EXHIBIT 10.11
WINSTON LABORATORIES, INC.
Stock Option Plan for Non-Employee Directors
1. PURPOSE. The pm-poses of this Plan are to encourage Non-Employee Directors of
Winston Laboratories, Inc., a Delaware Corporation, (the “Company”), to own
shares of the Company’s stock and thereby to align their interests more closely
with the interests of the other stockholders of the Company, to encourage the
highest level of director performance by providing the Non-Employee Directors
with a direct interest in the Company’s attainment of its financial goals, and
to provide financial incentives that will help attract and retain the most
qualified Directors.
2. DEFINITIONS. As used in this Plan:
“Annual Option” means an Option Right granted to a Director pursuant to
Section 5 of this Plan.
“Board” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means the Compensation Committee of the Winston Laboratories, Inc.
Board of Directors.
“Common Shares” means (i) shares of the common stock, $.001 par value, of the
Company and (ii) any security into which Common Shares may be converted by
reason of any transaction or event of the type referred to in Section 6 of this
Plan.
“Date of Grant” means the date on which a grant of Initial Options or Annual
Options, as the case may be, shall become effective as provided in Sections 4(a)
and Section 5(a), respectively.

 

 

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“Disability” means the inability to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than 12 months. A Non-Employee Director
shall not be considered to be subject to a Disability until he furnishes a
certification from a practicing physician in good standing to the effect that
such Director meets the criteria described in this Section.
“Effective Date” has the meaning set forth in Section 14.
“Initial Option” means the Option Right granted to a Non-Employee Director
pursuant to Section 4 of this Plan.
“Market Value” shall mean, as of any particular date, (i) the closing sale price
per Common Share as reported on the principal exchange on which Common Shares
are then trading, if any, or if applicable, the Nasdaq National Market or other
principal automated quotation system, on the Date of Grant, or if there are no
sales on such day, on the next preceding trading day during which a sale
occurred, or (ii) if clause (i) does not apply, the fair market value of the
Common Shares as determined by the Board.
“Non-Employee Director” means a member of the Board who is not an employee of
the Company. For purposes of this Plan, an employee is an individual whose wages
are subject to the withholding of federal income tax under Section 3401 and 3402
of the Code. A Non-Employee Director who becomes an employee (within the meaning
of this Section) shall not forfeit any Option Right granted hereunder solely by
reason of assuming employee status.
“Optionee” means the Non-Employee Director so designated in an agreement
evidencing an outstanding Option Right.
“Option Price” means the purchase price payable upon the exercise of an Option
Right.

 

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“Option Right” means the right to purchase Common Shares from the Company upon
the exercise of an Initial Option or an Annual Option granted pursuant to this
Plan. Option Rights shall be evidenced by written agreements containing terms
and conditions not inconsistent with this Plan.
“Plan” means the Winston Laboratories, Inc. Stock Option Plan for Non-Employee
Directors, as the same may be amended from time to time.
“Rule 16b-3” means Rule 16b-3, as promulgated and amended from time to time by
the Securities and Exchange Commission under the Exchange Act.
“Termination of Service” means the time at which the Optionee ceases to serve as
a member of the Board for any reason, with or without cause, which includes
termination by resignation, removal, death or retirement.
“Voting Stock” has the meaning set forth in Section 12(a).
3. SHARES AVAILABLE UNDER THE PLAN.
(a) Subject to Section 3(b) the number of Common Shares issued or transferred,
plus the number of Common Shares covered by outstanding awards granted under
this Plan, shall not in the aggregate exceed 100,000 Common Shares, which may be
Common Shares held in treasury or a combination thereof.
(b) For the purposes of this Section 3, any Common Shares subject to an Option
Right that has been cancelled or terminated shall again be available for the
grant of Option Rights under this Plan.
4. INITIAL OPTIONS.
(a) With respect to each person who is appointed or elected a Non-Employee
Director of the Company on or after the Effective Date of this Plan, an option
to purchase 5,000 Common Shares shall be automatically granted as of the
Effective Date of this Plan or as of the date such person is first appointed or
elected a director, whichever comes later.

 

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(b) The Option Price per share of each Initial Option shall be the Market Value
per Common Share as of the Date of Grant.

  (c)    (i)  Subject to subsection (ii) of this Section 4(c) and Section 12 of
this Plan, each Initial Option, until terminated as provided in Section 4(d),
shall become exercisable to the extent of 100% of the Common Shares subject
thereto after the Optionee has continuously served as a director for one year
from the Date of Grant.

  (ii)   If an Optionee ceases to be a director by reason of death or
Disability, all Initial Options held by such Optionee that would have otherwise
become exercisable had such director continuously served as a director for one
year through the Date of Grant immediately following such death or Disability,
notwithstanding subsection (i) of this Section 4(c), become immediately
exercisable in full.

(d) Each Initial Option shall terminate on the earliest of the following dates:

  (i)   Six (6) months following the effective date of the Optionee’s
‘Termination of Service, if such Termination of Service results other than from
the Optionee’s death or Disability;     (ii)   One (1) year following the
effective date of the Optionee’s Termination of Service, if such Termination of
Service results from Optionee’s death or Disability; or     (iii)   Ten
(10) years from the Date of Grant.

 

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(e) The Option Price shall be payable (i) in cash or by check acceptable to the
Company, (ii) by transfer to the Company of Common Shares which have been owned
by the Optionee for more than six months prior to the date of exercise and which
have a Market Value on the date of exercise equal to the Option Price, or
(iii) by a combination of such methods of payment.
(f) Initial Options granted pursuant to this Section 4 shall be options that are
not intended to qualify under any particular provision of the Code.
5. ANNUAL OPTION.
(a) Each Non-Employee Director, one year from the Effective Date of the Plan or
one year from the Non-Employee Director’s date of initial appointment, whichever
comes later, shall be automatically granted an Option to purchase 2,500 Common
Shares, and annually thereafter will automatically be granted an Option to
purchase 2,500 Common Shares.
(b) The Option Price per share of each Annual Option shall be the Market Value
per Common Share as of the Date of Grant.

  (c)    (i)  Subject to subsection (ii) of this Section 5(c) and Section 12 of
the Plan, each Annual Option until terminated as provided in Section 5(d), shall
become exercisable to the extent of 50% of the Common Shares subject thereto
after the Optionee has continuously served as a director for one year from the
Date of Grant, and to the extent of an additional 50% of the Common Shares
subject to the Annual Option after the second year of continuous service from
the Date of Grant.

 

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  (ii)   If an Optionee ceases to be a director by reason of death or
Disability, all Annual Options held by such Optionee that would have otherwise
become exercisable had such Director continuously served as a director through
the Date of Grant immediately following such death or Disability shall,
notwithstanding subsection (i) of the Section 5(d), become immediately
exercisable in full,

(d) Each Annual Option shall terminate on the earliest of the following dates:

  (i)   Six (6) months following the effective date of the Optionee’s
Termination of Service, if such Termination of Service results other than from
Optionee’s death or Disability;     (ii)   One (1) year following the effective
date of the Optionee’s Termination of Service, if such Termination of Service
results from Optionee’s death or Disability; or     (iii)   Ten (10) years from
Date of Grant.

(e) The Option Price shall be payable in cash or by check acceptable to the
Company.
6. ADJUSTMENTS. The Committee shall make or provide for such adjustments in the
number of Common Shares covered by Option Rights granted hereunder, the Option
Prices per Common Share applicable to any such Option Rights, and the kind of
shares (including shares of another issuer) covered thereby, as the Committee
shall in good faith determine to be equitably required in order to prevent
dilution or expansion of the rights of Optionees that otherwise would result
from (a) any stock dividend, stock split, combination of shares,
re-capitalization or other change in the capital structure of the Company, or
(b) the merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of warrants or other rights to purchase securities or any other
corporate transaction or event having an effect similar to any of the foregoing.
The Committee shall also make or provide for such adjustments in the maximum
number of Common Shares specified in Section 3(a) of this Plan as the Committee
may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 6.

 

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7. FRACTIONAL SHARES. The Company shall not be required to issue any fractional
Common Shares pursuant to this Plan. Whenever under the terms of this Plan a
fractional Common Share would otherwise be required to be issued, an amount in
lieu thereof shall be paid in cash based upon the Market Value of such
fractional Common Share.
8. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by the
Committee. Notwithstanding the foregoing, grants of Option Rights under this
Plan shall be automatic as described in Sections 4 and 5, and the Committee
shall have no authority, discretion or power to determine the terms of the
Option Rights to be granted pursuant to the Plan, the number of Common Shares to
be issued thereunder or the time at which such Options Rights are to be granted,
or establish the duration and nature of Option Rights, except in the sense of
administering the Plan subject to the provisions of the Plan.
(b) Subject to subsection (a) of this Section 8, the interpretation and
construction by the Committee of any provision of this Plan or any agreement,
notification or document evidencing the grant of Option Rights, and any
determination by the Committee pursuant to any provision of this Plan or any
such agreement, notification or document shall be final and conclusive. No
member of the Committee shall be liable for any such action taken or
determination made in good faith.

 

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9. AMENDMENTS AND OTHER MATTERS. (a) This Plan may be terminated, and from time
to time amended, by the Board; provided, however, that except as expressly
authorized by this Plan, no such amendment shall (i) increase the number of
Common Shares specified in Section 3(a) hereof, materially modify the
requirements as to eligibility for participation in this Plan, or otherwise
cause this Plan or any grant, award or election made pursuant to this Plan to
cease to satisfy any applicable condition of rule 16b-3; provided further that
Plan provisions relating to the amount and price of securities to be awarded and
the timing of awards under the Plan shall not be amended more than once every
six months, other than to comply with changes in the Code, the Employment
Retirement Income Security Act, or the rules promulgated thereunder. No
amendment or termination of the Plan shall adversely affect any outstanding
award theretofore granted under the Plan without the consent of the Director
holding such award.
(b) Any grant, award or election that may be made pursuant to an amendment to
this Plan shall be null and void if it is subsequently determined that
(1) stockholder approval of such amendment was required in order for this Plan
to continue to satisfy the applicable conditions of Rule 16b-3, or (ii) such
grant, award, election or amendment disqualified any Optionee as a
“disinterested person” within the meaning of Rule 16b-3.
10. NO ADDITIONAL RIGHTS. Nothing contained in this Plan or in any award granted
under this Plan shall interfere with or limit in any way the right of the
stockholders of the Company to remove any Director from the Board pursuant to
state law or the Bylaws or Certificate of Incorporation of the Company, nor
confer upon any Director any right to continue in the service of the Company.

 

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11. SECURITIES LAW MATTERS. (a) The Company may require any Optionee, as a
condition of receiving Option Rights, to give written assurances in substance
and form satisfactory to the Company and its counsel to the effect that such
person is acquiring the Common Shares subject to the Option Rights for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) Each award of Option Rights shall be subject to the requirement that, if at
any time counsel to the Company shall determine that the listing, registration
or qualification of the Common Shares subject to such Option Rights upon any
securities exchange or. automated quotation system or under any state or federal
law, or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance of shares
thereunder, such award of Option Rights may not be accepted or exercised in
whole or in part unless such listing, registration, qualification, consent or.
approval shall have been effected or obtained on conditions acceptable to such
counsel. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration or qualification.
(c) To the extent necessary for an Option Right, its exercise or the sale of
Common Shares acquired thereunder to be exempt from Section 16(b) of the
Exchange Act, such Option Right shall be held six months from the Date of Grant,
or at least six months shall elapse from the Date of Grant to the date of
disposition of the Common Shares acquired upon exercise of such Option Right.

 

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12. CHANGE IN CONTROL. Upon a Change in Control (as hereinafter defined), all
Option Rights held by an Optionee with respect to the Optionee’s service as a
director shall, notwithstanding Sections 4(c) and 5(c) of this Plan, become
immediately exercisable in full. If any event or series of events constituting a
Change in Control shall be abandoned, the effect thereof shall be null and of no
further force and effect and the provisions of Sections 4(c) and 5(c) shall be
reinstated but without prejudice to any exercise of any Option Right that may
have occurred prior to such nullification. For purposes of this Plan, “Change in
Control” means the occurrence of any of the following events:
(a) The Company is merged, consolidated or reorganized into or with another
corporation or legal person, and as a result of such merger, consolidation or
reorganization less than a majority of the combined voting power of the then
outstanding securities of such corporation or person immediately after such
transfer are held in the aggregate by the holders of securities entitled to vote
generally in the election of directors of the Company (“Voting Stock”)
immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all of its
assets to another corporation or other legal person, and as the result of such
sale or transfer less than a majority of the combined voting power of the then
outstanding securities of such corporation or person immediately after such sale
or transfer is held in. the aggregate by the holders of Voting Stock of the
company immediately prior to such sale or transfer.
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the Exchange Act
disclosing that any person (as the term “person” is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) other than Joel E. Bernstein or any of his
affiliates has or intends to become the beneficial owner (as the term
“beneficial owner” is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing more
than twenty percent (2Q%) of the Voting Stock.

 

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(d) If, during any period of two consecutive years, individuals who at the
beginning of my such period constitute the Directors of the Company cease for
any reason to constitute at least a majority thereof; provided, however, that
for purposes of this subsection (d) each Director who is first elected, or first
nominated for election by the Company’s stockholders, by a vote of at least
two-thirds of the Directors of the Company (or a committee thereof) then still
in office who were Directors of the Company at the beginning of any such period
shall be deemed to have been a Director of the Company at the beginning of such
period.
Notwithstanding the foregoing, to the extent necessary for an Option Right, its
exercise or the sale of Common Shares acquired thereunder to be exempt from
section 16(b) of the Exchange Act (i) except in the case of death or Disability,
an Optionee shall not be entitled to exercise any Option Rights granted within
six months prior to the occurrence of a Change in Control until the expiration
of the six-month period following the Date of Grant of such Option Rights, or
(ii) at least six months shall elapse from the Date of Grant of such Option
Rights to the date of disposition of the Common Shares acquired upon exercise of
such Option Rights.
13. TERMINATION OF THE PLAN. No further awards shall be granted under this Plan
after the passage of ten years from the date on which this Plan is first
approved by the stockholders of the Company.
14. EFFECTIVE DATE. The effective date of this Plan (the “Effective Date”) shall
be February 1, 1999, subject to approval by the Company’s stockholders at the
1999 Annual Meeting of Stockholders.

 

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