NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Published on August 9, 1996
EXHIBIT 4.1
CENTRAL GARDEN & PET COMPANY
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
(Effective February 20, 1996)
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SECTION 1
ESTABLISHMENT, PURPOSE AND DURATION
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1.1 Establishment. Central Garden & Pet Company, a Delaware corporation
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(the "Company"), hereby establishes the "Central Garden & Pet Company
Nonemployee Director Stock Option Plan" (the "Plan"), for the benefit of
nonemployee members of the Board of Directors of the Company ("Nonemployee
Directors"), in order to compensate such Nonemployee Directors for their past
services by awarding them stock options under the Plan ("Options").
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
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success, and enhance the value, of the Company, by attracting, retaining and
motivating Nonemployee Directors of outstanding competence. The Plan also is
designed to align the interests of Nonemployee Directors with the interests of
the stockholders of the Company.
1.3 Effective Date. The Plan is effective as of February 20, 1996,
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subject to the approval by an affirmative vote, at the next meeting of the
stockholders of the Company, or any adjournment thereof, of the holders of a
majority of the outstanding shares of the common stock of the Company
("Shares"), present in person or by proxy and entitled to vote at such meeting.
As provided in the Plan, Options will be granted prior to the receipt of such
vote, but such grants shall be null and void if such vote is not in fact
received.
1.4 Duration of the Plan. The Plan shall commence on the date specified
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in Section 1.3, and subject to the right of the Board of Directors of the
Company to terminate the Plan at any time and for any reason pursuant to Section
7, shall remain in effect thereafter. In the event that on any date of grant the
number of Shares to be subject to Options granted to all Nonemployee Directors
exceeds the number of Shares then available for grant under the Plan, each
Nonemployee Director shall share pro rata in the number of Shares that remain
available for grant on such date.
SECTION 2
DEFINITIONS
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For purposes of this Plan, the following terms shall have the meanings
indicated unless a different meaning is plainly required by the context:
2.1 "Affiliate" means any corporation or any other entity (including, but
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not limited to, partnerships and joint ventures) controlling, controlled by, or
under common control with the Company.
2.2 "Board" means the Board of Directors of the Company.
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2.3 "Code" means the Internal Revenue Code of 1986, as amended.
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Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
2.4 "Company" means Central Garden & Pet Company, a Delaware corporation,
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or any successor thereto.
2.5 "Director" means an individual who is a member of the Board.
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2.6 "Disability" means a permanent and total disability within the
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meaning of section 22(e)(3) of the Code.
2.7 "Exchange Act" means the Securities Exchange Act of 1934, as amended
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from time to time, or any successor Act thereto. Reference to a specific
section of the Exchange Act shall include such section, any valid regulation
promulgated thereunder, and any comparable provision of any future legislation
amending, supplementing or superseding such section.
2.8 "Exercise Price" means the price at which a Share may be purchased
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pursuant to an Option.
2.9 "Fair Market Value" means the average of the highest and lowest
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quoted selling prices for Shares on the relevant date, or if there were no sales
on such date, the arithmetic mean of the highest and lowest quoted selling
prices on the nearest day after the relevant date, as determined by the Board.
2.10 "Nonemployee Director" means a Director who is an employee of
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neither the Company nor of any Affiliate.
2.11 "Option" means an option to purchase Shares which has been granted
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under the provisions of the Plan. Options are not intended to be an incentive
stock option under section 422 of the Code.
2.12 "Optionee" means a Nonemployee Director to whom an Option has been
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granted under the provisions of the Plan.
2.13 "Plan" means the Central Garden & Pet Company Nonemployee Director
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Stock Option Plan, as set forth in this instrument and as hereafter amended from
time to time.
2.14 "Shares" means the shares of common stock, $0.01 par value, of the
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Company.
SECTION 3
ADMINISTRATION OF THE PLAN
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3.1 The Board. The Plan shall be administered by the Board. It shall be
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the duty of the Board to conduct the general administration of the Plan in
accordance with its provisions.
3.2 Authority of the Board. The Board shall have all powers and
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discretion necessary or appropriate to administer the Plan and to control its
operation in accordance with its terms, including, but not by way of limitation,
the following powers:
(a) To interpret the provisions of the Plan and to determine, in its
sole discretion, any question arising under, or in connection with the
administration or operation of, the Plan;
(b) To employ such counsel, agents and advisers, and to obtain such
legal, clerical and other services, as it may deem necessary or appropriate
in carrying out the provisions of the Plan; and
(c) To prescribe, amend and rescind rules and regulations relating to
the Plan, and to make all other determinations which may be necessary or
advisable for the administration of the Plan.
3.3 Decisions Binding. All actions, interpretations and decisions of the
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Board shall be final, conclusive and binding on all persons, and shall be given
the maximum deference permitted by law.
3.4 Administrative Expenses. All expenses incurred in the administration
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of the Plan by the Board, or otherwise, including legal fees and expenses, shall
be paid and borne by the Company.
3.5 Indemnification. Each person who is or shall have been a member
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of the Board shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, notion, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Certificate of Incorporation or
Bylaws, as a matter of law, or otherwise, or any power that the Company may have
to indemnify them or hold them harmless.
SECTION 4
SHARES SUBJECT TO THE PLAN
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4.1 Number of Shares. Subject to adjustment as provided in Section 4.3,
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the maximum number of Shares available for grant under the Plan may not exceed
100,000. Such Shares may be either authorized but unissued Shares or treasury
Shares.
4.2 Effect of Lapsed Options. If an Option is cancelled, terminates,
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expires or lapses for any reason, any Shares subject to such Option again shall
be made available for grant under the Plan (to the same Optionee or to a
different person).
4.3 Adjustments in Authorized Shares. In the event of any merger,
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reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be delivered under the Plan, and in the
number and class of and/or the Exercise Price of Shares subject to outstanding
Options, as the Board, in its sole discretion, shall determine to be appropriate
to prevent the dilution or diminishment of Options. Notwithstanding the
preceding sentence, the number of Shares subject to any Option always shall be a
whole number.
SECTION 5
ELIGIBILITY
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5.1 Eligibility. All Nonemployee Directors shall be eligible to
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participate in the Plan.
5.2 Consideration for Grant of Option. Any Option under the Plan shall
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be granted in consideration of the past services of the Optionee.
SECTION 6
OPTIONS
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6.1 Grant of Options.
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6.1.1 Each Nonemployee Director who is a Nonemployee Director on
February 20, 1996 automatically will receive on such date an Option to purchase
10,000 Shares.
6.1.2 Each Optionee who received an Option to purchase 10,000 Shares
pursuant to Section 6.1.1, and each Nonemployee Director who becomes a
Nonemployee Director after February 20, 1996, automatically will receive, on the
date of each subsequent annual meeting of the stockholders of the Company on
which the Nonemployee Director is such, an Option to purchase such number of
Shares as determined by A divided by B, where "A" is $25,000 and "B" is the Fair
Market Value of a Share on the date on which the Option is granted. Any
fractional Share shall be rounded up to the next full Share. Accordingly, for
example, if the Fair Market Value of a Share on the date of grant is $9.00, then
the Optionee or Nonemployee Director (as applicable) would receive an Option to
purchase 2,778 Shares (i.e., $25,000 divided by $9.00, rounded up to the next
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full Share).
6.2 Terms of Options.
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6.2.1 Option Agreement. Each Option shall be evidenced by a written
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stock option agreement which shall be executed by the Optionee and
the Company.
6.2.2 Exercise Price. The Exercise Price for the Shares subject to
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each Option shall be one hundred percent (100%) of the Fair Market Value of such
Shares on the date of grant.
6.2.3 Exercisability. Each Option shall become exercisable in full
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four (4) years after the date of grant of the Option. Notwithstanding the
preceding sentence, if prior to the date when an Option would become
exercisable, the Optionee terminates service on the Board on account of death or
Disability, the Option shall become exercisable in full on the date of such
termination of service.
6.2.4 Expiration of Options. Each Option shall terminate upon the
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expiration of five (5) years from the date of grant of the Option.
6.2.5 Payment. Options shall be exercised by the Optionee's delivery
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of a written notice of exercise to the Secretary of the Company, setting forth
the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Exercise Price for any such
Shares shall be payable to the Company in full in cash or its equivalent.
As soon as practicable after receipt of a written notification of exercise
and full payment for the Shares purchased, the Company shall deliver to the
Optionee Share certificates (in the Optionee's name) representing such Shares.
6.2.6 Restrictions on Share Transferability. The Board may impose
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such restrictions on any Shares acquired pursuant to the exercise of an Option,
as it may deem advisable, including, but not limited to, restrictions related to
applicable Federal securities laws, the requirements of any national securities
exchange or system upon which Shares are then listed and/or traded, and/or under
any blue sky or state securities laws.
6.2.7 Nontransferability of Options. No Option granted under the
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Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will, the laws of descent and distribution, or as
permitted in Section 7.2. All Options granted to an Optionee under the Plan
shall be exercisable during his or her lifetime only by such Optionee.
SECTION 7
MISCELLANEOUS
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7.1 Amendment or Termination of the Plan. The Board, in its sole
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discretion, may amend, alter, modify or terminate the Plan, in whole or in part,
at any time and for any reason. However, only if and to the extent required to
maintain the Plan's qualification under Rule 16b-3 promulgated under the
Exchange Act, any such amendment shall be subject to stockholder approval. In
addition, as required by Rule 16b-3, the provisions regarding the formula for
determining the amount and timing of Options shall in no event be amended more
than once every six months, other than to comport with changes in the Code
and/or the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). (ERISA is inapplicable to the Plan.) Neither the amendment,
suspension, termination, nor scheduled expiration of the Plan shall, without the
consent of the Optionee, alter or impair any rights or obligations under any
Option theretofore granted. No Option may be granted during any period of
suspension nor after termination of the Plan.
7.2 Beneficiary Designation. If permitted by the Board, an Optionee may
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name a beneficiary or beneficiaries to whom any benefit under the Plan is to be
paid in case of the Optionee's death before he or she receives any or all of
such benefit. Each such designation shall revoke all prior designations by the
same Optionee and must be in a form and manner acceptable to the Board. In the
absence of any such designation, or if no beneficiary survives the Optionee,
benefits remaining unpaid at the Optionee's death shall be paid to the person or
persons entitled to such benefits under the Optionee's will or, if the Optionee
shall fail to make testamentary disposition of such benefits, his or her legal
representative. Any transferee must furnish the Company with (a) written notice
of his or her status as a transferee, and (b) evidence satisfactory to the
Company to establish the validity of the transfer and compliance with any laws
or regulations pertaining to said transfer.
7.3 Captions. The captions contained herein and in the table of contents
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are provided as a matter of convenience only, and in no way define, limit,
enlarge or describe the scope or intent of the Plan. Such captions shall not
affect in any way the construction of any provision of the Plan.
7.4 Applicable Law; Severability. The Plan hereby created shall be
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construed, administered and governed in all respects in accordance with the laws
of the State of California (with the exception of its conflict of laws
provisions). If any provision of this instrument shall be held invalid or
unenforceable by a court of competent jurisdiction, the remaining provisions
hereof shall continue to be fully effective.
7.5 No Effect Upon Other Compensation Plans. The adoption of this Plan
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shall not affect any other stock option, compensation or incentive plans in
effect for the Company or any Affiliate, and this Plan shall not preclude the
Board from establishing any other forms of incentive or compensation for
Nonemployee Directors.
7.6 No Effect on Service. Nothing in the Plan shall interfere with or
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limit in any way the right of the Company to terminate any Optionee's service on
the Board at any time, with or without cause.
7.7 Requirements of Law. The granting of Options and the issuance of
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Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
7.8 Rule 16b-3 Compliance. Transactions under this Plan are intended to
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comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan, an Option or any action
by the Board fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Board. Notwithstanding any
contrary provision of the Plan, if the Board specifically determines that
compliance with Rule 16b-3 no longer is required, all references in the Plan to
Rule 16b-3 shall be of no force or effect.
EXECUTION
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IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
executed this Plan on the date indicated below.
CENTRAL GARDEN & PET COMPANY
Dated: _____________, 1996 By ______________________________
Title: