, negligent or guilty of misconduct in the performance of their duties to the Company; and (c) with respect to any criminal action or proceeding, that they had no reasonable cause to believe that their conduct was unlawful. Section 1701.13(E) provides that to the extent a director, officer, employee, or agent has been successful on the merits or otherwise in defense of any such action, suit, or proceeding, he shall be indemnified against expenses reasonably incurred in connection therewith. At present there are no material claims, actions, suits, or proceedings pending where indemnification would be required under these provisions, and the Company does not know of any such threatened claims, actions, suits, or proceedings which may result in a request for such indemnification. The Company has entered into indemnification contracts with its directors and executive officers. These contracts generally: (i) confirm the existing indemnity provided to them under the Company's Code of Regulations and assure that this indemnity will continue to be provided; (ii) provide that if the Company does not maintain directors' and officers' liability insurance, the Company will, in effect, become a self-insurer of the coverage; and (iii) provide that, in addition, the directors and officers shall be indemnified to the fullest extent permitted by law against all expenses (including legal fees), judgments, fines, penalties, and settlement amounts paid or incurred by them in any action or proceeding, including any action by or in the right of the Company, on account of their service as a director, officer, employee, or agent of the Company or at the request of the Company as a director, officer, employee, trustee, fiduciary, manager, member or agent of another corporation, partnership, trust, limited liability company, employee benefit plan or other enterprise; and (iv) provide for the mandatory advancement of expenses to the executive officer or director in connection with the defense of any proceedings, provided the executive officer or director agrees to reimburse the Company for that advancement if it is ultimately determined that the executive officer or director is not entitled to indemnification for that proceeding under the agreement. Coverage under the contracts is excluded: (A) on account of conduct which is finally adjudged to be -2- 4 knowingly fraudulent, deliberately dishonest, or willful misconduct; or (B) if a final court of adjudication shall determine that such indemnification is not lawful; or (C) in respect of any suit in which judgment is rendered for violations of Section 16(b) of the Securities and Exchange Act or similar provisions of any federal, state or local statutory law; or (D) on account of any remuneration paid which is finally adjudged to have been in violation of law; or (E) on account of conduct occurring prior to the time the executive officer or director became an officer, director, employee, or agent of the Company or its subsidiaries (but in not event earlier than the time such entity became a subsidiary of the Company); or (F) with respect to proceedings initiated or brought voluntarily by the executive officer or director and not by way of defense, except for proceedings brought to enforce rights under the indemnification agreement. ITEM 8. EXHIBITS. Exhibit Number Description of Exhibit - -------------- ---------------------- 5 Opinion of Paul S. Williams as to legality of the Common Shares being registered 23(a) Consent of Deloitte & Touche LLP, Columbus, Ohio 23(b) Consent of Deloitte & Touche LLP, Costa Mesa, California 23(c) Consent of Arthur Andersen LLP 23(d) Consent of Ernst & Young LLP 23(e) Consent of PricewaterhouseCoopers LLP 23(f) Consent of Paul S. Williams (included in Opinion filed as Exhibit 5 hereto) 99(a) R.P. Scherer Corporation 1990 Nonqualified Stock Option Plan, as amended 99(b) R.P. Scherer Corporation 1990 Nonqualified Performance Stock Option Plan A, as amended 99(c) R.P. Scherer Corporation 1990 Nonqualified Performance Stock Option Plan B, as amended 99(d) R.P. Scherer Corporation 1992 Stock Option Plan, as amended July, 1995 99(e) R.P. Scherer Corporation 1997 Stock Option Plan 99(f) Form of R.P. Scherer Corporation Director Stock Option Agreement ITEM 9. UNDERTAKINGS. A. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or -3- 5 high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that clauses (i) and (ii) of this paragraph do not apply if the information required to be included in a post-effective amendment by those clauses is contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 6 above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. -4- 6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Post-Effective Amendment No.1 on Form S-8 to Form S-4 Registration Statement and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dublin, State of Ohio, on the 12th day of August, 1998. CARDINAL HEALTH, INC. By: /s/ Robert D. Walter ---------------------------------- Robert D. Walter, Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No.1 on Form S-8 to Form S-4 Registration Statement has been signed by the following persons in the capacities indicated on the 12th day of August, 1998. Signature Title - --------- ----- /s/ Robert D. Walter Chief Executive Officer (principal - ----------------------- executive officer) and Director Robert D. Walter /s/ David Bearman Executive Vice President and Chief - ----------------------- Financial Officer (principal financial David Bearman officer) /s/Richard J. Miller Vice President, Controller and Principal - ----------------------- Accounting Officer Richard J. Miller /s/ John F. Finn Director - ----------------------- John F. Finn /s/ Robert L. Gerbig Director - ------------------------ Robert L. Gerbig /s/ John F. Havens Director - ------------------------ John F. Havens /s/ Regina E. Herzlinger Director - ------------------------ Regina E. Herzlinger -5- 7 /s/ John C. Kane Director - ------------------------ John C. Kane /s/ J. Michael Losh Director - ------------------------ J. Michael Losh /s/ George R. Manser Director - ------------------------ George R. Manser /s/ John B. McCoy Director - ------------------------ John B. McCoy /s/ Jerry E. Robertson Director - ------------------------ Jerry E. Robertson /s/ L. Jack Van Fossen Director - ------------------------ L. Jack Van Fossen /s/ Melburn G. Whitmire Director - ------------------------ Melburn G. Whitmire /s/ Aleksander Erdeljan Director - ------------------------ Aleksander Erdeljan -6- 8 EXHIBIT INDEX ------------- EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 5 Opinion of Paul S. Williams as to legality of the Common Shares being registered 23(a) Consent of Deloitte & Touche LLP, Columbus, Ohio 23(b) Consent of Deloitte & Touche LLP, Costa Mesa, California 23(c) Consent of Arthur Andersen LLP 23(d) Consent of Ernst & Young LLP 23(e) Consent of PricewaterhouseCoopers LLP 23(f) Consent of Paul S. Williams (included in Opinion filed as Exhibit 5 hereto) 99(a) R.P. Scherer Corporation 1990 Nonqualified Stock Option Plan, as amended 99(b) R.P. Scherer Corporation 1990 Nonqualified Performance Stock Option Plan A, as amended 99(c) R.P. Scherer Corporation 1990 Nonqualified Performance Stock Option Plan B, as amended 99(d) R.P. Scherer Corporation 1992 Stock Option Plan, as amended July, 1995 99(e) R.P. Scherer Corporation 1997 Stock Option Plan 99(f) Form of R.P. Scherer Corporation Director Stock Option Agreement -7- EX-5 2 EXHIBIT 5 1 EXHIBIT 5 August 12, 1998 Cardinal Health, Inc. 5555 Glendon Court Dublin, OH 43016 Gentlemen: I have acted as counsel to Cardinal Health, Inc., an Ohio corporation (the "Company"), in connection with Post-Effective Amendment No. 1 on Form S-8 to the Company's Registration Statement on Form S-4 (the "Registration Statement") filed under the Securities Act of 1933, as amended, (the "Act") relating to the issuance of up to 2,371,167 Common Shares, without par value (the "Common Shares"), of the Company pursuant to the following plans and agreements (collectively, the "Plans") of R.P. Scherer Corporation: R.P. Scherer Corporation 1990 Nonqualified Stock Option Plan, as amended R.P. Scherer Corporation 1990 Nonqualified Performance Stock Option Plan A, as amended R.P. Scherer Corporation 1990 Nonqualified Performance Stock Option Plan B, as amended R.P. Scherer Corporation 1992 Stock Option Plan, as amended July, 1995 R.P. Scherer Corporation 1997 Stock Option Plan R.P. Scherer Corporation Director Stock Options In connection with the foregoing, I have examined: (a) the Amended and Restated Articles of Incorporation, as amended, and Restated Code of Regulations, as amended, of the Company, (b) the Plans, and (c) such records of the corporate proceedings of the Company and such other documents as I deemed necessary to render this opinion. Based on such examination, I am of the opinion that the Common Shares available for issuance under the Plans, when issued, delivered and paid for in accordance with the terms and conditions of the Plans, will be legally issued, fully paid and nonassessable. I hereby consent to the filing of this Opinion as Exhibit 5 to the Registration Statement and the reference to me in Item 5 of Part II of the Registration Statement. In giving such consent, I do not thereby admit that I am in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission. Very truly yours, /s/ Paul S. Williams Paul S. Williams, Esq. EX-23.A 3 EXHIBIT 23(A) 1 Exhibit 23(a) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Cardinal Health, Inc. on Form S-8 filed as Post Effective Amendment No. 1 to Registration Statement No. 333-56655 on Form S-4 of our report dated August 12, 1997, except for Note 16 as to which the date is August 23, 1997 and Note 17 as to which the date is December 30, 1997 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement described in Note 17), appearing in the Annual Report of Form 10-K/A of Cardinal Health, Inc. for the year ended June 30, 1997. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbus, Ohio August 10, 1998 EX-23.B 4 EXHIBIT 23(B) 1 Exhibit 23(b) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Cardinal Health, Inc. on Form S-8 filed as Post Effective Amendment No. 1 to Registration Statement No. 333-56655 on Form S-4 of our report dated October 31, 1997, appearing in the Annual Report on Form 10-K of Bergen Brunswig Corporation for the fiscal year ended September 30, 1997. /s/ Deloitte & Touche LLP Costa Mesa, California August 10, 1998 EX-23.C 5 EXHIBIT 23(C) 1 EXHIBIT 23(c) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Post-Effective Amendment No. 1 on Form S-8 (Registration Statement File No. 333-56655-01) to Registration Statement file No. 333-56655 on Form S-4, of our report dated April 27, 1998 (except with respect to the matter discussed in Note 16, as to which the date is May 17, 1998) included in R.P. Scherer Corporation's Annual Report on Form 10-K for the year ended March 31, 1998. /s/ Arthur Andersen LLP Detroit, Michigan August 10, 1998 EX-23.D 6 EXHIBIT 23(D) 1 EXHIBIT 23(d) CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in Post-Effective Amendment No. 1 on Form S-8 to the Registration Statement (Form S-4 No. 333-56655) of Cardinal Health, Inc of our report dated August 2, 1996, with respect to the consolidated financial statements of Pyxis Corporation, included in the Annual Report (Form 10-K/A) of Cardinal Health, Inc. for the year ended June 30, 1997, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP ERNST & YOUNG LLP San Diego, California August 10, 1998 EX-23.E 7 EXHIBIT 23(E) 1 EXHIBIT 23(e) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 filed as Post Effective Amendment No. 1 to Registration Statement on Form S-4 (No. 333-56655) of Cardinal Health, Inc. of our report dated January 30, 1997 related to the financial statements of Owen Healthcare, Inc. which appears on page 11 of Cardinal Health, Inc.'s Annual Report on Form 10-K/A (Amendment No. 1) for the year ended June 30, 1997. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Houston, Texas August 10, 1998 EX-99.A 8 EXHIBIT 99(A) 1 Exhibit 99(a) R.P. SCHERER CORPORATION (f/k/a RPS CORPORATION) ------------------------ 1990 NONQUALIFIED STOCK OPTION PLAN 1. PURPOSE. The purpose of this 1990 Nonqualified Stock Option Plan (this "Option Plan") is to provide a means by which certain employees of RPS Corporation, a Delaware corporation (the "Company"), R.P. Scherer Corporation, a Delaware corporation and a wholly owned subsidiary of the Company ("R.P. Scherer"), or any subsidiary thereof, may be given an opportunity to purchase common stock, par value $.01 per share (the "Common Stock"), and Series B Redeemable Preferred Stock, par value $.01 per share (the "Preferred Stock", and together with the Common Stock, the "Stock") of the Company. This Option Plan is intended to advance the interests of the Company by encouraging stock ownership on the part of certain employees, by enabling the Company and R.P. Scherer to secure and retain the services of highly qualified persons, and by providing employees with an additional incentive to advance the success of the Company. 2. STOCK SUBJECT TO OPTION. Subject to adjustment as provided in Section 4(e) hereof, options may be granted by the Company in accordance with the provisions of Section 4 hereof to purchase up to an aggregate of 90,794 shares of authorized but unissued Common Stock and up to an aggregate of 181,590 shares of the authorized but unissued Preferred Stock. Shares of Stock that by reason of the expiration of an option or otherwise are no longer subject to purchase pursuant to an option granted under this Option Plan may be the subject of other options granted under this Option Plan or any other option, incentive or compensatory plan adopted by the Company. 3. PARTICIPANTS. All key employees of the Company, R.P. Scherer or any of its subsidiaries, as determined by the Board of Directors of the Company (the "Board") or the 2 Committee (as such term is defined in Section 4(a) hereof), may be granted options under this Option Plan. A person who holds an option granted hereunder that has not expired is referred to as an "Optionee"; PROVIDED, HOWEVER, that in the event of such person's death or Disability (as hereinafter defined) such person's estate, personal representative or beneficiary following the death or incapacity or such person (an "Optionee's Representative") shall be able to exercise the rights otherwise available to the Optionee. 4. TERMS AND CONDITIONS OF OPTIONS. The Committee may grant options from time to time pursuant to this Option Plan. Such options shall be evidenced by written agreements substantially in the form of the Nonqualified Stock Option Agreement (the "Stock Option Agreement"), which is attached hereto as Appendix A, and shall not be inconsistent with this Option Plan. The shares of Stock subject to each option shall, upon issuance, be subject to the terms and conditions, including restrictions on transferability, contained in an agreement substantially in the form of the Stockholders Purchase Agreement attached hereto as Appendix B to be entered into by the Company and the Optionees (the "Stockholders Purchase Agreement"), or, with respect to certain Optionees, the Management Stock Subscription Agreement between the Company and such Optionees (the "Stock Subscription Agreement"). Nothing in this Option Plan or an option granted hereunder shall govern the employment rights and duties between an Optionee and the Company or R.P. Scherer, or any subsidiary thereof, nor in any way be deemed to constitute an employment agreement among such parties. (a) OPTION PRICE. The price per share of the Common Stock subject to each option (the "Common Stock Option Price") shall be set by a Compensation Committee (the "Committee") of the Board; PROVIDED, HOWEVER, that the Common Stock Option Price may be less than the fair market value of a share of Common Stock on the Date of - -------------------------------------------------------------------------------- Page 2 3 Grant, as such date is set forth in the applicable Stock Option Agreement. For purposes of the foregoing, the fair market value of the Common Stock on the Date of Grant shall be the fair market value established by the Committee acting in good faith, and the fair market value may be more or less than the book value of the Common Stock. The price per share of the Preferred Stock subject to each option (the "Preferred Stock Option Price") shall be the liquidation preference of each such underlying share of Preferred Stock. The Common Stock Option Price and the Preferred Stock Option Price are collectively referred to as the "Option Price." (b) TERM OF OPTION. Notwithstanding any other provision of this Option Plan, each option granted under this Option Plan shall expire not more than ten years and one day from the date the option is granted, except that under the circumstances described in Sections 4(d), 4(f) and 4(g), options may expire and terminate at an earlier date. (c) NON-TRANSFERABILITY OF OPTION RIGHTS. No option shall be assignable or transferable otherwise than by will or by the laws of descent and distribution. During the lifetime of an Optionee, the option is exercisable only by such Optionee or, as provided in Section 3, such Optionee's Representative. (d) TERMINATION OF EMPLOYMENT. (i) Subject to the provisions of Sections 4(d)(ii), 4(d)(iii), 4(d)(iv) and 4(d)(v), in the event that an Optionee's employment by the Company, R.P. Scherer or any subsidiary thereof shall terminate, all options granted to such Optionee pursuant to this Option Plan shall terminate immediately and shall not be exercisable. (ii) In the event that an Optionee's employment is terminated because of death or Disability, the Company shall have the right, but not the obligation, for a period - -------------------------------------------------------------------------------- Page 3 4 of 120 days from the date of termination of employment due to death or Disability (the "Call Period"), to repurchase an Optionee's options granted pursuant to this Option Plan, or a portion thereof, to the extent (and only to the extent) that such options, or a portion thereof, entitle the Optionee to purchase the Exercisable Shares (as hereinafter defined) existing on the date of such Optionee's death or Disability. The Company may exercise its repurchase right under this Section 4(d)(ii) at any time during the Call Period by delivering written notice (the "Call Notice") to such Optionee or such Optionee's Representative of the Company's exercise of this right. During the Call Period, the Optionee (or the Optionee's Representative) may send written notice to the Company to repurchase, and the Company shall repurchase, such Optionee's options, or a portion thereof, to the same extent as if the Company had exercised its repurchase right under this Section 4(d)(ii). The repurchase price for each option repurchased pursuant to this Section 4(d)(ii) shall be equal to the sum of (A) the product obtained by multiplying the number of Exercisable Shares which are shares of Common Stock by an amount which shall equal the excess, if any, of the Fair Market Value (as hereinafter defined) per share of the underlying Common Stock, over the Common Stock Option Price, and (B) the product obtained by multiplying the number of Exercisable Shares which are shares of Preferred Stock by an amount which shall equal the liquidation preference per share of the underlying Preferred Stock over the Preferred Stock Option Price. The closing of any repurchase of any options pursuant to this Section 4(d)(ii) shall be held at the principal executive offices of R.P. Scherer at 10:00 a.m. local time on the tenth business day following the date of delivery of a Call Notice or a Put Notice, as the case may be, or at such other date, time and place as the parties may mutually agree upon. Options granted - -------------------------------------------------------------------------------- Page 4 5 to an Optionee pursuant to this Option Plan, or any portion thereof, shall terminate immediately upon such Optionee's death or Disability and shall not be exercisable to the extent that such options, or any portion thereof, do not entitle such Optionee to purchase Exercisable Shares pursuant to this Section 4(d)(ii). The term "Disability" shall mean an Optionee's physical or mental disability (so that the Optionee is not reasonably able to render his full service to the Company, R.P. Scherer or any subsidiary thereof) for any consecutive period exceeding three months or as determined by agreement of a majority of the members of the Board in their reasonable discretion. The date of such Disability shall be on the last day of such three-month period or the day selected by the Board, as the case may be. The term "Fair Market Value shall mean, with respect to each share of underlying Common Stock, (A) the fair market value of the Company as determined within six months prior to the applicable date or, if no such determination has been made within six months, then within 75 days of the applicable date determined as of the applicable date, in each case by the Board, divided by (B) the number of shares of Common Stock then outstanding (assuming the exercise of all outstanding stock options, warrants or rights for the purchase of Common Stock). (iii) If neither the Company nor the Optionee (or the Optionee's Representative) has exercised its repurchase right pursuant to Section 4(d)(ii) upon the Optionee's death or Disability, such Optionee (or such Optionee's Representative) shall have the right, at any time within 120 days following the end of the Call Period, to exercise the options granted to Optionee pursuant to this Option Plan to purchase the Exercisable Shares which existed on the date of such Optionee's death or Disability. - -------------------------------------------------------------------------------- Page 5 6 Options granted to an Optionee pursuant to this Option Plan, or any portion thereof, shall terminate at the end of the 120-day period following the Call Period and shall not be exercisable to the extent that such options, or any portion thereof, are neither repurchased by the Company pursuant to Section 4(d)(ii) nor exercised by the Optionee or the Optionee's Representative pursuant to this Section 4(d)(iii). (iv) In the event that an Optionee's employment is terminated by reason of Termination without Cause (as hereinafter defined), the Company shall have the right, but not the obligation, for a period of 120 days from the date of termination of employment of the Optionee, to repurchase an Optionee's option granted pursuant to this Option Plan, or a portion thereof, to the extent (and only to the extent) that such options, or a portion thereof, entitle the Optionee to purchase the Exercisable Shares existing on the date of such Optionee's termination of employment. The Company may exercise its repurchase right under this Section 4(d)(iv) at any time during the 120-day period by delivering written notice to an Optionee of its exercise of this right. The repurchase price for each option, or portion thereof, repurchased pursuant to this Section 4(d)(iv) shall be equal to the sum of (A) the product obtained by multiplying the number of Exercisable Shares which are shares of Common Stock by an amount which shall equal the excess, if any, of the lesser of (x) Termination Book Value (as hereinafter defined) per share of the underlying Common Stock and (y) the Fair Market Value per share of the underlying Common Stock, over the Common Stock Option Price and (B) the product obtained by multiplying the number of Exercisable Shares which are shares of Preferred Stock by an amount which shall equal the liquidation preference per share of the underlying Preferred Stock over the Preferred Stock Option Price. The closing of any repurchase of any - -------------------------------------------------------------------------------- Page 6 7 options pursuant to this Section 4(d)(iv) shall be held at the principal executive offices of R.P. Scherer at 10:00 a.m. local time on the tenth business day following the date of delivery of the Company's written notice of the exercise of its repurchase right, or at such other date, time and place as the parties may mutually agree upon. Options granted to an Optionee under this Option Plan, or any portion thereof, shall terminate immediately upon such Optionee's Termination without Cause and shall not be exercisable to the extent that such options, or any portion thereof, do not entitle such Optionee to purchase Exercisable Shares pursuant to this Section 4(d)(iv). The term "Termination without Cause" shall mean termination of employment of an Optionee by reason of any occurrence other than death or Disability of such Optionee, termination for Cause or the voluntary termination by such Optionee of his employment by resignation or any other means, that results in such Optionee no longer being employed by the Company, R.P. Scherer or any subsidiary thereof. The term "Cause" used in connection with the termination of employment of an Optionee shall mean a termination of employment due to (i) the commission by such Optionee of an act of fraud upon, or bad faith or willful misconduct toward, the Company, R.P. Scherer or any subsidiary thereof (including the unauthorized disclosure of confidential or proprietary information of the Company, R.P. Scherer or any subsidiary thereof), (ii) a conviction of such Optionee by a court of competent jurisdiction (or a plea of NOLO CONTENDERE or the equivalent under the laws of any other country or political subdivision thereof) of a crime involving, in the reasonable determination of the Board, fraud or dishonesty, or a crime which in the reasonable determination of the Board would tend to be injurious to the reputation of the Company, - -------------------------------------------------------------------------------- Page 7 8 R.P. Scherer or any of its subsidiaries, or of such Optionee, (iii) misconduct by such Optionee which, in the reasonable determination of the Board, has been or is likely to be materially injurious to the Company, R.P. Scherer or any subsidiary thereof; or (iv) the failure of such Optionee substantially to perform the duties and obligations imposed upon him by R.P. Scherer or any subsidiary thereof. "Termination Book Value" shall mean the book value of the Company (excluding the amount of stockholders' equity attributable to the Company's 17% Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share, the Preferred Stock and to the Company's Series C Redeemable Preferred Stock, par value $.01 per share) per outstanding share of Common Stock (assuming the exercise of all outstanding stock options, warrants or rights for the purchase of Common Stock) as of the last day of the fiscal quarter ended immediately preceding the date on which the termination of employment occurs, as determined from the Company's consolidated balance sheet prepared, in accordance with generally accepted accounting principles as applied in the United States, by the management of the Company and R.P. Scherer and reviewed by the independent public accountants regularly employed by the Company. (v) If the Company has not, pursuant to Section 4(d)(iv), exercised its repurchase right upon the Optionee's termination of employment by reason of Termination without Cause, such Optionee shall have the right, at any time within 120 days following the end of the 120-day period provided for in Section 4(d)(iv), to exercise the options granted to such Optionee pursuant to this Option Plan to purchase the Exercisable Shares which existed on the date of such Optionee's termination of employment. Options granted to an Optionee pursuant to this Option Plan, or any portion - -------------------------------------------------------------------------------- Page 8 9 thereof, shall terminate at the end of the 120-day period following the 120-day period provided for in Section 4(d)(iv) and shall not be exercisable to the extent that such options, or any portion thereof, are neither repurchased by the Company pursuant to Section 4(d)(iv) nor exercised by the Optionee pursuant to this Section 4(d)(v). (e) ADJUSTMENT OF OPTIONS ON RECAPITALIZATION. The aggregate number of shares of Stock of which options may be granted to persons participating under this Option Plan, the number of shares of Stock covered by each outstanding option and the Option Price for the shares of Stock subject to each such option may be appropriately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a recapitalization, the subdivision or consolidation of shares, or the payment of a stock dividend after the Date of Grant; PROVIDED, HOWEVER, that any options to purchase fractional shares of Stock resulting from any such adjustment shall be cancelled. (f) SALE OF THE COMPANY. In the event the Company proposes to engage in a Sale of the Company (as hereinafter defined), the Company shall give each Optionee written notice of such Sale on or before 15 days (or shorter time if, in the sole discretion of the Company, 15 days' notice is impracticable) before the consummation of such Sale, and, unless otherwise agreed to by the Company and the Optionee, each option granted under this Option Plan may be exercised after receipt of such notice and prior to such Sale to purchase all of the Stock subject to each option granted under this Option Plan. Options not exercised prior to such Sale shall expire on the occurrence of such Sale, and no payment shall be owed to such Optionee with respect to such options; PROVIDED, HOWEVER, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the option - -------------------------------------------------------------------------------- Page 9 10 granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 4(f). A "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (other than a subsidiary or affiliate of the Company) in which the holders of Stock are required to exchange their Stock for cash, property and/or securities, or (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or affiliate of the Company. (g) DISSOLUTION OF ISSUER OF THE STOCK. In the event of the proposed dissolution or liquidation of the Company, the Company shall give each Optionee not less than 30 days' prior written notice of the date of the proposed dissolution or liquidation, and, unless otherwise agreed to by the Company and the Optionee, each option granted under this Option Plan may be exercised during the 30-day period preceding the dissolution or liquidation to purchase all of the Stock subject to each option granted under this Option Plan. Options not exercised prior to such dissolution or liquidation shall expire on the occurrence of such dissolution or liquidation, and no payment shall be owed to such Optionee with respect to such options; PROVIDED, HOWEVER, that if the proposed dissolution or liquidation of the Company is not consummated and the Board in good faith determines that the proposed dissolution or liquidation of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 4(g). The provisions of this Section 4(g) shall not be applicable if the Optionee receives notice under Section 4(f) at a time earlier than the notice provided for herein. - -------------------------------------------------------------------------------- Page 10 11 (h) RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a stockholder with respect to any shares of Stock held under option until the date of issuance of the stock certificates to him for such shares. Except as provided in Section 4(e) hereof, no adjustment to the option shall be made for dividends, distributions or rights attributable to shares of Stock the record date for which is prior to the date of issuance of Stock upon exercise of the option. (i) TIME OF GRANTING OPTIONS. The grant of an option shall occur only when a Stock Option Agreement shall have been duly executed and delivered by or on behalf of the Company and the employee to whom such option shall be granted. (j) STOCK LEGEND. Certificates evidencing shares of Stock purchased upon the exercise of options issued under this Option Plan shall be endorsed with a legend in substantially the form contained in the Optionee's Stock Subscription Agreement or Stockholders Purchase Agreement, as the case may be. (k) DEFERRAL OF PURCHASES. (i) The Company shall not be obligated to purchase any options granted pursuant to this Option Plan at any time pursuant to Section 4(d)(ii) or 4(d)(9v) hereof, regardless of whether it has delivered a notice of its election to purchase any such options, (A) to the extent that the purchase of such options (together with any other purchases of options or Stock, as the case may be, pursuant to Sections 4(d)(ii) or 4(d)(9v) hereof from other Optionees, and pursuant to similar provisions in the 1990 RPS Corporation Nonqualified Performance Stock Option Plan A (the "Performance Stock Option Plan A") and the agreements relating thereto and pursuant to similar provisions in any Optionee's Stock Subscription Agreement or Stockholders Purchase Agreement, of which the Company has at such time been given notice) would - -------------------------------------------------------------------------------- Page 11 12 (1) result in a violation of any law, statute, rule, regulation, policy, guideline, order, writ, injunction, decree or judgment promulgated or entered by any federal, state, local or foreign court or governmental authority applicable to the Company, R.P. Scherer or any of their subsidiaries or any of its or their property or (2) after giving effect thereto, result in a Financing Default, or (B) if immediately prior to such purchase there exists a Financing Default. The term "Financing Default" shall mean an event which constitutes (or with notice or lapse of time or both would constitute) an event of default (which event of default has not been cured or waived) under any of the following as they may be amended from time to time: (A) the Credit Facilities Agreement (the "Credit Facilities Agreement") dated as of October 3, 1989, among R.P. Scherer and the other borrowers named therein (the "Borrowers"), the guarantors named therein (the "Guarantors"), Citibank, N.A. and CIBC International Trust Limited as lead managers, Citicorp Investment Bank Limited, as facility agent and the banks parties thereto, and any extensions, renewals, refinancing or refunding thereof in whole or in part; (B) the Credit Agreement (the "Revolving Credit Agreement") dated as of October 3, 1989 between R.P Scherer and Citibank, N.A. and any extensions, renewals, refinancing or refunding thereof in whole or in part; (C) any notes executed and delivered by any of the Borrowers under the Credit Facilities Agreement, or by R.P. Scherer under the Revolving Credit Agreement and any extensions, renewals, refinancing or refunding thereof in whole or in part; (D) any guaranties executed by any of the Guarantors under the Credit Facilities Agreement and any extensions, renewals, refinancing or refunding thereof in whole or in part; (E) the Senior Subordinated Loan Agreement, dated as of June 5, 1989, among Shearson Lehman Hutton Holdings Inc., the Company and RPS Acquisition Corporation - -------------------------------------------------------------------------------- Page 12 13 ("Acquisition") and any extensions, renewals, refinancing or refunding thereof in whole or in part; (F) any notes executed and delivered by Acquisition under the Senior Subordinated Loan Agreement and any extensions, renewals, refinancing or refunding thereof in whole or in part; (G) the Indenture (the "Subordinated Debenture Indenture") to be entered into between R.P. Scherer and The First National Bank of Boston, as trustee relating to the Senior Subordinated Debentures due 1999; (H) the Indenture (the "Exchange Debenture Indenture") to be entered into between the Company and Ameritrust Company National Association, as trustee, relating to the 17% Subordinated Exchange Debentures; and (I) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (A) through (H) above. (ii) If at any time consummation of all purchases of options to be made by the Company pursuant to Sections 4(d)(ii) or 4(d)(iv) hereof (and pursuant to similar provisions for the purchase of options or Stock, as the case may be, contained in the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements) is not required because of the applicability of clause (A) of Section 4(k)(i) hereof and similar provisions for the purchase of options or Stock, as the case may be, in the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements, but clause (B) of Section 4(k)(i) hereof or similar provisions for the purchase of options or Stock, as the case may be, in the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements are not applicable, then the - -------------------------------------------------------------------------------- Page 13 14 Company shall purchase (in accordance with the following sentence) from the Optionee or the Optionee's Representative, as the case may be, desiring or obligated to sell to the Company options pursuant to this Option Plan and from the other persons and entities having the right or obligation to sell options or Stock, as the case may be, pursuant to provisions in the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements, the maximum number of options and shares of Stock of which it is able to repurchase without the events described in Section 4(k)(i)(A) resulting; PROVIDED, HOWEVER, that, subject to the last sentence of this Section 4(k)(ii), the provisions of Section 4(k)(iii) hereof shall apply in respect of all options not purchased under Section 4(d)(ii) or 4(d)(iv) hereof because of the operation of Sections 4(k)(i) or 4(k)(ii) hereof. In the event any of the events described in Section 4(k)(i)(A) would result from the purchase of any options pursuant to Sections 4(d)(ii) or 4(d)(iv) hereof, the Board, in its sole discretion, may determine priorities among the Optionee or the Optionee's Representative, as the case may be, and the other persons having the right or obligation to sell options or Stock, as the case may be, pursuant to the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements, taking into account relative hardship and such other factors as it deems relevant, and may elect to cause the Company to consummate purchases of options hereunder according to such priorities (such options which are to be so purchased are hereinafter called the "Purchased Options" and such options which are not to be so purchased are hereinafter called the "Unpurchased Options"); the Company shall pay the Optionee or the Optionee's Representatives, as the case may be, holding Unpurchased - -------------------------------------------------------------------------------- Page 14 15 Options the applicable purchase price for such options on the tenth business day after the Company learns it is no longer precluded from paying for such options. (iii) Anything to the contrary contained in Section 4(d)(ii) or 4(d)(iv) hereof notwithstanding, any options which the Optionee or the Optionee's Representative, as the case may be, has elected to sell to the Company or which the Company has elected to purchase from the Optionee or the Optionee's Representative, as the case may be, but which in accordance with Sections 4(k)(i) and 4(k)(ii) hereof are not purchased at the applicable time provided in Section 4(d)(ii) or 4(d)(iv) hereof, shall be purchased by the Company on the tenth day after such date or dates that the Company after due inquiry learns that (after taking into account any purchases of options or Stock, as the case may be, to be made at such time pursuant to the Performance Stock Option Plan A and the agreements relating thereto, and in the Stock Subscription Agreements and Stockholders Purchase Agreements) it is no longer permitted to defer purchasing such options under Sections 4(k)(i) and 4(k)(ii) hereof, and the Company shall give seven days prior notice of any such purchase; PROVIDED, HOWEVER, that the Optionee (or the Optionee's Representative) shall not be obligated to sell a lesser number of options at any one time pursuant to this Section 4(k)(iii) had they not been so delayed; and, PROVIDED, FURTHER, that if the Optionee (or the Optionee's Representative) exercises its right to have options repurchased pursuant to Section 4(d)(ii) or the Company exercises its repurchase rights pursuant to Section 4(d)(ii), and the purchase of the options cannot be consummated by reason of Sections 4(k)(i) and 4(k)(ii), the purchase price for such options shall be calculated pursuant to Sections 4(d)(ii) as of the time the repurchase right is exercised, including interest on the aggregate purchase price for such options at a rate - -------------------------------------------------------------------------------- Page 15 16 per annum equal to the yield to maturity on U.S. Treasury obligations having a maturity equal to a period of three months. If the Optionee elects pursuant to Section 4(k)(ii) to rescind or defer his election to sell any or all of the Purchased Options, the Optionee or the Optionee's Representative, as the case may be, may exercise his right pursuant to Section 4(d)(ii) to require the Company to purchase his options for a period of ten days after receiving notice that the Company is no longer precluded from purchasing such options. (l) PAYMENT FOR OPTIONS. If at any time the Company elects or is required to purchase any options pursuant to Sections 4(d)(ii) or 4(d)(iv), the Company shall pay the purchase price for the options it purchases to the extent permitted by any loan agreement, indenture or other agreement to which the Company is a party, by the Company's delivery of a bank cashier's check or certified check for the purchase price, if any, and, then, at the Company's sole discretion, to the extent permitted by any loan agreement, indenture or other agreement to which the Company or R.P. Scherer is a party, by the Company's delivery of a junior subordinated promissory note (which shall be subordinated and subject in right of payment to the prior payment of all indebtedness of the Company including, without limitation, any debt outstanding under the Credit Facilities Agreement, the Senior Subordinated Loan Agreement, the Subordinated Debenture Indenture, the Exchange Debenture Indenture and any modifications, renewals, extensions, replacements and refunding of all such indebtedness) of the Company (a "Junior Subordinated Note") equal to the remainder, if any, of the purchase price payable in five equal annual installments commencing on the first anniversary of the issuance thereof and bearing interest payable annually at the publicly announced - -------------------------------------------------------------------------------- Page 16 17 prime rate of the facility agent under the Credit Facilities Agreement on the date of issuance, against delivery of the certificates or other instruments representing the options so purchased. If, in a purchase pursuant to Section 4(d)(ii), the Company elects to pay all or any portion of the purchase price for the options with a Junior Subordinated Note, the Company shall give the Optionee or the Optionee's Representative, as the case may be, notice of the amount of such note at least twenty days prior to such purchase, and the Optionee or the Optionee's Representative, as the case may be, shall have ten days thereafter to rescind their election to sell the options. 5. EXERCISE OF OPTIONS. (a) During the term of this Option Plan, as set forth in Section 7 hereof, the options granted to each Optionee hereunder shall become exercisable in accordance with the terms and conditions of this Section 5 and (i) in the case of a Sale of the Company, in accordance with Section 4(f) hereof, (ii) in the case of a dissolution or liquidation of the Company, in accordance with Section 4(g) hereof and (iii) in the case of a termination of employment of an Optionee, in accordance with Section 4(d)(iii) or 4(d)(v) hereof. The Committee may accelerate the time at which an option may be exercised and reserves the right to delay and/or reduce the periods during which options may be exercised in order to comply with federal and state securities law. (b) EXERCISABLE SHARES. The total number of shares of Stock for which an option shall be exercisable (the "Exercisable Shares") shall be the number of shares of Common Stock and Preferred Stock subject to such option multiplied by the percentages set forth below for the applicable time period: - -------------------------------------------------------------------------------- Page 17 18 Applicable Time Applicable Period Percentage --------------- ---------- Prior to October 5, 1990 0% on or after October 5, 1990 33-1/3% and prior to October 5, 1991 on or after October 5, 1991 66-2/3% and prior to October 5, 1992 on or after October 5, 1992 100% The number of Exercisable Shares which are shares of Common Stock and the number of Exercisable Shares which are shares of Preferred Stock shall be in the same proportion to the total number of shares of Common Stock and Preferred Stock, respectively, issuable upon exercise of any option granted hereunder. (c) MANNER OF EXERCISE. Shares of Stock purchased upon exercise of options shall at the time of purchase be paid in full in cash or as otherwise permitted by the Committee. Options may be exercised in whole or in part from time to time by written notice to the Company stating the full number of shares of Stock with respect to which the option is being exercised and the time of delivery thereof, which shall be at least 15 days after the giving of such notice unless an earlier date shall have been mutually agreed upon, accompanied by full payment for the shares of Stock by certified or official bank check or the equivalent thereof acceptable to the Company; PROVIDED, HOWEVER, that any such exercise must be for both Common Stock and Preferred Stock in the same proportion to the total number of shares of Common Stock and Preferred Stock, respectively, issuable to the Optionee upon exercise of the option granted hereunder. At the time of delivery, the Company shall, without stock transfer or issue tax to an - -------------------------------------------------------------------------------- Page 18 19 Optionee, deliver to such Optionee at the principal executive offices of R.P. Scherer, or such other place as shall be mutually agreed upon, a certificate or certificates for such shares of Stock; PROVIDED, HOWEVER, that the time of delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any requirements of law, including making provision for the deduction and withholding of amounts required to be deducted and withheld under applicable local, state, and federal income tax laws (which provision may require additional payment by such Optionee). The Company shall pay any stock transfer tax or issue tax resulting from the issuance of shares of Stock upon the exercise of any option. If Stock issuable upon exercise of any option is not registered under the Securities Act, the Company at the time of exercise shall require in addition that the Optionee or Optionee's Representative deliver an investment representation in form acceptable to the Company and its counsel, and the Company shall place a legend on the certificate for such Stock restricting the transfer of such Stock. At no time shall the Company have any obligation or duty to register under the Securities Act the Stock issuable upon exercise of options. The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of any option or portion thereof prior to the Optionee or the Optionee's Representative; PROVIDED, HOWEVER, that those Optionees who have executed a Stock Subscription Agreement shall not be required to execute a Stockholders Purchase Agreement. 6. ADMINISTRATION. (a) This Option Plan shall be administered by the Committee consisting of not fewer than three directors to be appointed by the Board. If necessary to secure the - -------------------------------------------------------------------------------- Page 19 20 exemption pursuant to Rule 16b-3 which has been adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (as such Rule or its equivalent is then in effect) ("Rule 16b-3"), no person shall be eligible to serve on the Committee unless he is then a "disinterested person" within the meaning of paragraph (d)(3) of Rule 16b-3. The Board may, from time to time, remove members from or add members to the Committee. Vacancies in the Committee, however caused, shall be filled by the Board. The Committee shall select a chairman from among its members and shall hold meetings at such times and places as it may determine. The Committee may appoint a secretary and, subject to the provisions of this Option Plan and to policies determined by the Board, may make such rules and regulations for the conduct of its business as it shall deem advisable. A majority of the Committee shall constitute a quorum. All action of the Committee shall be taken by a majority of its members. Any action may be taken by a written instrument signed by a majority of the members, and action so taken shall be fully as effective as if it had been taken by a vote of the majority of the members at a meeting duly called and held. The Board may act in lieu of the Committee and shall act in lieu of a Committee at any time such a Committee has not been created. (b) Subject to the express terms and conditions of this Option Plan, the Committee shall have full power to grant options under this Option Plan, to construe or interpret this Option Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for its administration. (c) The Committee may, from time to time, determine which employees of the Company, R.P. Scherer and any subsidiary thereof shall be granted options under this - -------------------------------------------------------------------------------- Page 20 21 Option Plan, the number of shares of Stock subject to each option, and the time or times at which options shall be granted, and the Company may grant such options under this Option Plan. (d) No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to this Option Plan or to any option. 7. EFFECTIVE DATE AND TERMINATION. (a) The effective date of this Option Plan is __________, 1990. (b) This Option Plan shall terminate on ________, 2000, but the Board may terminate this Option Plan at any time prior to such date. Termination of this Option Plan shall not alter or impair, without the consent of the Optionee, any of the rights or obligations and any option theretofore granted under this Option Plan. 8. NOTICES. Whenever it is provided in this Option Plan that any notice be given between the Company and an Optionee, such notice shall be delivered in person or by registered or certified mail, return receipt requested, postage prepaid, first class mail, to the following address: If to the Company: RPS Corporation c/o R.P. Scherer Corporation 2075 W. Big Beaver Road Troy, Michigan 48007-7060 Attention: Robert J. Lollini If to an Optionee: At the address listed beside such Optionee's name on the signature page of the Stock Option Agreement executed by such Optionee. - -------------------------------------------------------------------------------- Page 21 22 Any party hereto may change the address designated for mailing by written notice to the other party. All such notices shall be deemed to be delivered when delivered in person, or if placed in the mail, two days thereafter. 9. GOVERNING LAW. THIS OPTION PLAN SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS. 10. AMENDMENTS. The Board may, from time to time, alter, amend, suspend or discontinue this Option Plan, or alter or amend any and all option agreements granted thereunder, PROVIDED, HOWEVER, that no such action of the Board may alter the provisions of this Option Plan so as to alter any outstanding Stock Option Agreement to the detriment of an Optionee without his consent. 11. STATUS OF OPTIONS. Options granted pursuant to this Option Plan are not intended to qualify as Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986 (the "Code"), and the terms of this Option Plan and options granted hereunder shall be so construed; PROVIDED, HOWEVER, that nothing in this Option Plan shall be interpreted as a representation, guarantee or other undertaking on the part of the Company that the options granted pursuant to this Option Plan are not, or will not be, determined to be Incentive Stock Options, within the meaning of Section 422A of the Code. - -------------------------------------------------------------------------------- Page 22 23 I hereby certify that the foregoing Option Plan was duly adopted by the Board on June 18, 1990. Executed as of this 29th day of November, 1990. ---------------------------------------- Secretary - -------------------------------------------------------------------------------- Page 23 24 APPENDIX A ---------- FORM OF NONQUALIFIED STOCK OPTION AGREEMENT RPS Corporation (the "Company"), in consideration of the value of the continuing services of ___________________________ (hereinafter called the "Optionee") as an employee of the Company, R.P. Scherer Corporation, a Delaware corporation and a wholly owned subsidiary of the Company ("R.P. Scherer"), or any subsidiary thereof, which continuing services the grant of this option is designed to secure, and in consideration of the undertakings made herein by Optionee, and pursuant to its 1990 Nonqualified Stock Option Plan (the "Option Plan"), hereby grants to Optionee an option (the "Option"), evidenced by this Nonqualified Stock Option Agreement, exercisable for the period and upon the terms hereinafter set forth, to purchase ______ shares of the Company's Common Stock, par value $.01 per share (the "Common Stock") at a price of $10 per share (the "Common Stock Option Price"), and _____ shares of the Company's Series B Redeemable Preferred Stock, par value $.01 per share (the "Preferred Stock", and together with the Common Stock, the "Stock"), at a price of $10 per share (the "Preferred Stock Option Price"). Capitalized terms defined in the Option Plan shall have the same meaning when used herein, unless otherwise defined herein. 1. TERM OF OPTION. This Option is granted and dated on the date set forth on the signature page (sometimes hereinafter called the "Date of Grant") and shall terminate and expire, to the extent not previously exercised, ten years and one day after the Date of Grant, except that under the circumstances described in Sections 4, 6 and 7 hereof this Option may expire and terminate at an earlier date. 2. EXERCISE OF OPTION. (a) During the term of this Option, as set forth in Section 1 hereof, the Company shall determine the extent of exercisability of this Option in accordance - -------------------------------------------------------------------------------- Page 24 25 with the terms and conditions of this Section 2 and (i) in the case of a Sale of the Company (as hereinafter defined), in accordance with Section 6 hereof, (ii) in the case of a dissolution or liquidation of the Company, in accordance with Section 7 hereof and (iii) in the case of a termination of employment of Optionee, in accordance with Sections 4(c) and 4(e) hereof. The Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board") may accelerate the time at which termination may be exercised and reserves the right to delay and/or reduce the periods during which this Option may be exercised in order to comply with federal and state securities laws. (b) EXERCISABLE SHARES. The total number of shares of Stock for which this Option shall be exercisable (the "Exercisable Shares") shall be the number of shares of Common Stock and Preferred Stock subject to this Option multiplied by the percentages set forth below for the applicable time period: Applicable Time Applicable Period Percentage --------------- ---------- Prior to October 5, 1990 0% on or after October 5, 1990 33-1/3% and prior to October 5, 1991 on or after October 5, 1991 66-2/3% and prior to October 5, 1992 on or after October 5, 1992 100% The number of Exercisable Shares which are shares of Common Stock on the number of Exercisable Shares which are shares of Preferred Stock shall be in the same proportion to the total number of shares of Common Stock and Preferred Stock, respectively, issuable upon exercise of this Option. - -------------------------------------------------------------------------------- Page 25 26 (c) MANNER OF EXERCISE. Shares of Stock purchased upon exercise of this Option shall at the time of purchase be paid for in full in cash or as otherwise permitted by the Committee. This Option may be exercised in whole or in part from time to time by written notice to the Company stating the full number of shares of Stock with respect to which this Option is being exercised and the time of delivery thereof, which shall be at least 15 days after the giving of such notice unless an earlier date shall have been mutually agreed upon, accompanied by full payment for the shares of Stock by certified or official bank check or the equivalent thereof acceptable to the Company; PROVIDED, HOWEVER, that any such exercise must be for both Common Stock and Preferred Stock in the same proportion to the total number of shares of Common Stock and Preferred Stock, respectively, issuable to Optionee upon exercise of this Option. At the time of delivery, the Company shall, without stock transfer or issue tax to Optionee, deliver to Optionee at the principal executive offices of R.P. Scherer, or such other place as shall be mutually agreed upon, a certificate or certificates for such shares of Stock; PROVIDED, HOWEVER, that the time of delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any requirements of law, including making provision for the deduction and withholding of amounts required to be deducted and withheld under applicable local, state, and federal income tax laws (which provision may require additional payment by Optionee). The Company shall pay any stock transfer tax or issue tax resulting from the issuance of shares of Stock upon the exercise of this Option. If Stock issuable upon exercise of this Option is not registered under the Securities Act of 1933, as amended (the "Securities Act"), the Company at the time of exercise shall require in addition that Optionee or Optionee's Representative deliver an investment representation in form acceptable to the Company and its counsel, and the Company shall place a legend on the - -------------------------------------------------------------------------------- Page 26 27 certificate for such Stock restricting the transfer of such Stock. At no time shall the Company have any obligation or duty to register under the Securities Act the Stock issuable upon exercise of this Option. The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of this Option or portion thereof prior to the execution by Optionee or Optionee's Representative of the Stockholders Purchase Agreement or the Stock Subscription Agreement. 3. NON-TRANSFERABILITY OF OPTION RIGHTS. This Option is not assignable or transferable otherwise than by will or by the laws of descent and distribution. During the lifetime of Optionee, this Option shall be exercisable only by him or Optionee's Representative. 4. TERMINATION OF EMPLOYMENT. (a) Subject to the provisions of Sections 4(b), 4(c), 4(d) and 4(e), in the event that Optionee's employment by the Company, R.P. Scherer or any subsidiary thereof shall terminate, this Option shall terminate immediately and shall not be exercisable. (b) In the event that Optionee's employment is terminated because of death or Disability (as hereinafter defined), the Company shall have the right, but not the obligation, for a period of 120 days from the date of termination of employment due to Optionee's death or Disability (the "Call Period"), to repurchase this Option or a portion thereof, to the extent (and only to the extent) that this Option, or a portion thereof, entitles Optionee to purchase the Exercisable Shares existing on the date of Optionee's death or Disability. The Company may exercise its repurchase right under this Section 4(b) at any time during the Call Period by delivering written notice (the "Call Notice") to Optionee (or Optionee's Representative) of its exercise of this right. During the Call Period, Optionee (or Optionee's Representative) may send written notice to the Company (the "Put Notice") that such person wishes the Company to - -------------------------------------------------------------------------------- Page 27 28 repurchase, and the Company shall repurchase, this Option, or a portion thereof, to the same extent as if the Company had exercised its repurchase right under this Section 4(b). The repurchase price for the repurchase of this Option pursuant to this Section 4(b) shall be equal to the sum of (i) the product obtained by multiplying the number of Exercisable Shares which are shares of Common Stock by an amount which shall equal the excess, if any, of the Fair Market Value (as hereinafter defined) per share of the underlying Common Stock, over the Common Stock Option Price, and (ii) the product obtained by multiplying the number of Exercisable Shares which are shares of Preferred Stock by an amount which shall equal the liquidation preference per share of the underlying Preferred Stock over the Preferred Stock Option Price. The closing of a repurchase of this Option pursuant to this Section 4(b) shall be held at the principal executive offices of R.P. Scherer at 10:00 a.m. local time on the tenth business day following the date of delivery of a Call Notice or a Put Notice, as the case may be, or at such other date, time and place as the parties may mutually agree upon. This Option, or any portion thereof, shall terminate immediately upon Optionee's death or Disability and shall not be exercisable to the extent that this Option, or any portion thereof, does not entitle Optionee to purchase Exercisable Shares pursuant to this Section 4(b). The term "Disability" shall mean an Optionee's physical or mental disability (so that the Optionee is not reasonably able to render his full service to the Company, R.P. Scherer or any subsidiary thereof) for any consecutive period exceeding three months or as determined by agreement of a majority of the members of the Board in their reasonable discretion. The date of such Disability shall be on the last day of such three-month period or the day selected by the Board, as the case may be. - -------------------------------------------------------------------------------- Page 28 29 The term "Fair Market Value" shall mean, with respect to each share of underlying common Stock, (i) the fair market value of the Company as determined within six months prior to the applicable date or, if no such determination has been made within six months, then within 75 days of the applicable date determined as of the applicable date, in each case by the Board, divided by (ii) the number of shares of Common Stock then outstanding (assuming the exercise of all outstanding stock options, warrants or rights for the purchase of Common Stock). (c) If neither the Company nor Optionee (or Optionee's Representative) has exercised its right pursuant to Section 4(b) upon the Optionee's death or Disability, Optionee (or Optionee's Representative) shall have the right, at any time within 120 days following the end of the Call Period, to exercise this Option to purchase the Exercisable Shares which existed on the date of his death or Disability. This Option, or any portion thereof, shall terminate at the end of the 120-day period following the Call Period and shall not be exercisable to the extent that this Option, or any portion thereof, is neither repurchased by the Company pursuant to Section 4(b) nor exercised by Optionee (or Optionee's Representative) pursuant to this Section 4(c). (d) In the event that Optionee's employment is terminated by reason of Termination without Cause (as hereinafter defined), the Company shall have the right, but not the obligation, for a period of 120 days from the date of termination of employment of Optionee, to repurchase this Option, or a portion thereof, to the extent (and only to the extent) that this Option, or a portion thereof, entitles Optionee to purchase the Exercisable Shares existing on the date of his termination of employment. The Company may exercise its repurchase right under this Section 4(d) at any time during the 120-day period by delivering written notice to Optionee of its exercise of this right. The repurchase price applicable to a repurchase pursuant to this - -------------------------------------------------------------------------------- Page 29 30 Section 4(d) shall be equal to the sum of (i) the product obtained by multiplying the number of Exercisable Shares which are shares of Common Stock by an amount which shall equal the excess, if any, of the lesser of (A) the Termination Book Value (as hereinafter defined) per share of the underlying Common Stock and (B) the Fair Market Value per share of the underlying Common Stock, over the Common Stock Option Price, and (ii) the product obtained by multiplying the number of Exercisable Shares which are shares of Preferred Stock by an amount which shall equal the liquidation preference per share of the underlying Preferred Stock over the Preferred Stock Option Price. The closing of the repurchase of this Option, or a portion thereof, pursuant to this Section 4(d) shall be held at the principal executive offices of R.P. Scherer at 10:00 a.m. local time or the tenth business day following the date of delivery of such written notice, or at such other date, time and place as the parties may mutually agree upon. This Option, or any portion thereof, shall terminate immediately upon Optionee's Termination without Cause and shall not be exercisable to the extent that this Option, or any portion thereof, does not entitle Optionee to purchase Exercisable Shares pursuant to this Section 4(d). The term "Termination without Cause" shall mean termination of employment of Optionee by reason of any occurrence other than death or Disability of Optionee, termination for Cause or the voluntary termination of Optionee of his employment by resignation or any other means, that results in Optionee no longer being employed by the Company, R.P. Scherer or any subsidiary thereof. The term "Cause" used in connection with the termination of employment of Optionee shall mean a termination of employment due to (i) the commission by Optionee of an act of fraud upon, or bad faith or willful misconduct toward, the Company, R.P. Scherer or any subsidiary thereof (including the unauthorized disclosure of confidential or proprietary - -------------------------------------------------------------------------------- Page 30 31 information of the Company, R.P. Scherer or any subsidiary thereof), (ii) a conviction of Optionee by a court of competent jurisdiction (or a plea of NOLO CONTENDERE or the equivalent under the laws of any other country or political subdivision thereof) or a crime involving, in the reasonable determination of the Board, fraud or dishonesty, or a crime which in the reasonable determination of the Board would tend to be injurious to the reputation of the Company, R.P. Scherer or any subsidiary thereof, or of Optionee, (iii) misconduct by Optionee which, in the reasonable determination of the Board, has been or is likely to be materially injurious to the Company, R.P. Scherer or any subsidiary thereof, or (iv) the failure of Optionee substantially to perform the duties and obligations imposed upon him by R.P. Scherer or any subsidiary thereof. "Termination Book Value" shall mean the book value of the Company (excluding the amount of stockholders' equity attributable to the Company's 17% Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share, the Preferred Stock and to the Company's Series C Redeemable Preferred Stock, par value $.01 per share) per outstanding share of Common Stock (assuming exercise of all outstanding stock options, warrants or rights for the purchase of Common Stock) as of the last day of the fiscal quarter ended immediately preceding the date on which the termination of employment occurs, as determined from the Company's consolidated balance sheet prepared, in accordance with generally accepted accounting principles as applied in the United States, by the management of the Company and R.P. Scherer and reviewed by the independent public accountants regularly employed by the Company. (e) If the Company has not, pursuant to Section 4(d), exercised its repurchase right upon Optionee's termination of employment by reason of Termination without Cause, Optionee shall have the right, at any time within 120 days following the end of the 120-day - -------------------------------------------------------------------------------- Page 31 32 period provided for in Section 4(d), to exercise this Option to purchase the Exercisable Shares which existed on the date of Optionee's termination of employment. This Option, or any portion thereof, shall terminate at the end of 120 days following the 120-day period provided for in Section 4(d) and shall not be exercisable to the extent that this Option, or any portion thereof, is neither repurchased by the Company pursuant to Section 4(d) nor exercised by Optionee pursuant to this Section 4(e). 5. ADJUSTMENTS ON RECAPITALIZATION. The aggregate number of shares of Stock subject to this Option and the Option Price may be appropriately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a recapitalization, the subdivision or consolidation of shares, or the payment of a stock dividend, after the Date of Grant; PROVIDED, HOWEVER, that any option to purchase fractional shares of Stock resulting from such adjustments shall be cancelled. 6. SALE OF THE COMPANY. In the event the Company proposes to engage in a Sale of the Company (as hereinafter defined), the Company shall give Optionee written notice of such Sale on or before 15 days (or shorter time if, in the sole discretion of the Company, 15 days' notice is impracticable) before the consummation of such Sale, and, unless otherwise agreed to by the Company and Optionee, this Option may be exercised after receipt of such notice and prior to such Sale to purchase all of the Stock subject to this Option. This Option, if not exercised prior to a Sale of the Company, shall expire on the occurrence of such Sale and no payment shall be owed to Optionee with respect to this Option; PROVIDED, HOWEVER, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, this Option shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 6. A "Sale of the - -------------------------------------------------------------------------------- Page 32 33 Company" shall mean (i) a merger or consolidation of the Company with or into another entity (other than a subsidiary or affiliate of the Company) in which the holders of Stock are required to exchange their Stock for cash, property and/or securities or (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or affiliate of the Company. 7. DISSOLUTION OF ISSUER OF THE STOCK. In the event of the proposed dissolution or liquidation of the Company, the Company shall give Optionee not less than 30 days' prior written notice of the date of such proposed dissolution or liquidation, and, unless otherwise agreed to by the Company and Optionee, this Option may be exercised during the 30-day period preceding the dissolution or liquidation to purchase all of the Stock subject to this Option. This Option, if not exercised prior to a dissolution or liquidation of the Company, shall expire upon the occurrence of such dissolution or liquidation, and no payment shall be owed to Optionee with respect to this Option; PROVIDED, HOWEVER, that if the proposed dissolution or liquidation of the Company is not consummated and the Board in good faith determines that the proposed dissolution or liquidation of the Company will not be consummated, this Option shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 7. The provisions of this Section 7 shall not be applicable if Optionee receives notice under Section 6 at a time earlier than the notice provided for in this Section 7. 8. DEFERRAL OF PURCHASES. (a) The Company shall not be obligated to purchase this Option (or any portion thereof) at any time pursuant to Section 4(b) or 4(d) hereof, regardless of whether it has delivered a notice of its election to purchase this Option (or any portion thereof), (i) to the extent that the purchase of this Option (or any portion thereof) together with any other purchases of options or Stock pursuant to Sections 4(b) or 4(d) hereof, as the case - -------------------------------------------------------------------------------- Page 33 34 may be, from other Optionees, and pursuant to similar provisions in the 1990 RPS Corporation Non-qualified Performance Stock Option Plan A (the "Performance Stock Option Plan A") and the agreements relating thereto and pursuant to similar provisions in Optionee's Stock Subscription Agreement or Stockholders Purchase Agreement, of which the Company has at such time been given or has given notice) would (A) result in a violation of any law, statute, rule, regulation, policy, guideline, order, writ, injunction, decree or judgment promulgated or entered by any federal, state, local or foreign court or governmental authority applicable to the Company, R.P. Scherer or any of their subsidiaries or any of its or their property or (B) after giving effect thereto, result in a Financing Default, or (ii) if immediately prior to such purchase there exists a Financing Default. The term "Financing Default" shall mean an event which constitutes (or with notice or lapse of time or both would constitute) an event of default (which event of default has not been cured or waived) under any of the following as they may be amended from time to time: (A) the Credit Facilities Agreement (the "Credit Facilities Agreement") dated as of October 3, 1989, among R.P. Scherer and the other borrowers named herein (the "Borrowers"), the guarantors named therein (the "Guarantors"), Citibank, N.A. and CIBC International Trust Limited as lead managers, Citicorp Investment Bank Limited, as facility agent and the banks parties thereto, and any extensions, renewals, refinancing or refunding thereof in whole or in part; (B) the Credit Agreement (the "Revolving Credit Agreement") dated as of October 3, 1989, between R.P. Scherer and Citibank, N.A. and any extensions, renewals, refinancing or refunding thereof in whole or in part; (C) any notes executed and delivered by any of the Borrowers under the Credit Facilities Agreement, or by R.P. Scherer under the Revolving Credit Agreement and any extensions, renewals, refinancing or refunding thereof in whole or in part; (D) any guaranties executed by any of the Guarantors under the Credit Facilities Agreement and any extensions, - -------------------------------------------------------------------------------- Page 34 35 renewals, refinancing or refunding thereof in whole or in part; (E) the Senior Subordinated Loan Agreement, dated as of June 5, 1989, among Shearson Lehman Hutton Holdings Inc., the Company and RPS Acquisition Corporation ("Acquisition") and any extensions, renewals, refinancing or refunding thereof in whole or in part; (F) any notes executed and delivered by Acquisition under the Senior Subordinated Loan Agreement and any extensions, renewals, refinancing or refunding thereof in whole or in part; (G) the Indenture (the "Subordinated Debenture Indenture") to be entered into between R.P. Scherer and The First National Bank of Boston, as trustee relating to the Senior Subordinated Debentures due 1999; (H) the Indenture, (the "Exchange Debenture Indenture") to be entered into between the Company and Ameritrust Company National Association, as trustee, relating to the 17% Subordinated Exchange Debentures; and (I) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (A) through (H) above. (b) If at any time consummation of all purchases of this Option (or any portion thereof) to be made by the Company pursuant to Sections 4(b) or 4(d) hereof (and pursuant to similar provisions for the purchase of options or Stock, as the case may be, contained in the Performance Stock Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements) is not required because of the applicability of clause (i) of Section 8(a) hereof and similar provisions for the purchase of options or Stock, as the case may be, in the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements, but clause (ii) of Section 8(a) hereof or similar provisions for the purchase of options or Stock, as the case may be, in the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements are not applicable, then the - -------------------------------------------------------------------------------- Page 35 36 Company shall purchase (in accordance with the following sentence) from Optionee or Optionee's Representative, as the case may be, desiring or obligated to sell to the Company this Option (or any portion thereof) pursuant to this Option Agreement and from the other persons and entities having the right or obligation to sell options or Stock, as the case may be, pursuant to provisions in the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements, the maximum number of options and shares of Stock of which it is able to repurchase without the events described in Section 8(a)(i) resulting; PROVIDED, HOWEVER, that subject to the last sentence of this Section 8(b), the provisions of Section 8(c) hereof shall apply in respect of this Option (or any portion thereof) not purchased under Section 4(b) or 4(d) hereof because of the operation of Sections 8(a) or 8(b) hereof. In the event any of the events described in Section 8(a)(i) would result from the purchase of any Option pursuant to Sections 4(b) or 4(d), the Board, in its sole discretion, may determine priorities among Optionee or Optionee's Representative, as the case may be, and the other persons having the right or obligation to sell options or Stock, as the case may be, pursuant to the Performance Stock Option Plan A and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements, taking into account relative hardship and such other factors as it deems relevant, and may elect to cause the Company to consummate purchases of this Option (or any portion thereof) according to such priorities (such portion of this Option which is to be so purchased is hereinafter called the "Purchased Option" and such portion of this Option which is not to be so purchased is hereinafter called the "Unpurchased Option"); the Company shall pay Optionee or Optionee's Representatives, as the case may be, holding such Unpurchased Option the applicable purchase - -------------------------------------------------------------------------------- Page 36 37 price for such option on the tenth business day after the Company learns it is no longer precluded from paying for such options. (c) Anything to the contrary contained in Section 4(b) or 4(d) hereof notwithstanding, this Option (or any portion thereof) which Optionee or Optionee's Representative, as the case may be, has elected to sell to the Company or which the Company has elected to purchase from Optionee or Optionee's Representative, as the case may be, but which in accordance with Sections 8(a) and 8(b) hereof is not purchased at the applicable time provided in Section 4(b) or 4(d) hereof, shall be purchased by the Company on the tenth day after such date or dates that the Company after due inquiry learns that (after taking into account any purchases of options or Stock, as the case may be, to be made at such time pursuant to the Performance Stock Option Plan A and the agreements relating thereto, and in the Stock Subscription Agreements and Stockholders Purchase Agreements) it is no longer permitted to defer purchasing this Option (or any portion thereof) under Sections 8(a) and 8(b) hereof, and the Company shall give seven days prior notice of any such purchase; PROVIDED, HOWEVER, that Optionee (or Optionee's Representative) shall not be obligated to sell a lesser portion of this Option at any one time pursuant to this Section 8(c) had it not been so delayed; and, PROVIDED, FURTHER, that if Optionee (or Optionee's Representative) exercises its right to have this Option (or any portion thereof) repurchased pursuant to Section 4(b) or the Company exercises its repurchase rights pursuant to Section 4(b), and the purchase of the Option (or any portion thereof) cannot be consummated by reason of Sections 8(a) and 8(b), the purchase price for the Option (or any portion thereof) shall be calculated pursuant to Sections 4(b) as of the time the repurchase right is exercised, including interest on the aggregate purchase price for the Option at a rate per annum equal to the yield to maturity on U.S. Treasury obligations having a maturity - -------------------------------------------------------------------------------- Page 37 38 equal to a period of three months. If Optionee elects pursuant to Section 8(b) to rescind or defer his election to sell any or all of the Purchased Option, Optionee or Optionee's Representative, as the case may be, may exercise his right pursuant to Section 4(b) to require the Company to purchase the Option (or any portion thereof) for a period of ten days after receiving notice that the Company is no longer precluded from purchasing the Option (or any portion thereof). 9. PAYMENT FOR OPTIONS. If at any time the Company elects or is required to purchase this Option (or any portion thereof) pursuant to Sections 4(b) or 4(d), the Company shall pay the purchase price for this Option (or any portion thereof) to the extent permitted by any loan agreement, indenture or other agreement to which the Company is a party, by the Company's delivery of a bank cashier's check or certified check for the purchase price, if any, and, then, at the Company's sole discretion, to the extent permitted by any loan agreement, indenture or other agreement to which the Company or R.P. Scherer is a party, by the Company's delivery of a junior subordinated promissory note (which shall be subordinated and subject in right of payment to the prior payment of all indebtedness of the Company including, without limitation, any debt outstanding under the Credit Facilities Agreement, the Senior Subordinated Loan Agreement, the Subordinated Debenture Indenture, the Exchange Debenture Indenture and any modifications, renewals, extensions, replacements and refunding of all such indebtedness) of the Company (a "Junior Subordinated Note") equal to the remainder, if any, of the purchase price payable in five equal annual installments commencing on the first anniversary of the issuance thereof and bearing interest payable annually at the publicly announced prime rate of the facility agent under the Credit Facilities Agreement on the date of issuance, against delivery of the certificates or other instruments representing this Option (or any portion thereof) so purchased. If, in a purchase pursuant to Section 4(b), the Company elects to pay all or any - -------------------------------------------------------------------------------- Page 38 39 portion of the purchase price for this Option (or any portion thereof) with a Junior Subordinated Note, the Company shall give Optionee or the Optionee's Representative, as the case may be, notice of the amount of such note at least twenty days prior to such purchase, and Optionee or Optionee's Representative, as the case may be, shall have ten days thereafter to rescind their election to sell this Option (or any portion thereof). 10. SUBJECT TO OPTION PLAN. This Option is subject to all the terms and conditions of the Option Plan, and specifically to the power of the Committee to make interpretations of the Option Plan and of options granted thereunder, and of the Board to alter, amend, suspend or discontinue the Option Plan subject to the limitations expressed in the Option Plan. By acceptance hereof, Optionee acknowledges receipt of a copy of the Option Plan and recognizes and agrees that all determinations, interpretations or other actions respecting the Option Plan may be made by the Board of the Committee, and that such determinations, interpretations or other actions are final, conclusive and binding upon all parties, including Optionee. 11. GOVERNING LAW. THIS NONQUALIFIED STOCK OPTION AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS. 12. JURISDICTION. Any suit, action or proceeding against Optionee with respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be brought in any court of competent jurisdiction in the State of New York, as the Company may elect in its sole discretion, and Optionee hereby submits to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. Optionee hereby irrevocably waives any objections which he may now or hereafter have to the laying of the venue of any suit, action - -------------------------------------------------------------------------------- Page 39 40 or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of New York, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. No suit, action or proceeding against the Company with respect to this Agreement may be brought in any court, domestic or foreign, or before any similar domestic or foreign authority other than in a court of competent jurisdiction in the State of New York, and Optionee hereby irrevocably waives any right which he may otherwise have had to bring such an action in any other court, domestic or foreign, or before any similar domestic or foreign authority. The Company hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or proceeding. IN WITNESS WHEREOF, this Nonqualified Stock Option Agreement is executed as of the ____ day of ____________, 19__. RPS CORPORATION By: ____________________________________ Name: __________________________________ Title: _________________________________ The undersigned Optionee hereby accepts the benefits of the foregoing Nonqualified Stock Option Agreement. ---------------------------------------- ---------------------------------------- Address of Optionee: ---------------------------------------- ---------------------------------------- ---------------------------------------- - -------------------------------------------------------------------------------- Page 40 41 FIRST AMENDMENT TO RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLANS WHEREAS, RPS Corporation, a Delaware corporation, established the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B; and WHEREAS, RPS CORPORATION changed its name to R.P. Scherer Corporation in 1991 (the "Company"); and WHEREAS, the Company desires to amend the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B. NOW, THEREFORE, the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B (each individually referred to respectively as the "1990 Plan," the "1990 Plan A" and the "1990 Plan B" and collectively, the "1990 Plans") are amended effective February __, 1994, with respect to each of the 1990 Plans subject to subsequent shareholder approval as follows: 1. The last sentence of Section 3 of each of the 1990 Plans is amended by adding the phrase "to the extent options are not transferred to a grantor trust pursuant to Section 4(c)." - -------------------------------------------------------------------------------- Page 41 42 2. Effective as of February 18, 1994, Section 4(c) of each of the 1990 Plans is amended in its entirety to read as follows: (c) NON-TRANSFERABILITY OF OPTION RIGHTS. No option shall be assignable or transferable otherwise than (i) by will, (ii) by the laws of descent and distribution, or (iii) to one or more grantor trusts provided that with regard to a transfer to one or more such grantor trusts the Optionee's Stock Option Agreement expressly so provides for such transfer, is approved by the Committee, and the Optionee does not receive any consideration for the transfer. The option is exercisable only by such Optionee or grantor trust trustee or, as provided in Section 3, such Optionee's Representative. 3. Effective as of February 18, 1994, a new Section 12 is added to each of the 1990 plans as follows: 12. TRUSTS. For all purposes of the Plan, a grantor trust trustee that is a transferee pursuant to Section 4(c) is the "Optionee"; provided, however, for purposes of determining the rights and obligations of the Company and such grantor trust trustee under Section 4(d), the employee granted the Options shall be deemed the Optionee whose termination, disability or death will effectuate such rights or obligations. IN WITNESS WHEREOF, these Amendments have been adopted by the Company this 18th day of February, 1994. ATTEST R.P. SCHERER CORPORATION /s/ By: /s/ Aleksandar Erdeljan - ---------------------------------- ------------------------------------ Its: President - -------------------------------------------------------------------------------- Page 42 43 SECOND AMENDMENT TO RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLANS The RPS Corporation 1990 Nonqualified Stock Option Plan, the RPS Corporation 1990 Nonqualified Performance Stock Option Plan A, and the RPS Corporation 1990 Nonqualified Performance Stock Option Plan B (each individually referred to respectively as the "1990 Plan," the "1990 Plan A" and the "1990 Plan B" and collectively referred to as the "1990 Plans") are amended effective September 1, 1994, as follows: 1. AMENDMENT TO SECTION 1. The first sentence of Section 1 of each of the 1990 Plans is amended in its entirety to read as follows: "The purpose of this plan (this "Option Plan") is to provide a means by which certain employees of R.P. Scherer Corporation (formerly RPS Corporation), a Delaware corporation (the "Company"), R.P. Scherer International Corporation (formerly R.P. Scherer Corporation) , a Delaware corporation and a wholly owned subsidiary of the Company ("R.P. Scherer"), or any subsidiary thereof, may be given an opportunity to purchase common stock, par value $0.01 per share (the "Common Stock") , and prior to conversion to Common Stock of Series B Redeemable Preferred Stock and conversion of the related options by operation of Section 4(e) to options for Common Stock (the "Conversion"), Series B Redeemable Preferred Stock, par value $0.01 per share (the "Preferred Stock," and together with the Common Stock, the "Stock") of the Company." 2. AMENDMENT TO SECTION 2. Section 2 of each of the 1990 Plans is amended by adding the phrase "prior to the Conversion" immediately following the phrase "Subject to adjustment as provided in Section 4(e) hereof," and by adding at the end of the first sentence the phrase, "and after the Conversion a number of shares of Common Stock pursuant to Section 4(e)." - -------------------------------------------------------------------------------- Page 43 44 3. AMENDMENTS TO SECTION 4 OF THE PLANS. Section 4 of the 1990 Plans is amended as follows: (i) Subject to shareholder ratification, Section 4(a) of each of the 1990 Plans is deleted and a new Section 4(a) is included to read as follows: "(a) TERMS AND CONDITIONS OF OPTIONS. The Committee may grant options from time to time pursuant to this Option Plan. Such options shall be evidenced by written agreements substantially in the form of the Nonqualified Stock Option Agreement (the "Stock Option Agreement"), Appendix A to the Option Plan as originally adopted, but pursuant to and interpreted in accordance with, and not inconsistent with, this Option Plan as amended. The shares of Stock subject to each option shall, (i) upon issuance, but in no event after September 1, 1994, be subject to the terms and conditions, including restrictions on transferability, contained in an agreement substantially in the form of the Stockholders Purchase Agreement, Appendix B to the Option Plan as originally adopted, entered into by the Company and the Optionees (the "Stockholders Purchase Agreement"), or, (ii) with respect to certain Optionees, unless terminated by the Company, the Management Stock Subscription Agreement between the Company and such Optionees (the "Stock Subscription Agreement") as amended and restated from time to time. Notwithstanding anything to the contrary herein, however, no insider, as defined for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, may sell shares of Stock subject to an option granted hereunder after August 31, 1994, and prior to March 2, 1995. Nothing in this Option Plan or an option granted hereunder shall govern the employment rights and duties between an Optionee and the Company or R.P. Scherer, or any subsidiary thereof, nor in any way be deemed to constitute an employment agreement among such parties. Effective September 1, 1994 any Stockholders Purchase Agreement in the form attached hereto as Appendix B entered into by the Company and Optionee shall be terminated." (ii) Section 4(b) of each of the 1990 Plans is amended by inserting the phrase "(as effective, pursuant thereto, prior to September 1, 1994)" immediately after the reference to Section 4(d) and adding a new sentence to the end of Section 4(b) to read "The termination date, which is not more than 10 years and 1 day from the date the option is granted and which is set forth in an Optionee's Option Agreement, shall be referred to as the "Termination Date." - -------------------------------------------------------------------------------- Page 44 45 (iii) Subject to shareholder ratification, Section 4(d)(i) of both the 1990 Plan and the 1990 Plan A are deleted and replaced with a new Section 4(d)(i)(A) and 4(d)(i)(B) to read as follows: "(i)(A) Prior to September 1, 1994, subject to the provisions of Sections 4(d)(ii), 4(d)(iii) , 4(d)(iv) and 4(d)(v), in the event that an Optionee's employment by the Company, R.P. Scherer or any subsidiary thereof shall terminate, all options granted to such Optionee pursuant to this Option Plan shall terminate immediately and shall not be exercisable; and (i)(B) On and after September 1, 1994, Sections 4(d)(ii), 4(d)(iii), 4(d)(iv) and 4(d)(v) shall be inapplicable, and notwithstanding an Optionee's termination of employment, options shall not terminate until their Termination Date and shall not be exercisable thereafter." (iv) Subject to shareholder ratification, Section 4(d) of the 1990 Plan B is amended by adding the phrase "Prior to September 1, 1994" at the beginning of the first sentence of the Section, and a new sentence shall be added at the end of Section 4(d) of the 1990 Plan B to read as follows: "On and after September 1, 1994, notwithstanding an Optionee's termination of employment, options shall not terminate until their Termination Date and shall not be exercisable thereafter." (v) Subject to shareholder ratification, Section 4(f) of both the 1990 Plan and the 1990 Plan A are deleted and a new Section 4(f) is included to read as follows: "(f) In the event the Company proposes to engage in a Sale of the Company (as hereunder defined and sometimes referred to as "Sale"), the Company shall give each Optionee written notice of such Sale on or before 15 days (or shorter time if, in the sole discretion of the Company, 15 days notice is impracticable) before the consummation of such Sale, and unless otherwise agreed to by the Company and the Optionee, each option shall, after receipt of such notice and prior to such Sale, automatically become exercisable for the Exercisable Shares existing on the date the Company gives written notice of the Sale. The Committee may, in its sole discretion, provide that the options not exercised prior to such Sale shall expire 30 days after the occurrence of such Sale, provided, however, that the Compensation Committee may not terminate options pursuant to this Section prior to March 2 1995. If options are not exercised in connection with such Sale, and provided the Committee does not provide for - -------------------------------------------------------------------------------- Page 45 46 the termination of such options, then following consummation of the Sale, such Optionee upon exercise of his options, will only be entitled to receive the kind and amount of stock, securities, or assets that such Optionee would have received had such Optionee exercised his or her options immediately prior to such Sale; PROVIDED, HOWEVER, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 4(f). A "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (other than a subsidiary or affiliate of the Company), (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or affiliate of the Company, (iii) 50% or more of the Company's then outstanding shares of voting stock is acquired by another corporation, person or entity (other than a subsidiary or affiliate of the Company), or (iv) the Company recapitalizes or enters into any similar transaction, and as a result of which the Common Stock either (A) is no longer a voting equity security of the Company or (B) is no longer listed on a national securities exchange or authorized for quotation on an inter-dealer quotation system of a national securities association." (vi) Section 4(j) of the 1990 Plan and of the 1990 Plan A and Section 4(h) of the 1990 Plan B are amended by adding the phrase "Prior to September 1, 1994", at the beginning thereof. 4. AMENDMENTS TO SECTION 5. (i) Section 5(c)(iii) of the 1990 Plan A is amended effective September 1, 1994 to read as follows: "(iii) in the case of termination of employment of an Optionee pursuant to Section 4(d)." (ii) Section 5(a) of the 1990 Plan is amended effective September 1, 1994 to read as follows: "(iii) in the case of termination of employment of an Optionee pursuant to Section 4(d)." (iii) Subject to shareholder ratification, Section 5(a)(vi) of the 1990 Plan B shall be amended in its entirety to read as follows: - -------------------------------------------------------------------------------- Page 46 47 "(vi) "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (except a subsidiary or Affiliate of the Company), (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or Affiliate of the Company, (iii) 50% or more of the Company's then outstanding shares of voting stock is acquired by another corporation, person or entity (other than a subsidiary Affiliate of the Company), or (iv) the Company recapitalizes or enters into any similar transaction, and as a result of which the Common Stock either (A) is no longer a voting equity security of the Company or (B) is no longer listed on a national securities exchange or authorized for quotation on an inter-dealer quotation system of a national securities association." (iv) Subject to shareholder ratification, the fourth sentence of Section 5(c) of the 1990 Plan B is deleted and replaced with the following: "The Committee may, in its sole discretion, provide that the options not exercised prior to a Sale of the Company shall expire 30 days after the occurrence of such Sale, provided, however, that the Compensation Committee may not terminate options pursuant to this Section prior to March 2, 1995. If options are not exercised in connection with such Sale, and provided the Committee does not provide for the termination of such options, then following consummation of the Sale, such Optionee upon exercise of his option, will only be entitled to receive the kind and amount of stock, securities, or assets that such Optionee would have received had such Optionee exercised his or her option immediately prior to such Sale; PROVIDED, HOWEVER, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section." 5. AMENDMENTS TO SECTION 6. Section 6 of the 1990 Plans is amended as follows: (i) The last sentence of Section 6(a) of each of the Plans is amended to read as follows: "The Board may act in lieu of the Committee with directors who are not "disinterested persons" abstaining and shall act in lieu of a Committee with directors who are not "disinterested persons" abstaining at any time such a Committee has not been created." (ii) Subject to shareholder ratification, a new paragraph is added to Section 6(b) of the Plans to read as follows: - -------------------------------------------------------------------------------- Page 47 48 "Notwithstanding anything to the contrary in the Plan as amended, other than Section 4(d) and Section 4(c), the Committee may grant options to eligible employees who are not United States citizens or residents on such terms and conditions as may, in the judgment of the Committee, be necessary or desirable to foster the purposes of the Plan. In furtherance of the purposes of the Plan, the Committee may adopt such modifications to the terms of Options and such procedures and guidelines, and may cause the Company to take such other actions, as may be necessary or advisable to comply with foreign laws and practices." IN WITNESS WHEREOF, the Corporation has adopted this Amendment this 29 day of September, 1994. ATTEST: R.P. SCHERER CORPORATION /s/ By: /s/ Aleksandar Erdeljan - ---------------------------------- ------------------------------------ Secretary Its: President & CEO - -------------------------------------------------------------------------------- Page 48 EX-99.B 9 EXHIBIT 99(B) 1 Exhibit 99(b) R.P. SCHERER CORPORATION (f/k/a RPS CORPORATION) ------------------------ 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A 1. PURPOSE. The purpose of this 1990 Nonqualified Performance Stock Option Plan A (this "Performance Plan") is to provide a means by which certain employees of RPS Corporation, a Delaware corporation (the "Company"), R.P. Scherer Corporation, a Delaware corporation and a wholly owned subsidiary of the Company ("R.P. Scherer"), or any subsidiary thereof, may be given an opportunity to purchase common stock, par value $.01 per share (the "Common Stock"), and Series B Redeemable Preferred Stock, par value $.01 per share (the "Preferred Stock" and together with the Common Stock, the "Stock") of the Company. This Performance Plan is intended to advance the interests of the Company by encouraging stock ownership on the part of certain employees, by enabling the Company and R.P. Scherer to secure and retain the services of highly qualified persons, and by providing employees with an additional incentive to advance the success of the Company. 2. STOCK SUBJECT TO OPTION. Subject to adjustment as provided in Section 4(e) hereof, options may be granted by the Company in accordance with the provisions of Section 4 hereof to purchase up to an aggregate of 90,798 shares of the authorized but unissued Common Stock and up to an aggregate of 181,596 shares of the authorized but unissued Preferred Stock. Shares of Stock that by reason of the expiration of an option or otherwise are no longer subject to purchase pursuant to an option granted under this Performance Plan may be the subject of other options granted under this Performance Plan or any other option, incentive or compensatory plan adopted by the Company. - -------------------------------------------------------------------------------- 1 2 3. PARTICIPANTS. All key employees of the Company, R.P. Scherer or any of its subsidiaries, as determined by the Board of Directors of the Company (the "Board") or the Committee (as such term is defined in Section 4(a) hereof), may be granted options under this Performance Plan. A person who holds an option granted hereunder that has not expired is referred to as an "Optionee"; PROVIDED, HOWEVER, that in the event of such person's death or Disability (as hereinafter defined) such person's estate, personal representative or beneficiary following the death or incapacity of such person (an "Optionee's Representative") shall be able to exercise the rights otherwise available to the Optionee. 4. TERMS AND CONDITIONS OF OPTIONS. The Committee may grant options from time to time pursuant to this Performance Plan. Such options shall be evidenced by written agreements substantially in the form of the Nonqualified Performance Stock Option Agreement A (the "Performance Stock Option Agreement"), which is attached hereto as Appendix A, and shall not be inconsistent with this Performance Plan. The shares of Stock subject to each option shall, upon issuance, become subject to the terms and conditions, including restrictions on transferability, contained in an agreement substantially in the form of the Stockholders Purchase Agreement attached hereto as Appendix B to be entered into by the Company and the Optionee (the "Stockholders Purchase Agreement"), or, with respect to certain Optionees, a Management Stock Subscription Agreement between the Company and such Optionee (the "Stock Subscription Agreement"). Nothing in this Performance Plan or an option granted hereunder shall govern the employment rights and duties between an Optionee and the - -------------------------------------------------------------------------------- 2 3 Company or R.P. Scherer or any subsidiary thereof, nor in any way be deemed to constitute an employment agreement among such parties. (a) OPTION PRICE. The price per share of the Common Stock subject to each option (the "Common Stock Option Price") shall be set by a Compensation Committee (the "Committee") of the Board; PROVIDED, HOWEVER, that the Common Stock Option Price per share may be less than the fair market value of a share of Common Stock on the Date of Grant, as such date is set forth in the applicable Performance Stock Option Agreement. For purposes of the foregoing, the fair market value of the Common Stock on the Date of Grant shall be the fair market value established by the Committee acting in good faith, and the fair market value may be more or less than the book value of the Common Stock. The price per share of the Preferred Stock subject to each option (the "Preferred Stock Option Price") shall be the liquidation preference of each such underlying share of Preferred Stock. The Common Stock Option Price and the Preferred Stock Option Price are collectively referred to as the "Option Price." (b) TERM OF OPTION. Notwithstanding any other provision of this Performance Plan, each option granted under this Performance Plan shall expire not more than ten years and one day from the date the option is granted, except that under the circumstances described in Sections 4(d), 4(f) and 4(g), options may expire and terminate at an earlier date. (c) NON-TRANSFERABILITY OF OPTION RIGHTS. No option shall be assignable or transferable otherwise than by will or by the laws of descent - -------------------------------------------------------------------------------- 3 4 and distribution. During the lifetime of an Optionee, the option is exercisable only by such Optionee or, as provided in Section 3, such Optionee's Representative. (d) TERMINATION OF EMPLOYMENT. (i) Subject to the provisions of Sections 4(d)(ii), 4(d)(iii), 4(d)(iv) and 4(d)(v), in the event that an Optionee's employment by the Company, R.P. Scherer or any subsidiary thereof shall terminate, all options granted to such Optionee pursuant to this Performance Plan shall terminate immediately and shall not be exercisable. (ii) In the event that an Optionee's employment is terminated because of death or Disability, the Company shall have the right, but not the obligation, for a period of 120 days from the date of termination of employment due to such Optionee's death or Disability (the "Call Period"), to repurchase an Optionee's options granted pursuant to this Performance Plan, or a portion thereof, to the extent (and only to the extent) that such options, or a portion thereof, entitle the Optionee to purchase the Exercisable Shares (as hereinafter defined) existing on the date of such Optionee's death or Disability. The Company may exercise its repurchase right under this Section 4(d)(ii) at any time during the Call Period by delivering written notice (the "Call Notice") to such Optionee or such Optionee's Representative of the Company's exercise of this right. During the Call Period, the Optionee (or the Optionee's Representative) may send written notice to the Company (the "Put Notice") that such person wishes the Company to repurchase, and the - -------------------------------------------------------------------------------- 4 5 Company shall repurchase, such Optionee's options, or a portion thereof, to the same extent as if the Company had exercised its repurchase right under this Section 4(d)(ii). The repurchase price for each option repurchased pursuant to this Section 4(d)(ii) shall be equal to the sum of (A) the product obtained by multiplying the number of Exercisable Shares which are shares of Common Stock by an amount which shall equal the excess, if any, of the Fair Market Value (as hereinafter defined) per share of the underlying Common Stock, over the Common Stock Option Price, and (B) the product obtained by multiplying the number of Exercisable Shares which are shares of Preferred Stock by an amount which shall equal the liquidation preference per share of the underlying Preferred Stock over the Preferred Stock Option Price. The closing of any repurchase of any options pursuant to this Section 4(d)(ii) shall be held at the principal executive offices of R.P. Scherer at 10:00 a.m. local time on the tenth business day following the date of delivery of a Call Notice or a Put Notice, as the case may be, or at such other date, time and place as the parties may mutually agree upon. Option granted to an Optionee pursuant to this Performance Plan, or any portion thereof, shall terminate immediately upon such Optionee's death or Disability and shall not be exercisable to the extent that such options, or any portion thereof, do not entitle such Optionee to purchase Exercisable Shares pursuant to this Section 4(d)(ii). The term "Disability" shall mean an Optionee's physical or mental disability (so that the Optionee is not reasonably able to render his full service to the Company, R.P. Scherer or any subsidiary thereof) for any - -------------------------------------------------------------------------------- 5 6 consecutive period exceeding three months or as determined by agreement of a majority of the members of the Board in their reasonable discretion. The date of such Disability shall be on the last day of such three-month period or the day selected by the Board, as the case may be. The term "Fair Market Value" shall mean, with respect to each share of underlying Common Stock, (A) the fair market value of the Company as determined within six months prior to the applicable date or, if no such determination has been made within six months, then within 75 days of the applicable date determined as of the applicable date, in each case by the Board, divided by (B) the number of shares of Common Stock then outstanding (assuming the exercise of all outstanding stock options, warrants or rights for the purchase of Common Stock). (iii) If neither the Company nor the Optionee (or the Optionee's Representative) has exercised its right pursuant to Section 4(d)(i) upon the Optionee's death or Disability, such Optionee (or such Optionee's Representative) shall have the right, at any time within 120 days following he end of the Call Period, to exercise the options granted to such Optionee pursuant to this Performance Plan to purchase the Exercisable Shares which existed on the date of such Optionee's death or Disability. Options granted to an Optionee pursuant to this Performance Plan, or any portion thereof, shall terminate at the end of the 120 day period following the Call Period and shall not be exercisable to the extent that such options, or any portion thereof, are neither repurchased by the Company pursuant to Section 4(d)(ii) nor exercised - -------------------------------------------------------------------------------- 6 7 by the Optionee or the Optionee's Representative pursuant to this Section 4(d)(iii). (iv) In the event that an Optionee's employment is terminated by reason of Termination without Cause (as hereinafter defined), the Company shall have the right, not the obligation, for a period of 120 days from the date of termination of employment of the Optionee, to repurchase an Optionee's options granted pursuant to this Performance Plan, or a portion thereof, to the extent (and only to the extent) that such options, or a portion thereof, entitle the Optionee to purchase the Exercisable Shares existing on the date of such Optionee's termination of employment. The Company may exercise its repurchase right under this Section 4(d)(iv) at any time during the 120-day period by delivering written notice to the Optionee of its exercise of this right. The repurchase price for each option, or portion thereof, repurchased pursuant to this Section 4(d)(iv) shall be equal to the sum of (A) the product obtained by multiplying the number of Exercisable Shares which are shares of Common Stock by an amount which shall equal the excess, if any, of the lesser of (x) the Termination Book Value (as hereinafter defined) per share of the underlying Common Stock and (y) the Fair Market Value per share of the underlying Common Stock, over the Common Stock Option Price, and (B) the product obtained by multiplying the number of Exercisable Shares which are shares of Preferred Stock by an amount which shall equal the liquidation preference per share of the underlying Preferred Stock over the Preferred Stock Option Price. The closing of any repurchase of any options - -------------------------------------------------------------------------------- 7 8 pursuant to this Section 4(d)(iv) shall be held at the principal executive offices of R.P. Scherer at 10:00 a.m. local time on the tenth business day following the date of delivery of the Company's written notice of the exercise of its repurchase right, or at such other date, time and place as the parties may mutually agree upon. Options granted to an Optionee under this Performance Plan, or any portion thereof, shall terminate immediately upon such Optionee's Termination without Cause and shall not be exercisable to the extent that such options, or any portion thereof, do not entitle such Optionee to purchase Exercisable Shares pursuant to this Section 4(d)(iv). The term "Termination without Cause" shall mean termination of employment of such Optionee by reason of any occurrence other than death or Disability of such Optionee, termination for Cause or the voluntary termination of such Optionee of his employment by resignation or any other means, that results in such Optionee no longer being employed by the Company, R.P. Scherer or any subsidiary thereof. The term "Cause" used in connection with the termination of employment of an Optionee shall mean a termination of employment due to (i) the commission by such Optionee of an act of fraud upon, or bad faith or willful misconduct toward, the Company, R.P. Scherer or any subsidiary thereof (including the unauthorized disclosure of confidential or proprietary information of the Company, R.P. Scherer or any subsidiary thereof), (ii) a conviction of such Optionee by a court of competent jurisdiction (or a plea of NOLO CONTENDERE or the equivalent under the laws of any other country or - -------------------------------------------------------------------------------- 8 9 political subdivision thereof) of a crime involving, in the reasonable determination of the Board, fraud or dishonesty, or a crime which in the reasonable determination of the Board would tend to be injurious to the reputation of the Company, R.P. Scherer or any of its subsidiaries, or of such Optionee, (iii) misconduct by such Optionee which, in the reasonable determination of the Board, has been or is likely to be materially injurious to the Company, R.P. Scherer or any subsidiary thereof; or (iv) the failure of such Optionee substantially to perform the duties and obligations imposed upon him by R.P. Scherer or any subsidiary thereof. "Termination Book Value" shall mean the book value of the Company (excluding the amount of stockholders' equity attributable to the Company's 17% Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share, the Preferred Stock and to the Company's Series C Redeemable Preferred Stock, par value $.01 per share) per outstanding share of Common Stock (assuming the exercise of all outstanding stock options, warrants or rights for the purchase of Common Stock) as of the last day of the fiscal quarter ended immediately preceding the date on which the termination of employment occurs, as determined from the Company's consolidated balance sheet prepared, in accordance with generally accepted accounting principles as applied in the United States, by management of the Company and R.P. Scherer and reviewed by the independent public accountants regularly employed by the Company (the "Accountants"). - -------------------------------------------------------------------------------- 9 10 (v) If the Company has not, pursuant to Section 4(d)(iv), exercised its repurchase right upon the Optionee's termination of employment by reason of Termination Without Cause, such Optionee shall have the right, at any time within 120 days following the end of the 120-day period provided for in Section 4(d)(iv), to exercise the options granted to such Optionee pursuant to this Performance Plan to purchase the Exercisable Shares which existed on the date of such Optionee's termination of employment. Any options granted to an Optionee pursuant to this Performance Plan, or a portion thereof, shall terminate at the end of the 120-day period following the 120-day period provided for in Section 4(d)(iv) and shall not be exercisable to the extent that such options, or any portion thereof, are neither repurchased by the Company pursuant to Section 4(d)(iv) nor exercised by the Optionee pursuant to this Section 4(d)(v). (e) ADJUSTMENT OF OPTIONS ON RECAPITALIZATION. The aggregate number of shares of Stock for which options may be granted to persons participating under this Performance Plan, the number of shares of Stock covered by each outstanding option and the Option Price for the shares of Stock subject to each such option may be appropriately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a recapitalization, the subdivision or consolidation of shares, or the payment of a stock dividend after the Date of Grant; PROVIDED, HOWEVER, that any options to purchase fractional shares of Stock resulting from any such adjustment shall be cancelled. - -------------------------------------------------------------------------------- 10 11 (f) SALE OF THE COMPANY. In the event the Company proposes to engage in a Sale of the Company (as hereinafter defined), the Company shall give each Optionee written notice of such Sale on or before 15 days (or shorter time if, in the sole discretion of the Company, 15 days' notice is impracticable) before the consummation of such Sale, and, unless otherwise agreed to by the Company and the Optionee, each option shall, after receipt of such notice and prior to such Sale, automatically become exercisable for the Exercisable Shares existing on the date the Company gives written notice of the Sale. Options not exercised prior to such Sale shall expire on the occurrence of such Sale, and no payment shall be owed to such Optionee with respect to such options; PROVIDED, HOWEVER, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 4(f). A "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (other than a subsidiary or affiliate of the Company) in which the holders of Stock are required to exchange their Stock for cash, property and/or securities, or (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or affiliate of the Company. (g) DISSOLUTION OF ISSUER OF THE STOCK. In the event of the proposed dissolution or liquidation of the Company, the Company shall give each Optionee not less than 30 days prior written notice of the date of the proposed - -------------------------------------------------------------------------------- 11 12 dissolution or liquidation, and, unless otherwise agreed to be the Company and the Optionee, each Optionee shall have the right during the 30-day period preceding the dissolution or liquidation to exercise such Optionee's option for the Exercisable Shares existing on the date the Company gives written notice of the proposed dissolution or liquidation of the Company. Any options (or any portion thereof) granted hereunder, if not exercised prior to the dissolution or liquidation of the Company, shall expire upon the consummation of a dissolution or liquidation of the Company, and no payment shall be owed to any Optionee; PROVIDED, HOWEVER, that if the proposed dissolution or liquidation of the Company is not consummated and the Board in good faith determines that the proposed dissolution or liquidation of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 4(g). The provisions of this Section 4(g) shall not be applicable if the Optionee receives notice under Section 4(f) at a time earlier than the notice provided for herein. (h) RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a stockholder with respect to any shares of Stock held under option until the date of issuance of the stock certificates to him for such shares. Except as provided in Section 4(e) hereof, no adjustment to the option shall be made for dividends, distributions or rights attributable to shares of Stock the record date for which is prior to the date of issuance of Stock upon exercise of the option. - -------------------------------------------------------------------------------- 12 13 (i) TIME OF GRANTING OPTIONS. The grant of an option shall occur only when a Performance Stock Option Agreement shall have been duly executed and delivered by or on behalf of the Company and the employee to whom such option shall be granted. (j) STOCK LEGEND. Certificates evidencing shares of Stock purchased upon the exercise of options issued under this Performance Plan shall be endorsed with a legend in substantially the form contained in the Optionee's Stock Subscription Agreement, or Stockholders Purchase Agreement, as the case may be, as provided for in this Section 4 hereof. (k) DEFERRAL OF PURCHASES. (i) The Company shall not be obligated to purchase any options granted pursuant to this Performance Plan at any time pursuant to Section 4(d)(ii) or 4(d)(iv) hereof, regardless of whether it has delivered a notice of its election to purchase any such shares, (A) to the extent that the purchase of such options (together with any other purchases of options or Stock, as the case may be, pursuant to Sections 4(d)(ii) or 4(d)(iv) hereof from other Optionees, and pursuant to similar provisions in the 1990 RPS Corporation Nonqualified Stock Option Plan (the "Stock Option Plan") and the agreements relating thereto and pursuant to similar provisions in any Optionee's Stock Subscription Agreement or Stockholder's Purchase Agreement, of which the Company has at such time been given or has given notice) would (1) result in a violation of any law, statute, rule, regulation, policy, guideline, order, writ, injunction, decree or judgment promulgated or - -------------------------------------------------------------------------------- 13 14 entered by any federal, state, local or foreign court or governmental authority applicable to the Company, R.P. Scherer or any of their subsidiaries or any of its or their property or (2) after giving effect thereto, result in a Financing Default, or (B) if immediately prior to such purchase there exists a Financing Default. The term "Financing Default" shall mean an event which constitutes (or with notice or lapse of time or both would constitute) an event of default (which event of default has not been cured or waived) under any of the following as they may be amended from time to time: (A) the Credit Facilities Agreement (the "Credit Facilities Agreement") dated as of October 3, 1989, among R.P. Scherer and the other borrowers named therein (the "Borrowers"), the guarantors named therein (the "Guarantors"), Citibank, N.A. and CIBC International Trust Limited as lead managers, Citicorp Investment Bank Limited, as facility agent and the banks parties thereto, and any extensions, renewals, refinancing or refunding thereof in whole or in part; (B) the Credit Agreement (the "Revolving Credit Agreement") dated as of October 3, 1989 between R.P. Scherer and Citibank, N.A. and any extensions, renewals, refinancing or refunding thereof in whole or in part; (C) any notes executed and delivered by any of the Borrowers under the Credit Facilities Agreement, or by R.P. Scherer under the Revolving Credit Agreement and any extensions, renewals, refinancing or refunding thereof in whole or in part; (D) any guaranties executed by any of the Guarantors under the Credit Facilities Agreement and any extensions, renewals, refinancing or refunding thereof in whole or in part; (E) the Senior Subordinated Loan Agreement, - -------------------------------------------------------------------------------- 14 15 dated as of June 5, 1989, among Shearson Lehman Hutton Holdings Inc., the Company and RPS Acquisition Corporation ("Acquisition") and any extensions, renewals, refinancing or refunding thereof in whole or in part; (F) any notes executed and delivered by Acquisition under the Senior Subordinated Loan Agreement and any extensions, renewals, refinancing or refunding thereof in whole or in part; (G) the Indenture (the "Subordinated Debenture Indenture") to be entered into between R.P. Scherer and The First National Bank of Boston, as trustee relating to the Senior Subordinated Debentures due 1999; (H) the Indenture (the "Exchange Debenture Indenture") to be entered into between the Company and Ameritrust Company National Association, as trustee, relating to the 17% Subordinated Exchange Debentures; and (I) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (A) through (H) above. (ii) If at any time consummation of all purchases of options to be made by the Company pursuant to Sections 4(d)(ii) or 4(d)(iv) hereof (and pursuant to similar provisions for the purchase of options or Stock, as the case may be, contained in the Stock Option Plan and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements) is not required because of the applicability of clause (A) of Section 4(k)(i) hereof and similar provisions for the purchase of options or Stock, as the case may be, in the Stock Option Plan and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders - -------------------------------------------------------------------------------- 15 16 Purchase Agreements, but clause (B) of Section 4(k)(i) hereof or similar provisions for the purchase of options or Stock, as the case may be, in the Stock Option Plan and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements are not applicable, then the Company shall purchase (in accordance with the following sentence) from the Optionee or the Optionee's Representative, as the case may be, desiring or obligated to sell to the Company options pursuant to this Performance Plan and from the other persons and entities having the right or obligation to sell options or Stock, as the case may be, pursuant to provisions in the Stock Option Plan and the agreements relating thereto and in the Stock Subscription Agreements and Stockholders Purchase Agreements, the maximum number of options of which it is able to repurchase without the events described in Section 4(k)(i)(A) resulting; PROVIDED, HOWEVER, that, subject to the last sentence of this Section 4(k)(ii), the provisions of Section 4(k)(iii) hereof shall apply in respect of all options not purchased under Section 4(d)(ii) or 4(d)(iv) hereof because of the operation of Sections 4(k)(i) or 4(k)(ii) hereof. In the event any of the events described in Section 4(k)(i)(A) would result from the purchase of any options pursuant to Sections 4(d)(ii) or 4(d)(iv) hereof, the Board, in its sole discretion, may determine priorities among the Optionee or the Optionee's Representative, as the case may be, and the other persons having the right or obligation to sell options or Stock, as the case may be, pursuant to the Stock Option Plan and the agreements relating thereto and in the Stock Subscription Agreements and - -------------------------------------------------------------------------------- 16 17 Stockholders Purchase Agreements, taking into account relative hardship and such other factors as it deems relevant, and may elect to cause the Company to consummate purchases of options hereunder according to such priorities (such options which are to be so purchased are hereinafter called the "Purchased Options" and such options which are not to be so purchased are hereinafter called the "Unpurchased Options"); the Company shall pay the Optionee or the Optionee's Representatives, as the case may be, holding Unpurchased Options the applicable purchase price for such options on the tenth business day after the Company learns it is no longer precluded from paying for such options. (iii) Anything to the contrary contained in Section 4(d)(ii) or 4(d)(iv) hereof notwithstanding, any options which the Optionee or the Optionee's Representative, as the case may be, has elected to sell to the Company or which the Company has elected to purchase from the Optionee or the Optionee's Representative, as the case may be, but which in accordance with Sections 4(k)(i) and 4(k)(ii) hereof are not purchased at the applicable time provided in Section 4(d)(ii) or 4(d)(iv) hereof shall be purchased by the Company on the tenth day after such date or dates that the Company after due inquiry learns that (after taking into account any purchases of options or Stock, as the case may be, to be made at such time pursuant to the Stock Option Plan and the agreements relating thereto, and in the Stock Subscription Agreements and Stockholders Purchase Agreements) it is no longer permitted to defer purchasing such options under Sections 4(k)(i) and 4(k)(ii) hereof, and - -------------------------------------------------------------------------------- 17 18 the Company shall give seven days prior notice of any such purchase; PROVIDED, HOWEVER, that the Optionee (or the Optionee's Representative) shall not be obligated to sell a lesser number of options at any one time pursuant to this Section 4(k)(iii) had they not been so delayed; and, PROVIDED, FURTHER, that if the Optionee (or the Optionee's Representative) exercises its right to have options repurchased pursuant to Section 4(d)(ii) or the Company exercises its repurchase rights pursuant to Section 4(d)(ii), and the purchase of the options cannot be consummated by reason of Sections 4(k)(i) and 4(k)(ii), the purchase price for such options hall be calculated pursuant to Section 4(d)(ii) as of the time the repurchase right is exercised, including interest on the aggregate purchase price for such options at a rate per annum equal to the yield to maturity on U.S. Treasury obligations having a maturity equal to a period of three months. If the Optionee elects pursuant to Section 4(k)(ii) to rescind or defer his election to sell any or all of the Purchased Options, the Optionee or the Optionee's Representative, as the case may be, may exercise his right pursuant to Section 4(d)(ii) to require the Company to purchase his options for a period of ten days after receiving notice that the Company is no longer precluded from purchasing such options. (l) PAYMENT FOR OPTIONS. If at any time the Company elects or is required to purchase any options pursuant to Sections 4(d)(ii) or 4(d)(iv), the Company shall pay the purchase price for the options it purchases to the extent permitted by any loan agreement, indenture or other agreement to which the Company is a party, by the Company's delivery of a bank cashier's - -------------------------------------------------------------------------------- 18 19 check or certified check for the purchase price, if any, and, then, at the Company's sole discretion, to the extent permitted by any loan agreement, indenture or other agreement to which the Company or R.P. Scherer is a party, by the Company's delivery of a junior subordinated promissory note (which shall be subordinated and subject in right of payment to the prior payment of all indebtedness of the Company including, without limitation, any debt outstanding under the Credit Facilities Agreement, Senior Subordinated Loan Agreement, the Subordinated Debenture Indenture, the Exchange Debenture Indenture and any modifications, renewals, extensions, replacements and refunding of all such indebtedness) of the Company (a "Junior Subordinated Note") equal to the remainder, if any, of the purchase price payable in five equal annual installments commencing on the first anniversary of the issuance thereof and bearing interest payable annually at the publicly announced prime rate of the facility agent under the Credit Facilities Agreement on the date of issuance, against delivery of the certificates or other instruments representing the options so purchased. If, in a purchase pursuant to Section 4(d)(ii), the Company elects to pay all or any portion of the purchase price for the options with a Junior Subordinated Note, the Company shall give the Optionee or the Optionee's Representative, as the case may be, notice of the amount of such note at least twenty days prior to such purchase, and the Optionee or the Optionee's Representative, as the case may be, shall have ten days thereafter to rescind their election to sell the options. - -------------------------------------------------------------------------------- 19 20 5. EXERCISE OF OPTIONS. During the term of this Performance Plan, as set forth in Section 7 hereof, the Committee shall determine the exercisability of options granted to each Optionee hereunder in accordance with the terms and conditions of this Section 5. (A) DEFINITIONS. The following terms shall have the following meanings when used in this Section: (i) "Cumulative EDITA" shall mean the aggregate of (a) Total Corporate Income and (b) Total Subsidiary EBITA. (ii) "Cumulative EBITA Goal" shall mean for each fiscal year of the Company set forth below, ending on March 31 of the year, the amount set forth opposite each such year: Full Fiscal Years Cumulative EBITA of the Company Goal ($ millions) ----------------- ----------------- 1990 $ 31.78 1991 $ 78.67 1992 $135.93 1993 $198.76 1994 $268.25 (iii) "Exercise Factor" shall mean that number which results from dividing Cumulative EBITA by the Cumulative EBITA Goal for the last completed fiscal year prior to the Initial Exercise Date, and, if necessary, rounding the result up to the nearest one-hundredth. (iv) "Initial Exercise Date" shall mean, with respect to an Optionee, the earliest to occur of (1) October 5, 1994, (2) the Initial Public Offering, (3) the date the Company gives written notice of the proposed Sale of the Company as provided in - -------------------------------------------------------------------------------- 20 21 Section 4(f) hereof, (4) the date the Company gives written notice of the proposed dissolution or liquidation of the Company as provided in Section 4(g) hereof, and (5) the termination of employment of an Optionee as provided in Sections 4(d)(iii) and 4(d)(v) hereof. (v) "Initial Public Offering" shall mean the sale of shares of Common Stock pursuant to one or more effective registration statements under the Securities Act of 1933, as amended (the "Securities Act") (other than a registration statement relating to shares of Common Stock issuable upon exercise of employee stock options or in connection with any employee benefit plan of the Company), relating to the sale of shares of Common Stock representing, when taken together with all shares of Common Stock sold pursuant to Rule 144 under the Securities Act or under previous registration statements (which were not in connection with employee stock options or employee benefit plans), more than 33-1/3% of the Common Stock outstanding prior to such sale (assuming exercise of all options, warrants or rights for purchase of shares of Common Stock). (vi) "Subsidiary" shall mean each of the following entities: (A) R.P. Scherer N.A.; (B) R.P. Scherer GmbH; (C) R.P. Scherer Leasing Company; (D) R.P. Scherer Canada Inc.; (E) R.P. Scherer SpA; (F) R.P. Scherer S.A.; (G) R.P. Scherer Limited and R.P. Scherer Holdings Limited, on a consolidated basis; (H) R.P. Scherer Pty. Ltd. and R.P. Scherer Holdings Pty. Ltd., on a consolidated basis; (I) R.P. Scherer Korea Limited; and (J) R.P. Scherer K.K. - -------------------------------------------------------------------------------- 21 22 (vii) "Subsidiary EBITA" shall mean for each Subsidiary, (a) for all full fiscal years of the Company, commencing with the fiscal year beginning April 1, 1989 and ending with the fiscal year which is last completed prior to the Initial Exercise Date, the annual results of operations before interest, taxes and amortization of good will of such Subsidiary, calculated in the currency of the country in which such Subsidiary operates, as determined from the annual financial statements of such Subsidiary prepared, in accordance with generally accepted accounting principles as applied in the United States, by management of the Company and R.P. Scherer and reviewed by the Accountants, excluding certain items set forth on Annex III hereto; PROVIDED, HOWEVER, that for the fiscal year commencing April 1, 1989, each Subsidiary's annual results of operations before interest, taxes and amortization of good will shall be determined on a pro forma basis after giving effect to the acquisition of R.P. Scherer as if such acquisition occurred on April 1, 1989; multiplied by (b) the percentage representing the extent of R.P. Scherer's beneficial ownership of the Subsidiary as set forth on Annex I hereto. Subsidiary EBITA shall then be converted into U.S. dollars by multiplying it by the rate of exchange, applicable to the currency in which such number was determined, as set forth on Annex II hereto. (viii) "Total Corporate Income" shall equal (a) for all full fiscal years of the Company, commencing with the fiscal years of the Company, commencing with the fiscal year beginning April 1, 1989 and ending with the fiscal year which is last completed prior to the Initial Exercise Date, earned royalties received or accrued by R.P. Scherer (on an unconsolidated basis) from each Subsidiary (which royalties shall, where necessary, be converted into U.S. dollars at the appropriate rate of exchange set - -------------------------------------------------------------------------------- 22 23 forth on Annex II hereto), net of withholding taxes paid or accrued, as determined from the annual unconsolidated financial statements of R.P. Scherer prepared, in accordance with generally accepted accounting principles as applied in the United States, by the management of the Company and R.P. Scherer and reviewed by the Accountants, excluding certain items set forth on Annex III hereto, MINUS (b) for all full fiscal years of the Company, commencing with the fiscal year beginning April 1, 1989 and ending with the fiscal year which is last completed prior to the Initial Exercise Date, corporate operating expense of the Company and R.P. Scherer each on an unconsolidated basis as determined from the unconsolidated annual financial statements of the Company and R.P. Scherer prepared, in accordance with generally accepted accounting principles as applied in the United States, by the management of the Company and R.P. Scherer and reviewed by the Accountants, excluding certain items set forth on Annex III hereto; and PROVIDED, HOWEVER, that for the fiscal year commencing April 1, 1989, both (a) and (b) above shall be determined on a pro forma basis after giving effect to the acquisition of R.P. Scherer as if such acquisition occurred on April 1, 1989. For purposes of calculating "corporate operating expense", costs incurred in connection with the acquisition of R.P. Scherer and the financing thereof shall not be included. (ix) "Total Subsidiary EBITA" shall mean the sum of all Subsidiary EBITA. (b) EXERCISABLE SHARES. The total number of shares of Stock for which an Optionee's option shall be exercisable (the "Exercisable Shares") shall be determined as follows: (i) if the Exercise Factor is equal to or exceeds 1.1, the number of - -------------------------------------------------------------------------------- 23 24 Exercisable Shares shall be 100% of an Optionee's Option Shares; (ii) if the Exercise Factor is equal to or is less than .9, there shall be no Exercisable Shares; and (iii) if the Exercise Factor exceeds .9, but is less than 1.1, the number of Exercisable Shares shall be calculated by (A) subtracting .1 from the Exercise Factor and (B) multiplying the result produced in (A) by the maximum number of shares of Stock for which an Optionee's option, granted pursuant to this Performance Plan, can be exercised. The number of Exercisable Shares which are shares of Common Stock and the number of Exercisable Shares which are shares of Preferred Stock shall be in the same proportion to the total number of shares of Common Stock and Preferred Stock, respectively, issuable upon exercise of any option granted hereunder. (c) EXERCISE OF OPTION. Except as otherwise provided in this Performance Plan, or in the applicable Performance Stock Option Agreement, no option granted pursuant to this Performance Plan shall be exercisable, in whole or in any part, until the Initial Exercise Date applicable to such Optionee. Thereafter, any option granted pursuant to this Performance Plan shall be exercisable for the number of Exercisable Shares as determined pursuant to Section 5(b) hereof and (i) in the case of a Sale of the Company, pursuant to Section 4(f) hereof, (ii) in the case of dissolution or liquidation of the Company, pursuant to Section 4(g) hereof and (iii) in the case of termination of employment of an Optionee pursuant to Section 4(d)(iii) and 4(d)(v) hereof. The Committee may accelerate the time at which an option may be exercised and may delay and/or reduce the periods during which options may be exercised in order to comply with federal and state securities laws. - -------------------------------------------------------------------------------- 24 25 (d) MANNER OF EXERCISE. Shares of Stock purchased upon exercise of options shall at the time of purchase be paid for in full in cash or as otherwise permitted by the Committee. Options may be exercised in whole or in part from time to time by written notice to the Company stating the full number of shares of Stock with respect to which the option is being exercised and the time of delivery thereof, which shall be at least 15 days after the giving of such notice unless an earlier date shall have been mutually agreed upon, accompanied by full payment for the shares of Stock by certified or official bank check or the equivalent thereof acceptable to the Company; PROVIDED, HOWEVER, that any such exercise must be for both Common Stock and Preferred Stock in the same proportion to the total number of shares of Common Stock and Preferred Stock, respectively, issuable to the Optionee upon exercise of the option granted hereunder. At the time of delivery, the Company shall, without stock transfer or issue tax to an Optionee, deliver to such Optionee at the principal executive offices of R.P. Scherer or such other place as shall be mutually agreed upon, a certificate or certificates for such shares of Stock; PROVIDED, HOWEVER, that the time of delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any requirements of law, including making provision for the deduction and withholding of amounts required to be deducted and withheld under applicable local, state, and federal income tax laws (which provision may require additional payment by such Optionee). The Company shall pay any stock transfer tax or issue tax resulting from the issuance of shares of Stock upon the exercise of any option. If Stock issuable upon exercise of any option is not registered under the Securities Act, the Company at the time of exercise shall require in addition - -------------------------------------------------------------------------------- 25 26 that the Optionee or Optionee's Representative deliver an investment representation in form acceptable to the Company and its counsel, and the Company shall place a legend on the certificate for such Stock restricting the transfer of such Stock. At no time shall the Company have any obligation or duty to register under the Securities Act the Stock issuable upon exercise of options. The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of any option or portion thereof prior to the execution of the Stockholders Purchase Agreement by the Optionee or the Optionee's Representative; PROVIDED, HOWEVER, that those Optionees who have executed a Stock Subscription Agreement shall not be required to execute a Stockholders Purchase Agreement. 6. ADMINISTRATION. (a) This Performance Plan shall be administered by the Committee consisting of not fewer than three directors to be appointed by the Board. If necessary to secure the exemption pursuant to Rule 16b-3 which has been adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (as such Rule or its equivalent is then in effect) ("Rule 16b-3"), no person shall be eligible to serve on the Committee unless he is then a "disinterested person" within the meaning of paragraph (d)(3) of Rule 16b-3. The Board may, from time to time, remove members from or add members to the Committee. Vacancies in the Committee, however caused, shall be filled by the Board. The Committee shall select a chairman from among its members and shall hold meetings at such times and places as it may determine. The Committee may appoint a secretary and, subject to the provisions of this Performance Plan and to policies determined by the Board, may - -------------------------------------------------------------------------------- 26 27 make such rules and regulations for the conduct of its business as it shall deem advisable. A majority of the Committee shall constitute a quorum. All action of the Committee shall be taken by a majority of its members. Any action may be taken by a written instrument signed by a majority of the members, and action so taken shall be fully as effective as if it had been taken by a vote of the majority of the members at a meeting duly called and held. The Board may act in lieu of the Committee and shall act in lieu of a Committee at any time such a Committee has not been created. (b) Subject to the express terms and conditions of this Performance Plan, the Committee shall have full power to grant options under this Performance Plan, to construe or interpret this Performance Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for its administration. (c) The Committee may, from time to time, determine which employees of the Company, R.P. Scherer and any subsidiary thereof shall be granted options under this Performance Plan, the number of shares of Stock subject to each option, and the time or times at which options shall be granted, and the Company may grant such options under this Performance Plan. (d) No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to this Performance Plan or to any option. 7. EFFECTIVE DATE AND TERMINATION. (a) The effective date of this Performance Plan is _________, 1990. - -------------------------------------------------------------------------------- 27 28 (b) This Performance Plan shall terminate on ________, 2000, but the Board may terminate this Performance Plan at any time prior to such date. Termination of this Performance Plan shall not alter or impair, without the consent of the Optionee, any of the rights or obligations and any option theretofore granted under this Performance Plan. 8. NOTICES. Whenever it is provided in this Performance Plan that any notice to be given between the Company and an Optionee, such notice shall be delivered in person or by registered or certified mail, return receipt requested, postage prepaid, first class mail, to the following address: If to the Company: RPS Corporation c/o R.P. Scherer Corporation 2075 W. Big Beaver Road Troy, Michigan 48007-7060 If to an Optionee: At the address listed beside such Optionee's name on the signature page of the Performance Stock Option Agreement executed by such Optionee Any party hereto may change the address designated for mailing by written notice to the other party. All such notices shall be deemed to be delivered when delivered in person, or if placed in the mail, two days thereafter. 9. GOVERNING LAW. THIS PERFORMANCE PLAN SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS. - -------------------------------------------------------------------------------- 28 29 10. AMENDMENTS. The Board may, from time to time, alter, amend, suspend or discontinue this Performance Plan, or alter or amend any and all option agreements granted thereunder; PROVIDED, HOWEVER, that no such action of the Board may alter the provisions of this Performance Plan so as to alter any outstanding Stock Option Agreement to the detriment of an Optionee without his consent. 11. STATUS OF OPTIONS. Options granted pursuant to this Performance Plan are not intended to qualify as Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986 (the "Code"), and the terms of this Performance Plan and options granted hereunder shall be so construed; PROVIDED, HOWEVER, that nothing in this Performance Plan shall be interpreted as an representation, guarantee or other undertaking on the part of the Company that the options granted pursuant to this Performance Plan are not, or will not be, determined to be Incentive Stock Options, within the meaning of Section 422A of the Code. I hereby certify that the foregoing Performance Plan was duly adopted by the Board on June __, 1990. Executed as of this ____ day of _________ 1990. ---------------------------------------- Secretary - -------------------------------------------------------------------------------- 29 30 FIRST AMENDMENT TO RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLANS WHEREAS, RPS Corporation, a Delaware corporation, established the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B; and WHEREAS, RPS CORPORATION changed its name to R.P. Scherer Corporation in 1991 (the "Company"); and WHEREAS, the Company desires to amend the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B. NOW, THEREFORE, the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B (each individually referred to respectively as the "1990 Plan," the "1990 Plan A" and the "1990 Plan B" and collectively, the "1990 Plans") are amended effective February __, 1994, with respect to each of the 1990 Plans subject to subsequent shareholder approval as follows: - -------------------------------------------------------------------------------- 30 31 1. The last sentence of Section 3 of each of the 1990 Plans is amended by adding the phrase "to the extent options are not transferred to a grantor trust pursuant to Section 4(c)." 2. Effective as of February 18, 1994, Section 4(c) of each of the 1990 Plans is amended in its entirety to read as follows: (c) NON-TRANSFERABILITY OF OPTION RIGHTS. No option shall be assignable or transferable otherwise than (i) by will, (ii) by the laws of descent and distribution, or (iii) to one or more grantor trusts provided that with regard to a transfer to one or more such grantor trusts the Optionee's Stock Option Agreement expressly so provides for such transfer, is approved by the Committee, and the Optionee does not receive any consideration for the transfer. The option is exercisable only by such Optionee or grantor trust trustee or, as provided in Section 3, such Optionee's Representative. 3. Effective as of February 18, 1994, a new Section 12 is added to each of the 1990 plans -- as follows: 12. TRUSTS. For all purposes of the Plan, a grantor trust trustee that is a transferee pursuant to Section 4(c) is the "Optionee"; provided, however, for purposes of determining the rights and obligations of the Company and such grantor trust trustee under Section 4(d), the employee granted the Options shall be deemed the Optionee whose termination, disability or death will effectuate such rights or obligations. IN WITNESS WHEREOF, these Amendments have been adopted by the Company this 18TH day of February, 1994. ATTEST R.P. SCHERER CORPORATION - -------------------------------------------------------------------------------- 31 32 /s/ By: /s/ Aleksandar Erdeljan - ---------------------------------- ------------------------------------ Its: President - -------------------------------------------------------------------------------- 32 33 SECOND AMENDMENT TO RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLANS The RPS Corporation 1990 Nonqualified Stock Option Plan, the RPS Corporation 1990 Nonqualified Performance Stock Option Plan A, and the RPS Corporation 1990 Nonqualified Performance Stock Option Plan B (each individually referred to respectively as the "1990 Plan," the "1990 Plan A" and the "1990 Plan B" and collectively referred to as the "1990 Plans") are amended effective September 1, 1994, as follows: 1. AMENDMENT TO SECTION 1. The first sentence of Section 1 of each of the 1990 Plans is amended in its entirety to read as follows: "The purpose of this plan (this "Option Plan") is to provide a means by which certain employees of R.P. Scherer Corporation (formerly RPS Corporation), a Delaware corporation (the "Company"), R.P. Scherer International Corporation (formerly R.P. Scherer Corporation) , a Delaware corporation and a wholly owned subsidiary of the Company ("R.P. Scherer"), or any subsidiary thereof, may be given an opportunity to purchase common stock, par value $0.01 per share (the "Common Stock") , and prior to conversion to Common Stock of Series B Redeemable Preferred Stock and conversion of the related options by operation of Section 4(e) to options for Common Stock (the "Conversion"), Series B Redeemable Preferred Stock, par value $0.01 per share (the "Preferred Stock," and together with the Common Stock, the "Stock") of the Company." 2. AMENDMENT TO SECTION 2. Section 2 of each of the 1990 Plans is amended by adding the phrase "prior to the Conversion" immediately following the phrase "Subject to adjustment as provided in Section 4(e) hereof," and by adding at the end of the first sentence the phrase, "and after the Conversion a number of shares of Common Stock pursuant to Section 4(e)." - -------------------------------------------------------------------------------- 33 34 3. AMENDMENTS TO SECTION 4 OF THE PLANS. Section 4 of the 1990 Plans is amended as follows: (i) Subject to shareholder ratification, Section 4(a) of each of the 1990 Plans is deleted and a new Section 4(a) is included to read as follows: "(a) TERMS AND CONDITIONS OF OPTIONS. The Committee may grant options from time to time pursuant to this Option Plan. Such options shall be evidenced by written agreements substantially in the form of the Nonqualified Stock Option Agreement (the "Stock Option Agreement"), Appendix A to the Option Plan as originally adopted, but pursuant to and interpreted in accordance with, and not inconsistent with, this Option Plan as amended. The shares of Stock subject to each option shall, (i) upon issuance, but in no event after September 1, 1994, be subject to the terms and conditions, including restrictions on transferability, contained in an agreement substantially in the form of the Stockholders Purchase Agreement, Appendix B to the Option Plan as originally adopted, entered into by the Company and the Optionees (the "Stockholders Purchase Agreement"), or, (ii) with respect to certain Optionees, unless terminated by the Company, the Management Stock Subscription Agreement between the Company and such Optionees (the "Stock Subscription Agreement") as amended and restated from time to time. Notwithstanding anything to the contrary herein, however, no insider, as defined for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, may sell shares of Stock subject to an option granted hereunder after August 31, 1994, and prior to March 2, 1995. Nothing in this Option Plan or an option granted hereunder shall govern the employment rights and duties between an Optionee and the Company or R.P. Scherer, or any subsidiary thereof, nor in any way be deemed to constitute an employment agreement among such parties. Effective September 1, 1994 any Stockholders Purchase Agreement in the form attached hereto as Appendix B entered into by the Company and Optionee shall be terminated." (ii) Section 4(b) of each of the 1990 Plans is amended by inserting the phrase "(as effective, pursuant thereto, prior to September 1, 1994)" immediately after the reference to Section 4(d) and adding a new sentence to the end of Section 4(b) to read "The termination date, which is not more than 10 years and 1 day from the date the option is granted and which is set forth in an Optionee's Option Agreement, shall be referred to as the "Termination Date." - -------------------------------------------------------------------------------- 34 35 (iii) Subject to shareholder ratification, Section 4(d)(i) of both the 1990 Plan and the 1990 Plan A are deleted and replaced with a new Section 4(d)(i)(A) and 4(d)(i)(B) to read as follows: "(i)(A) Prior to September 1, 1994, subject to the provisions of Sections 4(d)(ii), 4(d)(iii), 4(d)(iv) and 4(d)(v), in the event that an Optionee's employment by the Company, R.P. Scherer or any subsidiary thereof shall terminate, all options granted to such Optionee pursuant to this Option Plan shall terminate immediately and shall not be exercisable; and (i)(B) On and after September 1, 1994, Sections 4(d)(ii), 4(d)(iii), 4(d)(iv) and 4(d)(v) shall be inapplicable, and notwithstanding an Optionee's termination of employment, options shall not terminate until their Termination Date and shall not be exercisable thereafter." (iv) Subject to shareholder ratification, Section 4(d) of the 1990 Plan B is amended by adding the phrase "Prior to September 1, 1994" at the beginning of the first sentence of the Section, and a new sentence shall be added at the end of Section 4(d) of the 1990 Plan B to read as follows: "On and after September 1, 1994, notwithstanding an Optionee's termination of employment, options shall not terminate until their Termination Date and shall not be exercisable thereafter." (v) Subject to shareholder ratification, Section 4(f) of both the 1990 Plan and the 1990 Plan A are deleted and a new Section 4(f) is included to read as follows: "(f) In the event the Company proposes to engage in a Sale of the Company (as hereunder defined and sometimes referred to as "Sale"), the Company shall give each Optionee written notice of such Sale on or before 15 days (or shorter time if, in the sole discretion of the Company, 15 days notice is impracticable) before the consummation of such Sale, and unless otherwise agreed to by the Company and the Optionee, each option shall, after receipt of such notice and prior to such Sale, automatically become exercisable for the Exercisable Shares existing on the date the Company gives written notice of the Sale. The Committee may, in its sole discretion, provide that the options not exercised prior to - -------------------------------------------------------------------------------- 35 36 such Sale shall expire 30 days after the occurrence of such Sale, provided, however, that the Compensation Committee may not terminate options pursuant to this Section prior to March 2 1995. If options are not exercised in connection with such Sale, and provided the Committee does not provide for the termination of such options, then following consummation of the Sale, such Optionee upon exercise of his options, will only be entitled to receive the kind and amount of stock, securities, or assets that such Optionee would have received had such Optionee exercised his or her options immediately prior to such Sale; PROVIDED, HOWEVER, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 4(f). A "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (other than a subsidiary or affiliate of the Company), (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or affiliate of the Company, (iii) 50% or more of the Company's then outstanding shares of voting stock is acquired by another corporation, person or entity (other than a subsidiary or affiliate of the Company), or (iv) the Company recapitalizes or enters into any similar transaction, and as a result of which the Common Stock either (A) is no longer a voting equity security of the Company or (B) is no longer listed on a national securities exchange or authorized for quotation on an inter-dealer quotation system of a national securities association." (vi) Section 4(j) of the 1990 Plan and of the 1990 Plan A and Section 4(h) of the 1990 Plan B are amended by adding the phrase "Prior to September 1, 1994", at the beginning thereof. 4. AMENDMENTS TO SECTION 5. (i) Section 5(c)(iii) of the 1990 Plan A is amended effective September 1, 1994 to read as follows: "(iii) in the case of termination of employment of an Optionee pursuant to Section 4(d)." (ii) Section 5(a) of the 1990 Plan is amended effective September 1, 1994 to read as follows: - -------------------------------------------------------------------------------- 36 37 "(iii) in the case of termination of employment of an Optionee pursuant to Section 4(d)." (iii) Subject to shareholder ratification, Section 5(a)(vi) of the 1990 Plan B shall be amended in its entirety to read as follows: "(vi) "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (except a subsidiary or Affiliate of the Company), (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or Affiliate of the Company, (iii) 50% or more of the Company's then outstanding shares of voting stock is acquired by another corporation, person or entity (other than a subsidiary Affiliate of the Company), or (iv) the Company recapitalizes or enters into any similar transaction, and as a result of which the Common Stock either (A) is no longer a voting equity security of the Company or (B) is no longer listed on a national securities exchange or authorized for quotation on an inter-dealer quotation system of a national securities association." (iv) Subject to shareholder ratification, the fourth sentence of Section 5(c) of the 1990 Plan B is deleted and replaced with the following: "The Committee may, in its sole discretion, provide that the options not exercised prior to a Sale of the Company shall expire 30 days after the occurrence of such Sale, provided, however, that the Compensation Committee may not terminate options pursuant to this Section prior to March 2, 1995. If options are not exercised in connection with such Sale, and provided the Committee does not provide for the termination of such options, then following consummation of the Sale, such Optionee upon exercise of his option, will only be entitled to receive the kind and amount of stock, securities, or assets that such Optionee would have received had such Optionee exercised his or her option immediately prior to such Sale; PROVIDED, HOWEVER, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section." 5. AMENDMENTS TO SECTION 6. Section 6 of the 1990 Plans is amended as follows: - -------------------------------------------------------------------------------- 37 38 (i) The last sentence of Section 6(a) of each of the Plans is amended to read as follows: "The Board may act in lieu of the Committee with directors who are not "disinterested persons" abstaining and shall act in lieu of a Committee with directors who are not "disinterested persons" abstaining at any time such a Committee has not been created." (ii) Subject to shareholder ratification, a new paragraph is added to Section 6(b) of the Plans to read as follows: "Notwithstanding anything to the contrary in the Plan as amended, other than Section 4(d) and Section 4(c), the Committee may grant options to eligible employees who are not United States citizens or residents on such terms and conditions as may, in the judgment of the Committee, be necessary or desirable to foster the purposes of the Plan. In furtherance of the purposes of the Plan, the Committee may adopt such modifications to the terms of Options and such procedures and guidelines, and may cause the Company to take such other actions, as may be necessary or advisable to comply with foreign laws and practices." IN WITNESS WHEREOF, the Corporation has adopted this Amendment this 29 day of September, 1994. ATTEST: R.P. SCHERER CORPORATION /s/ By: /s/ Aleksandar Erdeljan - ---------------------------------- ------------------------------------ Secretary Its: President & CEO - -------------------------------------------------------------------------------- 38 EX-99.C 10 EXHIBIT 99(C) 1 EXHIBIT 99(c) R.P. SCHERER CORPORATION (f/k/a RPS CORPORATION) ----------------------- 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B 1. Purpose. The purpose of this 1990 Nonqualified Performance Stock Option Plan B (this "Performance Plan") is to provide a means by which certain employees of RPS Corporation, a Delaware corporation (the "Company"), R.P. Scherer Corporation, a Delaware corporation and a wholly owned subsidiary of the Company ("R.P. Scherer"), or any subsidiary thereof, may be given an opportunity to purchase common stock, par value $.01 per share (the "Common Stock"), and Series B Redeemable Preferred Stock, par value $.01 per share (the "Preferred Stock" and together with the Common Stock, the "Stock") of the Company. This Performance Plan is intended to advance the interests of the Company be encouraging stock ownership on the part of certain employees, by enabling the Company and R.P. Scherer to secure and retain the services of highly qualified persons, and by providing employees with an additional incentive to advance the success of the Company. 2. Stock Subject to Option. Subject to adjustment as provided in Section 4(e) hereof, options may be granted by the Company in accordance with the provisions of Section 4 hereof to purchase up to an aggregate of 45,396 shares of the authorized but unissued Common Stock and up to an aggregate of 90,793 shares of the authorized but unissued Preferred Stock. Shares of Stock that by reason of the expiration of an option or otherwise are no longer subject to purchase pursuant to an option granted under this Performance Plan may be the subject of other options granted under this Performance Plan or any other option, incentive or compensatory plan adopted by the Company. 3. Participants. All key employees of the Company, R.P. Scherer or any of its subsidiaries, as determined by the Board of Directors of the Company (the "Board") or the 2 Committee (as such term is defined in Section 4 hereof), may be granted options under this Performance Plan. A person who holds an option granted hereunder that has not expired is referred to as an "Optionee;" provided, however, that in the event of such person's death or Disability (as hereinafter defined), such person's estate, personal representative or beneficiary following the death or incapacity of such person (an "Optionee's Representative") shall be able to exercise the rights otherwise available to the Optionee. 4. Terms and Conditions of Options. The Committee may grant options from time to time pursuant to this Performance Plan. Such options shall be evidenced by written agreements substantially in the form of the Nonqualified Performance Stock Option Agreement B (the "Performance Stock Option Agreement"), which is attached hereto as Appendix A, and shall not be inconsistent with this Performance Plan. The shares of Stock subject to each option shall, upon issuance, be subject to the terms and conditions, including restrictions on transferability, contained in an agreement substantially in the form of the Stockholders Purchase Agreement attached hereto as Appendix B to be entered into by the Company and the Optionees (the "Stockholders Purchase Agreement"), or, with respect to certain Optionees, a Management Stock Subscription Agreement between the Company and such Optionee (the "Stock Subscription Agreement"). Nothing in this Performance Plan or an option granted hereunder shall govern the employment rights and duties between an Optionee and the Company or R.P. Scherer, or any subsidiary thereof, nor in any way be deemed to constitute an employment agreement among such parties. (a) Option Price. The price per share of the Common Stock subject to each option (the "Common Stock Option Price") shall be set by a Compensation Committee (the "Committee") of the Board; provided, however, that the Common Stock Option Price per share may be less than the fair market value of a share of 2 3 Common Stock on the Date of Grant, as such date is set forth in the applicable Performance Stock Option Agreement. For purposes of the foregoing, the fair market value of the Common Stock on the Date of Grant shall be the fair market value established by the Committee acting in good faith, and the fair market value may be more or less than the book value of the Common Stock. The price per share of the Preferred Stock subject to each option (the "Preferred Stock Option Price") shall be the liquidation preference of each such underlying share of Preferred Stock. The Common Stock Option Price and the Preferred Stock Option Price are collectively referred to as the "Option Price." (b) Term of Option. Notwithstanding any other provision of this Performance Plan, each option granted under this Performance Plan shall expire not more than ten years and one day from the date the option is granted, except that under the circumstances described in Section 4(d), optioned may expire and terminate at an earlier date. (c) Non-Transferability of Option Rights. No option shall be assignable or transferable otherwise than by will or by the laws of descent and distribution. During the lifetime of an Optionee, the option is exercisable only by such Optionee or, as provided in Section 3, such Optionee's Representative. (d) Termination of Employment. In the event that an Optionee's employment by the Company, R.P. Scherer or any subsidiary thereof shall terminate, all options granted to such Optionee pursuant to this Performance Plan shall terminate immediately and shall not be exercisable; provided, however, that in the event of an Optionee's death or Disability no more than six months prior to the Initial Exercise Date, such Optionee's options shall be exercisable for 3 4 Exercisable Shares in accordance with the terms of Section 5 hereof. The term "Disability" shall mean an Optionee's physical or mental disability (so that the Optionee is not reasonably able to render his full service to the company, R.P. Scherer or any subsidiary thereof) for any consecutive period exceeding three months or as determined by agreement of a majority of the members of the Board in their reasonable discretion. The date of such Disability shall be on the last day of such three-month period of the day selected by the Board, as the case may be. (e) Adjustment of Options on Recapitalization. The aggregate number of shares of Stock for which options may be granted to persons participating under this Performance Plan, the number of shares of Stock covered by each outstanding option and the Option Price for the shares of Stock subject to each such option may be appropriately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a recapitalization, the subdivision or consolidation of shares, or the payment of a stock dividend after the Date of Grant; provided, however, that any options to purchase fractional shares of Stock resulting from any such adjustment shall be canceled. (f) Rights as a Stockholder. An Optionee shall have no rights as a stockholder with respect to any shares of Stock held under option until the date of issuance of the stock certificates to him for such shares. Except as provided in Section 4(e) hereof, no adjustment to the option shall be made for dividends, distributions or rights attributable to shares of Stock the record date for which is prior to the date of issuance of Stock upon exercise of the option. (g) Time of Granting Options. The grant of an option shall occur only when a Performance Stock Option Agreement shall have been duly executed and 4 5 delivered by or on behalf of the Company and the employee to whom such option shall be granted. (h) Stock Legend. Certificates evidencing shares of Stock purchased upon the exercise of options issued under this Performance Plan shall be endorsed with a legend in substantially the form contained in the Optionee's Stock Subscription Agreement, or Stockholders Purchase Agreement, as the case may be. 5. Exercise of Options. During the term of this Performance Plan, as set forth in Section 7 hereof, the Committee shall determine the exercisability of options granted to each Optionee hereunder in accordance with the terms and conditions of this Section 5. (a) Definitions. The following terms shall have the following meanings when used in this Section: (i) "Affiliates" shall mean any other person or entity directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person or entity. (ii) "Initial Exercise Date" shall man, with respect to an Optionee, the earliest to occur of (1) the Public Offering, (2) the date the Company give written notice of the proposed Sale of the Company, and (3) the date the Company gives written notice of the proposed dissolution or liquidation of the Company. In the event the Company proposes to engage in a Sale of the Company, the Company shall give each Optionee written notice of such Sale on or before 15 days (or such shorter time if, in the sole discretion of the Company, 15 days' notice is impracticable) before the consummation of such Sale of the Company; provided, however, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable. In the event of the proposed dissolution or liquidation of the Company, the Company shall give not less than 30 days prior written notice to each Optionee of the date of such proposed dissolution or liquidation; provided, however, that if the proposed dissolution or liquidation of the Company is not 5 6 consummated and the Board in good faith determines that the proposed dissolution or liquidation of the Company will not be consummated, the options granted hereunder shall, upon such determination of the board, cease to be exercisable. (iii) "Internal Rate of Return" shall mean the rate of return of Shearson Lehman on the Investment, expressed as a decimal, over the period from the making of the Investment to the Initial Exercise Date, as such rate is determined by the Board in good faith. For purposes of calculating the Internal Rate of Return, all consideration received by Shearson Lehman shall represent returns to Shearson Lehman. If the consideration received includes any property other than cash, such consideration shall be deemed to be the amount of any cash plus the fair market value of such other property as determined by the Board in good faith. The Board shall determine the Internal Rate of Return using the same method as that used to calculate the hypothetical examples shown on Annex I to this Performance Plan (substituting in such determination the actual returns received over the applicable time period). (iv) "Investment" shall mean the initial equity investment of Shearson Lehman in the Company and shall be deemed to equal $69 million. 6 7 Notwithstanding the foregoing, if, in the Public Offering, Shearson Lehman sells less than its entire initial equity investment of $69 million in the Company, the term "Investment" shall be deemed to be a number equal to (i) the number of shares of Stock and shares of the Company's Series C Redeemable Preferred Stock, par value $.01 per share ("Series C Preferred Stock"), which have been sold or redeemed since the making of the Investment, if any, and the number of shares of stock and Series C Preferred Stock being sold by Shearson Lehman in the Public Offering multiplied by (ii) $10. (v) "Public Offering" shall mean the sale of shares of Common Stock pursuant to one or more effective registration statements under the Securities Act of 1933, as amended (the "Act") (other than a registration statement relating to shares of Common Stock issuable upon exercise of employee stock options or in connection with any employee benefit plan of the Company), relating to the sale of shares of Common Stock beneficially owned by Shearson Lehman representing, when taken together with all shares of Common Stock sold by Shearson Lehman pursuant to Rule 144 under the Securities Act or under previous registration statements (which were not in connection with employee stock options or employee benefit plans), more than 33-1/3% of the Common Stock beneficially owned by Shearson Lehman prior to such sale. (vi) "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (except a subsidiary or Affiliate of the Company) in which the holders of Stock are required to exchange their Stock for cash, property and/or securities, or (ii) a sale or lease of all or 7 8 substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or Affiliate of the Company. (vii) "Shearson Lehman" shall mean Shearson Lehman Brothers Holdings Inc. (formerly known as Shearson Lehman Hutton Holdings Inc.), a Delaware corporation, and its Affiliates (including, but not limited to, its Merchant Banking Partnerships which made an initial equity investment in the Company). (b) Exercisable Shares. The number of shares of Stock for which an Optionee's option shall be exercisable (the "Exercisable Shares") shall be determined as follows: (i) if the Internal Rate of Return is equal to or exceeds .4, the Exercisable Shares shall be 100% of the number of shares of Stock for which an Optionee's option can be exercised; (ii) if the Internal Rate of Return is equal to or is less than .36, there shall be no Exercisable Shares; and (iii) if the Internal Rate of Return exceeds .36, but is less than .4, the number of Exercisable Shares shall be calculated by (A) subtracting .36 from the Internal Rate of Return, (B) dividing the result produced in (A) above by .04 and, if necessary, rounding the result up to the nearest one one-hundredths, and (C) multiplying the result produced in (B) above by the maximum number of shares of Stock for which an Optionee's option granted pursuant to this Performance Plan can be exercised. (c) Exercise of Option. Except as otherwise provided in this Performance Plan, or in the applicable Performance Stock Option Agreement, no option granted pursuant to this Performance Plan shall be exercisable, in whole or in any part, until the Initial Exercise Date applicable to such Optionee. Thereafter, any option granted pursuant to this Performance Plan shall be 8 9 exercisable for the number of Exercisable Shares as determined pursuant to Section 5(b) hereof. The Committee may accelerate the time at which an option may be exercised and may delay and/or reduce the periods during which options may be exercised in order to comply with federal and state securities laws. Any options (or any part thereof) granted hereunder, if not exercised prior to a Sale of the Company, shall expire on the occurrence of such Sale and no payment shall be owed to any Optionee. Any options (or any part thereof) granted hereunder, if not exercised prior to a dissolution or liquidation of the Company, shall expire upon the consummation of a dissolution or liquidation of the Company and no payment shall be owed to any Optionee. (d) Manner of Exercise. Shares of Stock purchased upon exercise of options shall at the time of purchase be paid for in full in cash or as otherwise permitted by the Committee. Options may be exercised in whole or in part from time to time by written notice to the Company stating the full number of shares of Stock with respect to which the option is being exercised and the time of delivery thereof, which shall be at least 15 days after the giving of such notice unless an earlier date shall have been mutually agreed upon, accompanied by full payment for the shares of Stock by certified or official bank check or the equivalent thereof acceptable to the Company; provided, however, that any such exercise must be for both Common Stock and Preferred Stock in the same proportion to the total number of shares of Common Stock and Preferred Stock, respectively, issuable to the Optionee upon exercise of the option granted hereunder. At the time of delivery, the Company shall, without stock transfer or issue tax to an Optionee, deliver to such Optionee, at the principal executive offices of R.P. Scherer, or 9 10 such other place as shall be mutually agreed upon, a certificate or certificates for such shares of Stock; provided, however, that the time of delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any requirements of law, including making provision for the deduction and withholding of amounts required to be deducted and withheld under applicable local, state, and federal income tax laws (which provision may require additional payment by such Optionee). The Company shall pay any stock transfer tax or issue tax resulting from the issuance of shares of stock upon the exercise of any option. If Stock issuable upon exercise of any option is not registered under the Act, the Company at the time of exercise shall require in addition that the Optionee or Optionee's Representative deliver an investment representation in form acceptable to the Company and its counsel, and the Company shall place a legend on the certificate for such Stock restricting the transfer of such Stock. At no time shall the Company have any obligation or duty to register under the Act the Stock issuable upon exercise of options. The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of any option or portion thereof prior to the execution by the Optionee or the Optionee's Representative of the Stockholders Purchase Agreement; provided, however, that those Optionees who have executed a Stock Subscription Agreement shall not be required to execute a Stockholders Purchase Agreement. 6. Administration. (a) This Performance Plan shall be administered by the Committee consisting of not fewer than three directors to be appointed by the Board. If 10 11 necessary to secure the exemption pursuant to Rule 16b-3 which has been adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (as such Rule or its equivalent is then in effect)("Rule 16b-3"), no person shall be eligible to serve on the Committee unless he is then a "disinterested person" within the meaning of paragraph (d)(3) of Rule 16b-3. The Board may, from time to time, remove members from or add members to the Committee. Vacancies in the Committee, however caused, shall be filled by the Board. The Committee shall select a chairman from among its members and shall hold meetings at such times and places as it may determine. The Committee may appoint a secretary and, subject to the provisions of this Performance Plan and to policies determined by the Board, may make such rules and regulations for the conduct of its business as it shall deem advisable. A majority of the Committee shall constitute a quorum. All action of the Committee shall be taken by a majority of its members. Any action may be taken by a written instrument signed by a majority of the members, and action so taken shall be fully as effective as if it had been taken by a vote of the majority of the members at a meeting duly called and held. The Board may act in lieu of the Committee and shall act in lieu of a Committee at any time such a Committee has not been created. (b) Subject to the express terms and conditions of this Performance Plan, the Committee shall have full power to grant options under this Performance Plan, to construe or interpret this Performance Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for its administration. 11 12 (c) The Committee may, from time to time, determine which employees of the Company, R.P. Scherer and any subsidiary thereof shall be granted options under this Performance Plan, the number of shares of Stock subject to each option, and the time or times at which options shall be granted, and the Company may grant such options under this Performance Plan. (d) No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to this Performance Plan or to any option. 12 13 7. Effective Date and Termination. (a) The effective date of this Performance Plan is _____________, 1990. (b) This Performance Plan shall terminate on _____________, 2000, but the Board may terminate this Performance Plan at any time prior to such date. Termination of this Performance Plan shall not alter or impair, without the consent of the Optionee, any of the rights or obligations and any option theretofore granted under this Performance Plan. 8. Notices. Whenever it is provided in this Performance Plan that any notice be given between the Company and an Optionee, such notice shall be delivered in person or by registered or certified mail, return receipt requested, postage prepaid, first class mail, to the following address: If to the Company: RPS Corporation c/o R.P. Scherer Corporation 2075 W. Big Beaver Road Troy, Michigan 48007=7060 Attention: Robert J. Lollini If to an Optionee: At the address listed beside such Optionee's name on the signature page of the Performance Stock Option agreement executed by such Optionee Any party hereto may change the address designated for mailing by written notice to the other party. All such notices shall be deemed to be delivered when delivered in person, or if placed in the mail, two days thereafter. 9. Governing Law. THIS PERFORMANCE PLAN SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE 13 14 STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAW. 10. Amendments. The Board may, from time to time, alter, amend, suspend or discontinue this Performance Plan, or alter or amend any and all option agreements granted thereunder; provided, however, that no such action of the Board may alter the provisions of this Performance Plan so as to alter any outstanding Stock Option Agreement to the detriment of an Optionee without his consent. 11. Status of Options. Options granted pursuant to this Performance Plan are not intended to qualify as Incentive Stock Option within the meaning of section 422A of the Internal Revenue Code of 1986 (the "Code"), and the terms of this Performance Plan and options granted hereunder shall be so construed; provided, however, that nothing in this Performance Plan shall be interpreted as a representation, guarantee or other undertaking on the part of the Company that the options granted pursuant to this Performance Plan are not, or will not be, determined to be Incentive Stock Options, within the meaning of Section 422A of the Code. I hereby certify that the foregoing Performance Plan was duly adopted by the Board on June 18, 1990. Executed as of this 29th day of November, 1990. ----------------------------------- Secretary 14 15 FIRST AMENDMENT TO RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLANS WHEREAS, RPS Corporation, a Delaware corporation, established the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B; and WHEREAS, RPS CORPORATION changed its name to R.P. Scherer Corporation in 1991 (the "Company"); and WHEREAS, the Company desires to amend the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B. NOW, THEREFORE, the RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLAN, the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN A and the RPS CORPORATION 1990 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN B (each individually referred to respectively as the "1990 Plan," the "1990 Plan A" and the "1990 Plan B" and collectively, the "1990 Plans") are amended effective February __, 1994, with respect to each of the 1990 Plans subject to subsequent shareholder approval as follows: 1. The last sentence of Section 3 of each of the 1990 Plans is amended by adding the phrase "to the extent options are not transferred to a grantor trust pursuant to Section 4(c)." 2. Effective as of February 18, 1994, Section 4(c) of each of the 1990 Plans is amended in its entirety to read as follows: 15 16 (c) Non-Transferability of Option Rights. No option shall be assignable or transferable otherwise than (i) by will, (ii) by the laws of descent and distribution, or (iii) to one or more grantor trusts provided that with regard to a transfer to one or more such grantor trusts the Optionee's Stock Option Agreement expressly so provides for such transfer, is approved by the Committee, and the Optionee does not receive any consideration for the transfer. The option is exercisable only by such Optionee or grantor trust trustee or, as provided in Section 3, such Optionee's Representative. 3. Effective as of February 18, 1994, a new Section 12 is added to each of the 1990 plans -- as follows: 12. Trusts. For all purposes of the Plan, a grantor trust trustee that is a transferee pursuant to Section 4(c) is the "Optionee"; provided, however, for purposes of determining the rights and obligations of the Company and such grantor trust trustee under Section 4(d), the employee granted the Options shall be deemed the Optionee whose termination, disability or death will effectuate such rights or obligations. IN WITNESS WHEREOF, these Amendments have been adopted by the Company this 18th day of February, 1994. ATTEST R.P. SCHERER CORPORATION /s/ By: /s/ ALEKSANDAR ERDELJAN - ----------------------------- ---------------------------- Its: President ------------------------ CERTIFICATION I certify that the foregoing amendments to the Plans were duly adopted by the Board of Directors of the Company on February 18, 1994. 16 17 Executed as of this 18th day of February, 1994 ------------------------------ Secretary 17 18 SECOND AMENDMENT TO RPS CORPORATION 1990 NONQUALIFIED STOCK OPTION PLANS The RPS Corporation 1990 Nonqualified Stock Option Plan, the RPS Corporation 1990 Nonqualified Performance Stock Option Plan A, and the RPS Corporation 1990 Nonqualified Performance Stock Option Plan B (each individually referred to respectively as the "1990 Plan," the "1990 Plan A" and the "1990 Plan B" and collectively referred to as the "1990 Plans") are amended effective September 1, 1994, as follows: 1. Amendment to Section 1. The first sentence of Section 1 of each of the 1990 Plans is amended in its entirety to read as follows: "The purpose of this plan (this "Option Plan") is to provide a means by which certain employees of R.P. Scherer Corporation (formerly RPS Corporation), a Delaware corporation (the "Company"), R.P. Scherer International Corporation (formerly R.P. Scherer Corporation) , a Delaware corporation and a wholly owned subsidiary of the Company ("R.P. Scherer"), or any subsidiary thereof, may be given an opportunity to purchase common stock, par value $0.01 per share (the "Common Stock") , and prior to conversion to Common Stock of Series B Redeemable Preferred Stock and conversion of the related options by operation of Section 4(e) to options for Common Stock (the "Conversion"), Series B Redeemable Preferred Stock, par value $0.01 per share (the "Preferred Stock," and together with the Common Stock, the "Stock") of the Company." 2. Amendment to Section 2. Section 2 of each of the 1990 Plans is amended by adding the phrase "prior to the Conversion" immediately following the phrase "Subject to adjustment as provided in Section 4(e) hereof," and by adding at the end of the first sentence the phrase, "and after the Conversion a number of shares of Common Stock pursuant to Section 4(e)." 18 19 3. Amendments to Section 4 of the Plans. Section 4 of the 1990 Plans is amended as follows: (i) Subject to shareholder ratification, Section 4(a) of each of the 1990 Plans is deleted and a new Section 4(a) is included to read as follows: "(a) Terms and Conditions of Options. The Committee may grant options from time to time pursuant to this Option Plan. Such options shall be evidenced by written agreements substantially in the form of the Nonqualified Stock Option Agreement (the "Stock Option Agreement"), Appendix A to the Option Plan as originally adopted, but pursuant to and interpreted in accordance with, and not inconsistent with, this Option Plan as amended. The shares of Stock subject to each option shall, (i) upon issuance, but in no event after September 1, 1994, be subject to the terms and conditions, including restrictions on transferability, contained in an agreement substantially in the form of the Stockholders Purchase Agreement, Appendix B to the Option Plan as originally adopted, entered into by the Company and the Optionees (the "Stockholders Purchase Agreement"), or, (ii) with respect to certain Optionees, unless terminated by the Company, the Management Stock Subscription Agreement between the Company and such Optionees (the "Stock Subscription Agreement") as amended and restated from time to time. Notwithstanding anything to the contrary herein, however, no insider, as defined for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, may sell shares of Stock subject to an option granted hereunder after August 31, 1994, and prior to March 2, 1995. Nothing in this Option Plan or an option granted hereunder shall govern the employment rights and duties between an Optionee and the Company or R.P. Scherer, or any subsidiary thereof, nor in any way be deemed to constitute an employment agreement among such parties. Effective September 1, 1994 any Stockholders Purchase Agreement in the form attached hereto as Appendix B entered into by the Company and Optionee shall be terminated." (ii) Section 4(b) of each of the 1990 Plans is amended by inserting the phrase "(as effective, pursuant thereto, prior to September 1, 1994)" immediately after the reference to Section 4(d) and adding a new sentence to the end of Section 4(b) to read "The termination date, which is not more than 10 years and 1 day from the date the option is granted and which is set forth in an Optionee's Option Agreement, shall be referred to as the "Termination Date." 19 20 (iii) Subject to shareholder ratification, Section 4(d)(i) of both the 1990 Plan and the 1990 Plan A are deleted and replaced with a new Section 4(d)(i)(A) and 4(d)(i)(B) to read as follows: "(i)(A) Prior to September 1, 1994, subject to the provisions of Sections 4(d)(ii), 4(d)(iii) , 4(d)(iv) and 4(d)(v), in the event that an Optionee's employment by the Company, R.P. Scherer or any subsidiary thereof shall terminate, all options granted to such Optionee pursuant to this Option Plan shall terminate immediately and shall not be exercisable; and (i)(B) On and after September 1, 1994, Sections 4(d)(ii), 4(d)(iii), 4(d)(iv) and 4(d)(v) shall be inapplicable, and notwithstanding an Optionee's termination of employment, options shall not terminate until their Termination Date and shall not be exercisable thereafter." (iv) Subject to shareholder ratification, Section 4(d) of the 1990 Plan B is amended by adding the phrase "Prior to September 1, 1994" at the beginning of the first sentence of the Section, and a new sentence shall be added at the end of Section 4(d) of the 1990 Plan B to read as follows: "On and after September 1, 1994, notwithstanding an Optionee's termination of employment, options shall not terminate until their Termination Date and shall not be exercisable thereafter." (v) Subject to shareholder ratification, Section 4(f) of both the 1990 Plan and the 1990 Plan A are deleted and a new Section 4(f) is included to read as follows: "(f) In the event the Company proposes to engage in a Sale of the Company (as hereunder defined and sometimes referred to as "Sale"), the Company shall give each Optionee written notice of such Sale on or before 15 days (or shorter time if, in the sole discretion of the Company, 15 days notice is impracticable) before the consummation of such Sale, and unless otherwise agreed to by the Company and the Optionee, each option shall, after receipt of such notice and prior to such Sale, automatically become exercisable for the Exercisable Shares existing on the date the Company gives written notice of the Sale. The Committee may, in its sole discretion, provide that the options not exercised prior to such Sale shall expire 30 days after the occurrence of such Sale, provided, however, that the Compensation Committee may not terminate options pursuant to this Section prior to March 2 1995. If options are not exercised in connection with such Sale, and provided the Committee does not provide for the 20 21 termination of such options, then following consummation of the Sale, such Optionee upon exercise of his options, will only be entitled to receive the kind and amount of stock, securities, or assets that such Optionee would have received had such Optionee exercised his or her options immediately prior to such Sale; provided, however, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section 4(f). A "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (other than a subsidiary or affiliate of the Company), (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or affiliate of the Company, (iii) 50% or more of the Company's then outstanding shares of voting stock is acquired by another corporation, person or entity (other than a subsidiary or affiliate of the Company), or (iv) the Company recapitalizes or enters into any similar transaction, and as a result of which the Common Stock either (A) is no longer a voting equity security of the Company or (B) is no longer listed on a national securities exchange or authorized for quotation on an inter-dealer quotation system of a national securities association." (vi) Section 4(j) of the 1990 Plan and of the 1990 Plan A and Section 4(h) of the 1990 Plan B are amended by adding the phrase "Prior to September 1, 1994", at the beginning thereof. 4. Amendments to Section 5. (i) Section 5(c)(iii) of the 1990 Plan A is amended effective September 1, 1994 to read as follows: "(iii) in the case of termination of employment of an Optionee pursuant to Section 4(d)." (ii) Section 5(a) of the 1990 Plan is amended effective September 1, 1994 to read as follows: "(iii) in the case of termination of employment of an Optionee pursuant to Section 4(d)." (iii) Subject to shareholder ratification, Section 5(a)(vi) of the 1990 Plan B shall be amended in its entirety to read as follows: 21 22 "(vi) "Sale of the Company" shall mean (i) a merger or consolidation of the Company with or into another entity (except a subsidiary or Affiliate of the Company), (ii) a sale or lease of all or substantially all of the assets of the Company or R.P. Scherer except to a subsidiary or Affiliate of the Company, (iii) 50% or more of the Company's then outstanding shares of voting stock is acquired by another corporation, person or entity (other than a subsidiary Affiliate of the Company), or (iv) the Company recapitalizes or enters into any similar transaction, and as a result of which the Common Stock either (A) is no longer a voting equity security of the Company or (B) is no longer listed on a national securities exchange or authorized for quotation on an inter-dealer quotation system of a national securities association." (iv) Subject to shareholder ratification, the fourth sentence of Section 5(c) of the 1990 Plan B is deleted and replaced with the following: "The Committee may, in its sole discretion, provide that the options not exercised prior to a Sale of the Company shall expire 30 days after the occurrence of such Sale, provided, however, that the Compensation Committee may not terminate options pursuant to this Section prior to March 2, 1995. If options are not exercised in connection with such Sale, and provided the Committee does not provide for the termination of such options, then following consummation of the Sale, such Optionee upon exercise of his option, will only be entitled to receive the kind and amount of stock, securities, or assets that such Optionee would have received had such Optionee exercised his or her option immediately prior to such Sale; provided, however, that if the proposed Sale of the Company is not consummated and the Board in good faith determines that the proposed Sale of the Company will not be consummated, the options granted hereunder shall, upon such determination of the Board, cease to be exercisable pursuant to this Section." 5. Amendments to Section 6. Section 6 of the 1990 Plans is amended as follows: (i) The last sentence of Section 6(a) of each of the Plans is amended to read as follows: "The Board may act in lieu of the Committee with directors who are not "disinterested persons" abstaining and shall act in lieu of a Committee with directors who are not "disinterested persons" abstaining at any time such a Committee has not been created." (ii) Subject to shareholder ratification, a new paragraph is added to Section 6(b) of the Plans to read as follows: 22 23 "Notwithstanding anything to the contrary in the Plan as amended, other than Section 4(d) and Section 4(c), the Committee may grant options to eligible employees who are not United States citizens or residents on such terms and conditions as may, in the judgment of the Committee, be necessary or desirable to foster the purposes of the Plan. In furtherance of the purposes of the Plan, the Committee may adopt such modifications to the terms of Options and such procedures and guidelines, and may cause the Company to take such other actions, as may be necessary or advisable to comply with foreign laws and practices." IN WITNESS WHEREOF, the Corporation has adopted this Amendment this 29 day of September, 1994. ---- ---------- ATTEST R.P. SCHERER CORPORATION /s/ By: /s/ ALEKSANDAR ERDELJAN - ----------------------------- ---------------------------- Its: President & CEO ------------------------ 23 EX-99.D 11 EXHIBIT 99(D) 1 Exhibit 99(d) STOCK OPTION PLAN OF R.P. SCHERER CORPORATION AND SUBSIDIARIES AMENDED JULY, 1995 R. P. Scherer Corporation, a Delaware corporation, hereby adopts this Stock Option Plan of R. P. Scherer Corporation (the "Company") and Subsidiaries ( the "Plan"). The purposes of the Plan are as follows: (1) To further the growth, development and financial success of the Company by providing additional incentives to certain of its management employees who have been or will be given responsibility for the management or administration of the Company's business affairs by assisting them to become owners of capital stock of the Company and thus to benefit directly from its growth, development and financial success. (2) To enable the Company to obtain and retain the services of the type of professional, technical and managerial employees considered essential in the long range success of the Company by providing and offering them an opportunity to become owners of capital stock of the Company under options. Each option granted to a management employee under the Plan represents the right to purchase a number of shares of common stock of the Company and each such option will consist of two portion: a purchase portion and a granted portion. The purchase portion of a particular option for an applicable management employee will be determined by applying 25% for such other portion set by the Compensation Committee) of such management employee's Bonus (as hereinafter defined) to purchase, at a predetermined price, the right to acquire shares of the Company's common stock upon payment of the appropriate exercise price. The exercise price for each share which is part of the purchase portion of an option will be fixed on the date of grant and equal the amount determined by increasing the remainder of such designated stock price by 10% per year for five years. The granted portion of such option will be the right to purchase an additional number of shares equal to the number of shares which make up the purchase portion of such option at an exercise price per share equal to the designated stock price. Options may be exercised in whole or in part, but may only be exercised for an equal number of purchase portion shares and granted portion shares. ARTICLE 1 DEFINITIONS Section 1.1 GENERAL 1 2 Whenever the following terms are used in the Plan they shall have the meaning specified below unless the context clearly indicates to the contrary. Section 1.2 "Applicable Amount" means, (i) the value equaling to $1.80 increased by a factor of 5% compounded annually beginning with Fiscal Year 1993 or (ii) such other value as may be determined from time to time by the Committee (as hereinafter defined). Section 1.3 "Applicable Fiscal Year" means the fiscal Year for which an Option is being granted. Section 1.4 "Average Fair Market Value" means with respect to any share of stock, the average of the Fair Market Value of a share of such stock on each of the trading days during the period from March 1 of the Fiscal Year preceding the Applicable Fiscal Year to April 30 of the Applicable Fiscal Year. If such stock is not listed or quoted, the Average Fair Market Value will be established by the Committee and will be binding upon all Optionees, the Company and all other interested persons. The Average Fair Market Value may be more or less than the book value of such stock. Section 1.5 "Board" means the Board of Directors of the Company. Section 1.6 "Bonus" means the Economic Value Added Bonus granted under the Bonus Plan, as from time to time amended, to any selected management Employee. Section 1.7 "Bonus Plan" means the R. P. Scherer Corporation Management Incentive Compensation Plan (Based upon Economic Value Added), as from time to time amended. Section 1.8 "Cause" means (i) any act or acts of an Optionee constituting a felony (or its equivalent) under the laws of the United States, any state thereof or any foreign jurisdiction; (ii) any material breach by an Optionee of any employment agreement with the Company or any of its Subsidiaries or the policies of the Company or any of its Subsidiaries or the willful and persistent failure or refusal of an Optionee (after written notice to such Optionee) to perform his duties of employment or comply with any lawful directives of the Board or of the Board of Directors of the Subsidiary of the Company which employ the Optionee, (iii) a course of conduct amounting to gross, willful misconduct or dishonesty; or (iv) any misappropriation of material property of the Company or any of its Subsidiaries by an Optionee or any misappropriation of a corporate or business opportunity of the Company or any of its Subsidiaries by an Optionee. Section 1.9 "Code" means the Internal Revenue Code of 1986, as amended. Section 1.10 "Committee" means the Compensation Committee of the Board, appointed as provided in Section 6.1. Section 1.11 "Common Stock" means the Common Stock, par value $.01 per share, of the Company. 2 3 Section 1.12 "Company" means R. P. Scherer Corporation. Section 1.13 "Date of Grant" means the date upon which the Committee approves the options to be granted for the Applicable Fiscal year which will be within six weeks of the end of the applicable Fiscal Year. Section 1.14 "Discounted Initial Value" is the excess of (i) $18.00 for Fiscal year 1992 or the Average Fair Market Value of a share of Common Stock for each fiscal year thereafter, over (ii) the corresponding Applicable Amount. Section 1.15 "Employee" means any employee of the Company, or of any corporation which is then a Subsidiary of the Company, whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan. Section 1.16 "Exchange Act" means the Securities Exchange Act of 1934, as amended. Section 1.17 "Fair Market Value" means the last sales price for a share of stock on a particular day on the principal exchange on which such stock may at the time be listed or, if there shall have been no sales on such exchange on any such trading day, the average of the closing bid and asked prices on such exchange on such trading day or if there is no such bid and asked price on such trading day on the next preceding date when such bid and asked price occurred or, if such stock shall not be so listed, the average of the closing sales prices as reported by NASDAQ at the end of each trading day in the over-the-counter market, or if such stock is not so listed or quoted, the price will be established by the Committee and will be binding upon all Optionees, the Company and all other interested persons. The Fair Market Value may be more or less than the book value of such stock. Section 1.18 "Fiscal Year" means the fiscal year of the Company which runs from April 1 through March 31. Section 1.19 "Good Reason" shall mean: (i) any material reduction by the Company of such Participant's duties, responsibilities or titles, (ii) any involuntary removal of such Participant from any position previously held (except in connection with a promotion or a termination for Cause, death or disability, or the voluntary termination by the Participant other than for Good Reason), or (iii) such other reasons (including non-employment related reasons) as may be approved by the Committee, in its sole discretion, from time to time. Section 1.20 "Granted Portion Exercise Price" has the meaning given in Section 4.1(b). Section 1.21 "Granted Portion Shares" has the meaning given in Section 3.3(a)(i). Section 1.22 "Option" means any option granted under the Plan to purchase Common Stock. An Option will entitle the holder to purchase a multiple number of shares of 3 4 Common Stock determined in accordance with Section 3.3. Each Option will be partially exercisable in accordance with Section 5.2. Options include only options which are not intended to be "incentive stock options" under Section 422 of the Code. Section 1.23 "Optionee" means an Employee to whom an Option is granted under the Plan. Section 1.24 "Permanent Incapacitation Disability" means the inability of an Employee to perform the principal duties of his job at the Company due to physical or mental condition, as determined by a physician, for a period of at least one year. Section 1.25 "Permitted Transferee" means (i) the guardian, executors, administrators, testamentary trustee, legalees or beneficiaries of an Optionee or of any Permitted Transferee, or (ii) a transferee pursuant to a qualified domestic relations order as defined by the Code, provided that such transfer is made expressly subject to the Plan and that the transferee agrees in writing to be bound by the terms and conditions hereof as if such transferee were the Optionee. Section 1.26 "Plan" means this Stock Option Plan of R. P. Scherer Corporation and its Subsidiaries, as from time to time amended. Section 1.27 "Purchased Portion Exercise Price" has the meaning given in Section 4.1(a). Section 1.28 "Purchased Portion Shares" has the meaning given in Section 3.3(a)(ii). Section 1.29 "Secretary" means the Secretary or any Assistant Secretary of the Company. Section 1.30 "Securities Act" means the Securities Act of 1993, as amended. Section 1.31 "Subsidiary" means, as to the Company, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by the Company. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. Section 1.32 "Termination of Employment" means the time when the employee-employer relationship between the Optionee and the Company and its Subsidiaries is terminated for any reason whatsoever. The Committee, in its absolute discretion, will determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, all questions of whether particular 4 5 leaves of absence constitute. Terminations of Employment and the question of whether any reemployment by the Company is simultaneous with termination. Notwithstanding any other provision of the Plan, the Company or any of its Subsidiaries have an absolute and unrestricted right to terminate any Employee's employment at any time for any reason whatsoever with or without cause. Section 1.33 "Total Available Shares" means the total number of shares of Common Stock set forth in Section 2.1 issuable upon the exercise of Options less the aggregate number of shares of Common Stock issued, or reserved for issuance, upon the exercise of Options granted hereunder prior to the date of such determination. Section 1.34 Pronouns: The masculine pronoun includes the feminine and neuter and the singular includes the plural, where the context so indicates. ARTICLE 2 SHARES SUBJECT TO PLAN ---------------------- Section 2.1 SHARES SUBJECT TO PLAN The shares of stock subject to Options shall be shares of Common Stock. The maximum aggregate number of shares of Common Stock which may be issued upon exercise of Options granted under the Plan is 1,800,000. If the outstanding shares of Common Stock subject to Options are, from time to time, changed into or exchanged for a different number of shares of Common Stock by reason of a reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend, combination of shares, or otherwise, the maximum aggregate number of shares of Common Stock which may be issued upon exercise of Options granted under the Plan will be increased or decreased in proportion to the change in Common Stock. Section 2.2 UNEXERCISED OPTIONS If any Option expires or is canceled without having been fully exercised, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration or cancellation may again be optioned hereunder, subject to the limitations of Section 2.1. ARTICLE 3 GRANTING OF OPTIONS ------------------- Section 3.1 ELIGIBILITY Any management Employee of the Company or of any Subsidiary who is (a) eligible to receive a Bonus or (b) such other management Employee designated by the Committee to receive an Option under the Plan, will be eligible to be granted an Option under the Plan. 5 6 Section 3.2 GRANTING OF OPTIONS The Committee, within six weeks after the close of each Fiscal Year, will (i) determine the number of shares of Common Stock subject to each Option to be granted to selected management Employee in accordance with Section 3.3; (ii) determine the terms and conditions of each Option, consistent with the Plan; and (iii) establish such conditions to the exercise of each Option as it may deem necessary, including but not limited to requiring Optionees to enter into agreements regarding transferability and other restrictions with respect to shares issuable upon exercise of any Options. Section 3.3 Determination of Number of Shares Subject to Each Option (a) Upon the determination of the dollar amount of the Bonus awarded each selected management Employee or the dollar amount such other compensation designated by the Committee to be used to purchase an Option under the Plan ("Designated Compensation"), the number of shares of Common Stock to be subject to each Option will equal: (i) (A) 25% (or such other fixed percentage as the Committee may determine will be applicable with respect to any particular selected management Employee) of the Bonus or the Designated Compensation paid to each selected management Employee, divided by (B) the Applicable Amount (The "Purchased Portion Shares"); plus (ii) an additional number of shares of Common Stock equal to the number resulting from the calculation in clause (i) (the "granted Portion Shares"). (b) Notwithstanding Section 3.3(a), if, as of any Date of Grant, the aggregate number of shares of Common Stock issuable upon the exercise of all Options to be purchased by or granted to management Employees as of such date pursuant to Section 3.2 exceeds the Total Available Shares, then the number of shares subject to any Option to be issued as of such Date of Grant (a "Current Option") will be reduced. In such case, the number of shares subject to any Current Option will equal (i) (A) the number of shares of Common Stock subject to such Current Option determined in accordance with Section 3.3(a), divided by (B) the aggregate number of shares of Common Stock subject to all Current Options determined in accordance with Section 3.3(a) multiplied by (ii) the Total Available Shares. ARTICLE 4 TERMS OF OPTION --------------- Section 4.1 EXERCISE PRICE (a) With respect to the Purchased Portion Shares, the Purchased Portion Exercise price is (i) the Discounted Initial Value multiplied in 1.61051 (which represents five 10% increases in the Discounted Initial Value on a compounded basis). 6 7 (b) With respect to the Granted Portion Shares, the Granted Portion Exercise Price is (i) the Average Fair Market Value of a share of Common Stock for the Applicable Fiscal Year. Section 4.2 COMMENCEMENT OF EXERCISABILITY (a) Subject to the provisions of Section 4.2(b), 4.3 and 7.2 each Option shall become exercisable three years after it is granted; provided, however, that by a resolution adopted after an Option is granted the Committee may, on such terms and conditions as it may determine to be appropriate and subject to Section 7.2, accelerate the time at which any Option may be exercised. (b) Upon the death of an Optionee or a Permanent Incapacitating Disability suffered by an Optionee while in the employ of the Company, any unexercisable Options held by such Optionee or by such Optionee's Permitted Transferees will immediately become exercisable. Section 4.3 EXPIRATION OF OPTIONS (a) Subject to the provision of Sections 4.3(c) and 7.2 each Option shall expire seven years and one day from the date it was granted; provided, however, subject to the provisions of Section 4.3(c), that by resolution adopted after an Option is granted the Committee may, on such terms and conditions as it may determine to be appropriate and subject to Section 4.2(b), 4.3(c) and 7.2, extend the time in which such Option may be exercised. (b) Upon the involuntary termination for Cause, or the voluntary termination without Good Reason before retirement (which for purposes of the Plan shall be determined at or over the age of 55 or at any earlier date approved by the Committee), of a Optionee's employment with the Company or any of its Subsidiaries, all outstanding unexercisable Options held by such Optionee or such Optionee's Permitted Transferees will immediately expire. (c) Upon the involuntary termination without Cause, or the voluntary termination with Good Reason before retirement (which for purposes of the Plan shall be determined at or over the age of 55 or at any earlier date approved by the Committee), of an Optionee's employment with the Company or any of its subsidiaries, a pro rata portion of the outstanding unexercisable Options held by such Optionee or such Optionee's Permitted Transferees shall become immediately exercisable as determined by the formula set forth below, while the remaining portion of such outstanding unexercisable Options will immediately expire. For each outstanding Option held, the number of shares immediately exercisable pursuant to that Option will equal (i) the number of shares of Common Stock subject to such Option, multiplied by (ii) the quotient of (A) the number of full years such Option had been held, divided by (B) three (provided, that such quotient shall be greater than one (the "Quotient")). In addition, the Company will pay to such Optionee an amount in cash equal to the amount paid by or on behalf of such 7 8 Optionee to purchase each outstanding Option multiplied by (ii)(A) one, minus (B) the Quotient. However, as provided in Section 4.2 (a), the Committee may expressly choose to depart from the default rule expressed in Section 4.3(c) herein in order to adopt other rules concerning the expiration and/or acceleration of such outstanding unexercisable Options. EXAMPLE An Optionee voluntarily terminates with Good Reason effective July 18, 1995. The Optionee held a total of 7,600 Options at such date, consisting of the following:
Purchased Portion Granted ----------------- ------- Fiscal Year Grant *Shares Cost/sh. Paid Portion Shares - ------------------------- -------- ---- -------------- 1992 1,000 $1.80 $ 1,800 1,000 1993 900 2.74 2,466 900 1994 1,500 3.00 4,500 1,500 1995 400 3.50 1,400 400 ------ ------- ------ 3,800 $10,166 3,800 ====== ======= ======
*Assume all grants were made in the month of June, immediately following each fiscal year end. The Optionee would be entitled to exercise the following upon the July 18, 1995 date of termination:
Shares ------ Fiscal Year Grant % Vested Purchased Granted - ----------------- -------- --------- ------- 1992 100% 1,000 1,000 1993 66 2/3 600 600 1994 33 1/3 500 500 1995 0 ------ ------ 2,100 2,100
All remaining shares (Purchased and Granted) would immediately expire upon termination. No options would be granted for fiscal 1996 as the termination took place in the first fiscal quarter. The Optionee would be repaid the following sums for Purchased Portion shares which would become unexercisable and expire: Amount Fiscal Year Grant % Repaid Shares Cost/sh. Repaid - ----------------- -------- ------ ------- ------ 1992 0% $1.80 $ ------ 1993 33 1/3 300 2.74 822 8 9 1994 66 2/3 1,000 3.00 3,000 1995 100 400 3.50 1,400 ----- $5,222
(d) No Option may be exercised to any extent by anyone after, and every Option will expire no later than, the expiration of seven years from the date the Option was granted. Section 4.4 NO RIGHT TO CONTINUE IN EMPLOYMENT OR OFFICE Nothing in the Plan (i) will confer upon any Optionee who is an Employee any right to continue in the employ of the Company or any of its Subsidiaries or (ii) will interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to terminate the employment of any Optionee at any time for any reason whatsoever, with or without good cause. Section 4.5 ADJUSTMENTS IN OUTSTANDING OPTIONS Subject to Section 4.6, if the outstanding shares of Common Stock subject to Options are, from time to time, changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company or of another corporation, by reason of a reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend, combination of shares, or otherwise, the number of shares of Common Stock subject to all outstanding Options, or portions thereof then unexercised, will be increased or decreased in proportion to the change in Common Stock and the Committee will make any other appropriate and equitable adjustment in the kind of shares, the exercise price or other consideration as to which all outstanding Options, or portions thereof then unexercised, will be exercisable. Any such adjustment made by the Committee will be final and binding upon all Optionees, the Company and all other interested persons. Section 4.6 MERGER, CONSOLIDATION, EXCHANGE, ACQUISITION, LIQUIDATION OR DISSOLUTION (a) All outstanding Options issued under the Plan will immediately become exercisable as to all shares of Common Stock covered thereby in the event that (i) Company merges with or into, or consolidates with, another entity; (ii) the Company sells, exchanges or otherwise disposes of all or substantially all of the assets of the Company; (iii) 50% or more of the Company's then outstanding shares of voting stock is acquired by another corporation, person or entity; (iv) the Company liquidates or dissolves; or (v) the Company recapitalizes or enters into any similar transaction, and as a result of which the Common Stock either (A) is no longer a voting equity security of the Company or (B) is no longer listed on a national securities exchange or authorized for quotation on an inter-dealer quotation system of a national securities association. In connection with any such transaction the Committee may, but shall not be required to, provide that all outstanding Options shall automatically be converted into the right to receive from the Company or its successor, not later than 30 days after the transaction, 9 10 cash in an amount equal to the number of shares of Common Stock covered by the Options immediately prior to the transaction times (i) the fair market value of the consideration receivable by the holder of one share of Common stock immediately following transaction less (ii) the exercise price per share of Common stock covered by the Option immediately prior to the transaction. In addition, the Committee may, in its sole discretion, provide that the Options will terminate 30 days following the consummation of a transaction described above. For purposes of this paragraph (a), the term "Company" shall not include any Subsidiary. (b) Upon the occurrence of any event described in paragraph (a) and if an Optionee does not elect to exercise his or her Options in connection with such event as therein provided and the Committee does not provide for the termination of such Options, thru following consummation of such event, such Optionee, upon exercise of his or her Options, will only be entitled to receive the kind and amount of stock, securities or assets that such Optionee would have received had such Optionee exercised his or her Options immediately prior to such transaction. (c) The Company shall promptly notify each holder of an Option of any event which shall cause the acceleration of all outstanding Options and of any conversion of Options into the right to receive cash or the termination of Options each as described in paragraph (a). Section 4.7 EXPIRATION OF OPTIONS UPON CERTAIN BREACHES Notwithstanding any other provision of the Plan or any other agreement, if an Optionee breaches any non-competition agreement with the Company or any of its Subsidiaries or breaches any agreement or duty imposed by law with respect to the pre-termination or post-termination conduct of such Optionee (including, without limitation, any confidentiality agreement), then all outstanding unexercisable Options held by such Optionee or such Optionee's Permitted Transferees will immediately expire. ARTICLE 5 EXERCISE OF OPTIONS ------------------- Section 5.1 PERSONS ELIGIBLE TO EXERCISE During the lifetime of the Optionee, only he or a Permitted Transferee may exercise an Option granted to him, or any portion thereof. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such Option portion becomes unexercisable under Section 4.3 or Section 4.6, be exercised by a Permitted Transferee. Section 5.2 PARTIAL EXERCISE At any time and from time to time following the date on which an Option becomes exercisable under Section 4.2 and prior to the time when any exercisable Option 10 11 or exercisable person thereof expires or becomes unexercisable under Section 4.3 or Section 4.6 such Option or portion thereof may be exercised, subject to Section 5.3, in whole or in part; provided, however, that the Company will not be required to issue fractional shares. Each Option granted to an Optionee in any Fiscal Year may only be exercised for an even number of shares of Common Stock representing an equal number of Shares subject to the Purchased Portion Exercise Price as shares subject to the Granted Portion Exercise Price; provided further that the Company is only required to issue the lesser of (i) 100 shares of Common Stock, and (ii) the total number of shares of Common Stock subject to any one Option. Section 5.3 MANNER OF EXERCISE All exercisable Option, or any exercisable portion thereof, may be exercised such that one share of Common Stock subject to the Purchased Portion Exercise Price is purchased for each Share of Common Stock subject to the Granted Portion Exercise Price that is purchased. Such Option or portion thereof is exercisable solely by delivering to the Secretary of his office all of the following prior to the time when such Option or such portion becomes unexercisable under Section 4.3 or Section 4.6: (i) notice in writing signed by the Optionee or other person then entitled to exercise such Option or portion thereof, stating that such Option or portion thereof is exercised; (ii) full payment of the Purchased Portion Exercise Price and the Granted Portion Exercise Price (in cash, by check or by the presentation of shares of Common Stock valued at the Fair Market Value of such shares of Common Stock on the trading day immediately preceding the date such Option is exercised) for the shares with respect to which such Option or portion thereof is thereby exercised, together with payment or arrangement for payment of any federal income or other tax required to be withheld by the Company with respect to such shares; (iii) such representations and documents as the Committee reasonably deems necessary of advisable to effect compliance with all applicable provisions of the Securities Act, and any other federal, state or foreign securities, laws or regulations. The Committee may, in its absolute 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 orders to transfer agents and registrars; and (iv) in the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other then the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof. Section 5.4 RIGHTS OF 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. 11 12 ARTICLE 6 ADMINISTRATION -------------- Section 6.1 COMPENSATION COMMITTEE The Committee shall consist of at least two directors of the Company. It shall be appointed by and shall serve at the pleasure of the Board. To the extent required to avoid liability under Section 16 of the Exchange Act, no person shall be eligible to serve on the Committee unless he is then a "disinterested person" as such term is used in Rule 16b-3(c)(2)(i) of the rules of the Securities and Exchange Commission under the Exchange Act, as such rule or its equivalent is then in effect. 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 shall be filled by the Board. Section 6.2 DUTIES AND POWERS OF COMMITTEE It shall be the duty of the committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such interpretations and rules shall be consistent with the basic purpose of the Plan to grant Options. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan provided that the Board will exercise any rights and duties of the Committee if such action would cause the Plan or any grant thereunder to fail to comply with the exemption provided in Rule 16b-3 (or any comparable rule then in effect) under Section 16 of the Exchange Act. Section 6.3 MAJORITY RULE The Committee will act by a majority of its members in office and the Committee may act either by vote at a telephonic or other meeting or by a memorandum or other written instrument signed by a majority of the Committee. Section 6.4 PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS; INDEMNIFICATION The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons, and all expenses and liabilities the Committee incurs in connection therewith or otherwise in connection with the administration of the Plan will be borne by the Company. The Committee, the Company and the officers and Directors of the Company will be entitled to rely upon the advice, opinions or valuations of any such persons so employed. All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon all Optionees, the Company and all other interested persons. No member of the Committee 12 13 will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Committee will be fully protected and indemnified by the Company with respect to any such action, determination or interpretation. ARTICLE 7 MISCELLANEOUS PROVISIONS ------------------------ Section 7.1 OPTIONS NOT TRANSFERABLE No Option or interest or right therein will be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means, whether such disposition by voluntary or involuntary or by operation of law or by judgment, levy, attachment, garnishment or any other legal or equitable proceeding (including bankruptcy), and any attempted disposition thereof will be null and void and of no effect provided, however, that nothing in this section 7.1 will prevent transfers to Permitted Transferees. Section 7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN The Board may amend or terminate the Plan, but may not (i) without the consent of the Optionees, alter or impair any rights or obligations under any Option theretofore granted, or (ii) make any alteration in the Plan that would cause the Plan to fail to comply with (A) Section 16 of the Exchange Act (or Rule 16b-3 of the rules of the Securities and Exchange Commission under the Exchange Act), or (B) any other requirement of applicable law or regulation, if such revision or amendment were not approved by the holders of the Common Stock of the Company, unless and until the approval of the holders of such Common stock is obtained. Section 7.3 EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS Nothing in the Plan will be construed to limit the right of the Company or any of its Subsidiaries (i) to establish any other forms of incentives or compensation for employees of the Company or any of its Subsidiaries or (ii) to grant or assume options otherwise than under the Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of option in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. Section 7.4 TITLES Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. 13 14 Section 7.5 FOREIGN EMPLOYEES Notwithstanding anything to the contrary in Articles III, IV and V (other than Section 4.3(d) and Section 5.1), the Committee may grant options to eligible Employees who are not United States citizens or residents on such terms and conditions as may, in the judgment of the committee, be necessary or desirable to foster the purposes of the Plan. In furtherance of the purposes of the Plan, the Committee may adopt such modifications to the terms of Options and such procedures and guidelines, and may cause the Company to take such other actions, as may be necessary or advisable to comply with foreign laws and practices. Section 7.6 CERTAIN POWERS OF THE COMMITTEE Notwithstanding anything to the contrary, the committee may on such terms and conditions as it may determine to be appropriate and subject to Section 7.2, waive certain provisions of this Plan from time to time as it sees fit, provided however that under no circumstances may Section 4.3(b) or 4.3(d) be waived. 14 15 I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of R.P. Scherer Corporation on June 15, 1992. The First Amendment to the Plan was adopted by the Board of Directors on ________, 1993. Executed as of this ____ day of __________, 1993. /s/ Nicole S. Williams Nicole S. Williams Secretary [Corporate Seal] I hereby certify that the foregoing Plan was duly adopted by the stockholders of R.P. Scherer Corporation on September 11, 1992. The First Amendment to the Plan was adopted by the stockholders of R.P. Scherer Corporation on ________, 1993. /s/ Nicole S. Williams Nicole S. Williams Secretary [Corporate Seal] 15 EX-99.E 12 EXHIBIT 99(E) 1 Exhibit 99(e) R. P. SCHERER CORPORATION 1997 STOCK OPTION PLAN 1. PURPOSE OF THE PLAN The purpose of the Plan is to attract, retain and motivate selected employees and directors who are in a position to have an impact on the results of the operations of the business of the Company or one or more of its Subsidiaries. The Company expects that it will benefit from the additional incentive which such employees will have to increase the value of the Company's Shares as a result of the Plan. 2. DEFINITIONS The following capitalized terms used in the Plan have the respective meanings set forth in this Section: (a) Act: The Securities Exchange Act of 1934, as amended, or any successor thereto. (b) Award: An Option or LSAR granted pursuant to the Plan. (c) Board: The Board of Directors of the Company. (d) Cause: The occurrence of any of the following events: (i) any act or acts of a Participant constituting a felony (or its equivalent) under the laws of the United States, any state thereof or any foreign jurisdiction; (ii) any material breach by a Participant of any employment agreement with the Company or any Subsidiary or the policies of the Company or any Subsidiary or the willful and persistent failure or refusal of a Participant (after written notice to such Participant) to perform his or her duties of employment or comply with any lawful directives of the Board or the board of directors of any Subsidiary that employ the Participant; (iii) a course of conduct amounting to gross, willful misconduct or dishonesty; or (iv) any misappropriation of material property of the Company or any Subsidiary by a Participant or any misappropriation of a corporate or business opportunity of the Company or any Subsidiary by a Participant. 2 (e) Change in Control: The occurrence of any of the following events; (i) the Company merges with or into, or consolidates with, another corporation, person or entity; (ii) the Company sells, exchanges or otherwise disposes of all or substantially all of the assets of the Company; (iii) 50% or more of the Company's then-outstanding shares of voting stock is acquired by another corporation, person or entity; (iv) the Company liquidates or dissolves, or (v) the Company recapitalizes or enters into any similar transaction, and as a result of which the Shares either (A) are no longer equity voting securities of the Company or (B) are no longer listed on a national securities exchange or authorized for quotation on an inter-dealer quotation system of a national securities association. (f) Code: The Internal Revenue Code of 1986, as amended, or any successor thereto. (g) Committee: The Compensation Committee of the Board. (h) Company: R. P. Scherer Corporation, a Delaware corporation. (i) Disability: Inability to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which constitutes a permanent and total disability, as defined in Section 22(e)(3) of the Code (or any successor section thereto). The determination whether a Participant has suffered a Disability shall be made by the Committee based upon such evidence as it deems necessary and appropriate. A Participant shall not be considered disabled unless he or she furnishes such medical or other evidence of the existence of the Disability as a Committee, in its sole discretion, may require. (j) Effective Date: The date on which the stockholders of the Company approve the Plan. (k) Fair Market Value: On a given date, the arithmetic mean of the high and low prices of the Shares as reported on such date on the Composite Tape of the principal national securities exchange on which such Shares are listed or admitted to trading, or, if no 3 Composite Tape exists for such national securities exchange on such date, then on the principal national securities exchange on which such Shares are listed or admitted to trading, or, if the Shares are not listed or admitted on a national securities exchange, the arithmetic mean of the per Share closing bid price and per Share closing asked price on such date as quoted on the National Association of Securities Dealers Automated Quotation System (or such market in which such prices are regularly quoted), or, if there is no market on which the Shares are regularly quoted, the Fair Market Value shall be the value established by the Committee in good faith. If no sale of Shares shall have been reported on such Composite Tape or such national securities exchange on such date or quoted on the National Association of Securities Dealers Automated Quotation System on such date, then the immediately proceeding date on which sales of the Shares have been so reported or quoted shall be used. (l) Good Reason: The occurrence of any of the following events: (i) any material reduction by the Company of a Participant's duties responsibilities or titles; (ii) any involuntary removal of a Participant from any position previously held (except in connection with a promotion or a termination for Cause, death or disability, or the voluntary termination by the Participant other than for Good Reason);or (iii) such other reasons (including non-employment related reasons) as may be approved by the Committee, in its sole discretion, from time to time. (m) ISO: An Option that is also an incentive stock option granted pursuant to Section 6(d) of the Plan. (n) LSAR: A limited stock appreciation right granted pursuant to Section 7 of the Plan. (o) Option: A stock option granted pursuant to Section 6 of the Plan. (p) Option Price: The purchase price per Share of an Option, as determined pursuant to Section 6(a) of the Plan. (q) Participant: An individual who is selected by the Committee to participate in the Plan pursuant to Section 5 of the Plan. (r) Plan: The R.P. Scherer Corporation 1997 Stock Option Plan. 4 (s) Retirement: A Participant's termination for employment with the Company or any Subsidiary at or over the age of 55 (or at any earlier date approved by the Committee). (t) Shares: Shares of common stock, par value $0.01 per Share, of the Company. (u) Subsidiary: A subsidiary corporation of the Corporation, as defined in Section 424(f) of the Code (or any successor section thereto). 3. SHARES SUBJECT TO THE PLAN The total number of Shares that may be issued under the Plan is 5% of the aggregate number of Shares outstanding as of the date of the Plan is adopted by the Board. The maximum number of Shares for which Awards may be granted during a calendar year to any Participant shall be 100,000. The Shares may consist, in whole or in part, of unissued Shares or treasury Shares. The issuance of Shares of the payment of cash upon the exercise of an Award shall reduce the total number of Shares available under the Plan, as applicable. Shares which are subject to Awards which terminate or lapse may be granted again under the Plan. 4. ADMINISTRATION The Plan shall be administered by the Committee, which may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two individuals who are each (a) "non-employee directors" within the meaning of Rule 16b-3 under the Act (or any successor rule thereto) and (b) "outside directors" within the meaning of Section 162 (m) of the Code (or any successor section thereto). The Committee shall have the authority to select the Participants to be granted Awards under the Plan, to determine the size and terms of an Award and to determine the time when grants of Awards will be made. The Committee is authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan. Any decision of the Committee shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. 5. ELIGIBILITY The Committee may, in its sole discretion, designate those person(s) who shall be Participant(s) in the Plan. Participants shall be selected from among the employees and directors of the Company and any of its Subsidiaries who are in the position to have an impact on the results of the operations of the Company or one or more of its Subsidiaries; provided that ISOs may only be granted to employees of the Company or its Subsidiaries. 5 6. TERMS AND CONDITIONS OF OPTIONS Options granted under the Plan shall be, as determined by the Committee, non-qualified, incentive or other stock options for federal income tax purposes, as evidenced by the related Option agreements. The Committee may, in its sole discretion, set forth terms in an Option agreement relating to a Participant's termination from employment due to Retirement, Cause or Good Reason. Options granted under the Plan shall be subject to the following terms and conditions: (a) Option Price. The Option Price per Share shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of the Shares on the date an Option is granted. (b) Exercisability of Options. Options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined by the Committee, but in no event shall an Option be exercisable more than ten years after the date it is granted. (c) Method of Exercise. Except as otherwise provided in the Plan or in an Award agreement, an Option may be exercised for all, or from time to time any part, of the Shares for which it is then exercisable. For purposes of this Section 6 of the Plan, the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, the date payment is received by the Company pursuant to clauses (i), (ii), or (iii) in the following sentence. The purchase price for the Shares as to which an Option is exercised shall be paid to the Company in full at the time of exercise at the election of the Participant (i) in cash, (ii) in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchase and satisfying such other requirements as may be imposed by the Committee, (iii) partly in cash and partly in such Shares, (iv) through the withholding of Shares (which would otherwise be delivered to the Participant) with an aggregate Fair Market Value on the exercise date equal to the aggregate Option Price or (v) through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the aggregate Option price for the Shares being purchased. No Participant shall have any rights to dividends or other rights of a stockholder with respect to Shares subject to an Option until the Shares have been issued to the Participant. A Participant may, if and to the extent permitted by the Committee, elect to defer payment of an Award. (d) ISOs. The Committee may grant Options under the Plan that are intended to be ISOs. Such ISOs shall comply with the requirements of Section 422 of the Code (or any successor section thereto). No ISO may be granted to any Participant who, at the time of such grant, owns more than ten percent of the total combined voting power of all classes of stock of the Company or of any Subsidiary, unless (i) the Option Price for such ISO is at lease 110% of the Fair Market Value of a Share on the date the ISO is granted and (ii) the date on which such ISO terminates is a date not later than the day 6 preceding the fifth anniversary of the date on which the ISO is granted. Any Participant who disposes of Shares acquired upon the exercise of an ISO either (i) within two years after the date of grant of such ISO or (ii) within one year after the transfer of such Shares to the Participant, shall notify the Company of such disposition and the amount realized upon such disposition. (e) Deferral. The Committee may develop procedures for a Participant to defer receipt of Shares otherwise subject to Options granted hereunder. 7. TERMS AND CONDITIONS OF LSARS LSARs granted under the Plan shall be exercisable upon the occurrence of specified contingent events, and such LSARs may be exercised by a Participant whether or not such Participant is employed by the Company at the time of exercise. Unless otherwise specified by the Committee, each LSAR shall entitle a Participant to receive, upon exercise, an amount in cash equal to the excess of (a) a price per Share determined in connection with specified contingent events, both as specified in the LSAR grant document, over (b) the exercise price of such LSAR (which shall be no less than the Fair Market Value of one Share on the date of grant of such LSAR). 8. TAX WITHHOLDING The Committee shall have the right to require payment of any federal, state, local or foreign income or other taxes required to be withheld with respect to the exercise of an Award. Unless the Committee specifies otherwise, the Participant may elect to pay a portion or all of such withholding taxes by (a) delivery in Shares or (b) having Shares withheld by the Company from any Shares that would have otherwise been received by the Participant. The number of Shares so delivered or withheld shall have an aggregate Fair Market Value sufficient to satisfy the applicable withholding taxes. 9. AMENDMENTS OR TERMINATION The Board may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which (a) without the approval of the stockholders of the Company, would (except as is provided in Section 13 of the Plan), (i) increase the total number of Share reserved for the purposes of the Plan, (ii) change in the maximum number of Shares for which Awards may be granted to any Participant, (iii) materially increase the benefits accruing to Participants under the Plan or (iv) materially modify the eligibility requirements for participation in the Plan, or (b) without the consent of a Participant, would impair any of the rights or obligations under any Award theretofore granted to such Participant under the Plan; provided, however, that the Committee may amend the Plan in such manner as it deems necessary to permit the granting of Awards meeting the requirements of the Code or other applicable (United States or foreign) laws. 7 10. NO RIGHT TO EMPLOYMENT The granting of an Award under the Plan shall impose no obligation on the Company or any Subsidiary to continue the employment of a Participant or to make any additional Awards to the Participant and shall not lessen or affect the Company's or Subsidiary's right to terminate the employment of such Participant. 11. SUCCESSORS AND ASSIGNS The Plan shall be binding on all successors and assigns of the Company any a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant's creditors. 12. NONTRANSFERABILITY OF AWARDS Unless otherwise so provided by the Committee, an Award shall not 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. 13. ADJUSTMENTS UPON CERTAIN EVENTS Notwithstanding any provision in the Plan to the contrary, the following provisions shall apply to all Awards granted under the Plan: (a) Generally. In the event of any change in the outstanding Shares by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of Shares or other corporate exchange, or any distribution to stockholders of Shares other than regular cash dividends, the Committee in its sole discretion and without liability to any person may make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number or kind of Shares or other securities issued or reserved for issuance pursuant to the Plan or pursuant to outstanding Awards, (ii) the Option Price and/or (iii) any other affected terms of such Awards. (b) Change in Control. Except as otherwise provided in an Award agreement, in the event of a Change in Control, the Committee in its sole discretion and without liability to any person may take such actions, if any, as it deems necessary or desirable with respect to any Award (including, without limitation, (i) the acceleration of an Award, (ii) the payment of a cash amount in exchange for the cancellation of an Award and/or (iii) the requiring of the issuance of substitute Awards that will 8 substantially preserve the value, rights and benefits of any affected Awards previously granted hereunder) as of the date of the consummation of the Change in Control. 14. CHOICE OF LAW The Plan shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to the choice of law provisions thereof. 15. TERM OF THE PLAN The Plan shall be effective as of the Effective Date. No Award may be granted under the Plan after the tenth anniversary of the date of the Plan is adopted by the Board, but Awards theretofore granted may extend beyond that date. EX-99.F 13 EXHIBIT 99(F) 1 Exhibit 99(f) STOCK OPTION AGREEMENT ---------------------- STOCK OPTION AGREEMENT (this "Agreement"), between R.P. Scherer Corporation, a Delaware corporation (the "Company"), and ______________ (the "Optionee"). WHEREAS, the Company believes that it is in the best interests of the Company to encourage stock ownership by those members of its Board of Directors (the "Board of Directors"), such as the Optionee, who are not officers, employees or employees of affiliates of the Company, and in consideration for the continuing service of the Optionee as a member of the Board of Directors, the Company and the Optionee agree as follows: 1. OPTION TO PURCHASE SHARES. 1.1 GRANT OF OPTION. Subject to the terms and conditions of this Agreement, the Company hereby irrevocably grants to the Optionee an option (such option and all options issued in exchange or substitution for all or part of this option are collectively referred to herein as the "Option") to purchase from the Company up to ______ shares (the "Shares") of the Company's Common stock, $0.01 par value (the "Common Stock"), for a price of $_____ per Share (the "Exercise Price"). The Option is intended to be a nonqualified option, and is not subject to the provisions of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The date of grant of this Option is _______________. 1.2 EXERCISE OF OPTION. (a) The Option shall be exercisable at any time on or after ________________, in whole or in part, until the Option Termination Date (as hereinafter defined); PROVIDED, HOWEVER, that this Option may not be exercised at any time to purchase fewer than 100 Shares. (b) If the Optionee wishes to exercise the Option in whole or in part, the Optionee shall send a written notice in the form of Exhibit A hereto (the "Notice of Exercise") to the Company, stating that the Option or a portion thereof is thereby exercised. (c) Subject to Section 6.1, the Company shall deliver to the Optionee a certificate or certificates evidencing the Shares to be purchased upon exercise of the Option, or any portion thereof, as soon as practicable after receipt of the Notice of Exercise, the Purchase price (as hereinafter defined) and Withholding Taxes (as hereinafter defined). (d) The Option shall terminate on _______________ (the "Option Termination Date") unless it terminates earlier as provided herein. 2 1.3 PAYMENTS. (a) PURCHASE PRICE. Any Notice of Exercise shall be accompanied by payment of an amount equal to the Exercise Price multiplied by the number of Shares being purchased (the "Purchase Price"), the payment of which shall take one of the following forms: (i) full payment in cash or by check payable to the order of the Company; (ii) through the delivery of shares issuable upon exercise of the Option having an aggregate "Fair Market Value" (as defined below) on the date of exercise equal to the Purchase Price; or (iii) a combination of the consideration provided in the foregoing clauses (i) and (ii). "Fair Market Value" of a share of Common Stock as of a given date shall be: (A) the closing price of a share of Common Stock on the principal exchange on which shares of Common Stock are then trading, if any, on the previous day, or, if shares were not traded on such previous day, then on the next preceding trading day during which a sale occurred; (B) if the Common Stock is not traded on an exchange but is quoted on National Association of Securities Dealers, Inc. ("NASD") Automated Quotation System ("NASDAQ") or a successor quotation system, (x) the last sale price (if the Common Stock is then listed as a National Market Issue under the NASD National Market System) or (y) the mean between the closing representative bid and asked prices (in all other cases) for the Common Stock on the previous day as reported by NASDAQ or such successor quotation system; (C) if the Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for the Common Stock, on the previous day, as determined in good faith by the Board of Directors; or (D) if the Common Stock is not publicly traded, the fair market value established by the Board of Directors acting in good faith. (b) WITHHOLDING TAXES. Any Notice of Exercise shall also be accompanied by full payment to the Company of all amounts which, under federal, sate or local tax law, it is required to withhold upon exercise of the Option ("Withholding Taxes"), the payment of which shall take one of the following forms: (i) full payment in cash or by check payable to the order of the Company or (ii) through the delivery of Shares issuable upon exercise f the Option having an aggregate Fair Market Value on the date of exercise equal to the Withholding Taxes; or (iii) a combination of the consideration provided in the foregoing clauses (i) and (ii). 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to Optionee that: (a) DUE AUTHORIZATION. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including the exercise of the Option) have been duly and validly authorized by the Board of Directors, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. 2 3 (b) SHARES. All Shares, upon issuance pursuant hereto, shall be duly authorized, validly issued, fully paid and nonassessable, with no personal liability attached to the ownership thereof, shall be delivered free and clear of all claims, liens, encumbrances, security interests and charges of any nature whatsoever and shall not be subject to any preemptive right of any stockholder of the Company. (c) GOOD STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to execute and deliver this Agreement. 3. TERMINATION OF SERVICE OR DEATH OR DISABILITY. 3.1 TERMINATION OF OPTION. Except to the extent provided in Section 3.3, the Option, if not exercisable at the time the Optionee ceases to be a member of the Board of Directors for any reason, shall terminate at such time. 3.2 EXERCISE OF OPTION. If the Optionee ceases to be a member of the Board of Directors for any reason other than death or "permanent disability" (as such term is defined in Section 22(e)(3) of the Code), the Option, if exercisable at that time, must be exercised (to the extent not previously exercised) within the one hundred and twenty (120) day period following termination of such directorship and prior to the Option Termination Date. Following the end of such one hundred and twenty (120) day period, the Option shall terminate. 3.3 ACCELERATION UPON DEATH OR PERMANENT DISABILITY. If the Optionee ceases to be a member of the Board of Directors by reason of the death or permanent disability of the Optionee (each an "Acceleration Event"), the Option may be exercised in full (to the extent not previously exercised) within 180 days of the Acceleration Event and prior to the Option Termination Date, (i) after the Optionee's death by the administrators or executors of the Optionee's estate or by the person or persons to whom the Optionee's rights under the Option shall have passed by will or by the applicable laws of descent or distribution; or (ii) after the Optionee's permanent disability by such Optionee or by the Optionee's guardian or legal representative. 4. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the outstanding shares of Common Stock are hereafter changed into or exchanged for a different number or kind of shares of capital stock or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend, combination of shares or otherwise, then in relation to the Common Stock that is affected by one or more of the above events, the numbers, rights and privileges of the shares of Common Stock then included in the Option shall be increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and nonassessable at the time of such occurrence; provided, however, the Company shall not be required to issue a fractional share of Common Stock and any adjustment made pursuant to this Section 4 shall be limited by deleting any fractional share. 3 4 5. NONASSIGNABILITY. No right granted to the Optionee under this Agreement shall be assignable or transferable, except by will or by the applicable laws of descent and distribution. Any person or persons to whom the Optionee's rights under the Option have passed in accordance with the preceding sentence shall be subject to all terms and conditions of this Agreement. During the life of the Optionee, all rights granted to the Optionee under this Agreement shall be exercisable only by the Optionee or by the Optionee's guardian or legal representative. 6. MISCELLANEOUS. 6.1 RESTRICTIONS. If a Registration Statement under the Securities Act of 1933, as amended, is not in effect with respect to the Shares issuable upon the exercise of the Option, or any part thereof, then the certificates representing such Shares shall bear the following legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933 (the "Act") and, accordingly, may not be offered, sold or otherwise pledged, hypothecated or transferred unless (A) pursuant to an effective registration statement under the Act or (B) an applicable exemption from the registration requirements of the Act is available." 6.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, written and oral, between the parties with respect to the subject matter hereof. 6.3 AMENDMENTS. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto. 6.4 NOTICES. All Notices to Exercise or other notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to the Company: R.P. Scherer Corporation 2075 W. Big Beaver Road Troy, Michigan 48007 Attention: Secretary If to the Optionee: At the address give below the Optionee's signature on the signature page hereof, 4 5 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 6.5 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 6.6 NO RIGHTS AS A STOCKHOLDER. Neither the Optionee nor any other person exercising this Option pursuant to Section 5 shall have any of the rights of a stockholder of the Company with respect to the Shares subject to the Option until the issuance of a stock certificate to him or her for such Shares. Except as provided in Section 4, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued. 6.7 DEFINITION. The term "Shares," as used herein, shall also mean, to the extent applicable, any other securities or properties receivable upon exercise of the Option. 6.8 STOCKHOLDER APPROVAL. Notwithstanding anything in this Agreement to the contrary, this Option shall not be exercisable until such time as the stockholders of the Company shall have ratified and approved this Agreement in accordance with the Company's Restated Certificate of Incorporation, as amended, the Company's By-Laws and the Securities Exchange Act of 1934, as amended, and the rules and regulation promulgated hereunder and the rules and regulations of any national securities exchange on which the Common Stock is listed or if the Common stock is not listed on an exchange but is quoted on NASDAQ, the rules and regulations of NASDAQ. IN WITNESS WHEREOF, the Company and the Optionee have caused this Agreement to be duly executed as of the day and year first above written. R.P. SCHERER CORPORATION By: ______________________________ Name: ____________________ Title: ____________________ [OPTIONEE] __________________________________ Address of the Optionee: ___________________________ ___________________________ 5 6 Schedule to Exhibit 99(f) Director Stock Option Agreements
DIRECTOR NUMBER OF CARDINAL EXERCISABLE EXERCISE TERMINATION EXCHANGE OPTIONS AS OF PRICE DATE John Avery 11,400 January 1, 1998 $47.77 December 5, 1998 Frederick Frank 11,400 January 1, 1998 $47.77 December 5, 1998 Lori Koffman 11,400 January 1, 1998 $47.77 December 5, 1998 James Stern 11,400 January 1, 1998 $47.77 December 5, 1998 Kenneth Way 11,400 January 1, 2000 $52.89 January 1, 2007
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