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Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Transition Systems, Inc.
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(Exact name of issuer as specified in its charter)
Massachusetts 04-2887598
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Boston Place, Boston, Massachusetts 02108
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(Address of principal executive offices) (Zip Code)
TRANSITION SYSTEMS, INC.
AMENDED AND RESTATED 1995 INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
(Full title of the plan)
Robert F. Raco
President & Chief Executive Officer
Transition Systems, Inc.
One Boston Place
Boston, Massachusetts 02108
(617) 723-4222
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(Name and address, including zip code, and
telephone number, including area code, of agent for service)
WITH A COPY TO:
Donald R. Ware, Esquire
Robert W. Sweet, Jr., Esquire
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 832-1000
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<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
================================================================================
Proposed
Title of Proposed Maximum
Securities Amount Maximum Aggregate Amount of
to be to be Offering Price Offering Registration
Registered Registered Per Share Price Fee
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<S> <C> <C> <C> <C>
Common Stock 1,354,071 $25.88(1) $35,043,357(1) $12,083.92(1)
(par value $0.01 shares
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Common Stock 4,063,854 $ 2.67(2) $10,850,490(2) $ 3,741.55(2)
(par value $0.01 shares
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Totals 5,417,925 $45,893,847 $15,825.47
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<FN>
(1) Estimated pursuant to Rules 457 (c) and (h) based on the average of
the high and low prices of the Common Stock as reported on the National
Association of Securities Dealers Automated Quotation National Market System on
August 14, 1996.
(2) For shares issuable pursuant to stock options outstanding at August
14, 1996, calculated pursuant to Rule 457(h) based on the exercise price of such
options.
</TABLE>
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated in this Registration Statement by
reference:
(a) the Prospectus dated April 18, 1996 of Transition Systems, Inc.
(the "Company" or the "Registrant") included in the Company's Registration
Statement on Form S-1, File No. 333-01758, as declared effective by the
Commission on April 17, 1996;
(b) the description of the Company's Common Stock contained in the
Registration Statement on Form 8-A filed with the Commission on April 10, 1996
under Section 12 of the Securities Exchange Act of 1934, including any amendment
or report filed for the purpose of updating such description;
(c) the Company's Quarterly Report on Form 10-Q for the Quarterly
Period ended March 30, 1996, as filed with the Commission on May 31, 1996; and
(d) the Company's Quarterly Report on Form 10-Q for the Quarterly
Period ended June 30, 1996, as filed with the Commission on August 9, 1996.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be part hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The validity of the securities registered hereby is being passed upon
for the Company by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
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ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 6 of the Company's Amended and Restated Articles of
Organization provides that a director shall not have personal liability to the
Company or its stockholders for monetary damages arising out of the director's
breach of fiduciary duty as a director of the Company, to the maximum extent
permitted by Massachusetts Law. Section 13(b)(1 1/2) of Chapter 156B of the
Massachusetts Business Corporation Law provides that the articles of
organization of a corporation may state a provision eliminating or limiting the
personal liability of a director to a corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided, however,
that such provision shall not eliminate or limit the liability of a director
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts of omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) under sections 61 or
62 of the Massachusetts Business Corporation Law dealing with liability for
unauthorized distributions and loans to insiders, respectively, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company's Amended and Restated By-Laws further provide that the
Company shall, to the fullest extent authorized by the Massachusetts Business
Corporation Law, indemnify each person who is, or shall have been, a director or
officer of the Company or who is or was a director or employee of the Company
and is serving, or shall have served, at the request of the Company, as director
or officer of another organization or in any capacity with respect to any
employee benefit plan of the Company, against all liabilities and expenses
(including judgments, fines, penalties, amounts paid or to be paid in
settlement, and reasonable attorneys' fees) imposed upon or incurred by any such
person in connection with, or arising out of, the defense or disposition of any
action, suit or other proceeding whether civil or criminal, in which they may be
involved by reason of being or having been such a director or officer or as a
result of service with respect to any such employee benefit plan.
Section 67 of Chapter 156B of the Massachusetts General Laws authorizes
a corporation to indemnify its directors, officers, employees and other agents
unless such person shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that such action was in the best
interests of the corporation or, to the extent such matter related to service
with respect to an employee benefit plan, in the best
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interests of the participants or beneficiaries of such employee benefit plan.
The effect of these provisions would be to permit indemnification by
the Company for, among other liabilities, liabilities arising out of the
Securities Act of 1933, as amended.
Section 67 of the Massachusetts Business Corporation Law also affords a
Massachusetts corporation the power to obtain insurance on behalf of its
directors and officers against liabilities incurred by them in those capacities.
The Company has procured a directors' and officers' liability and company
reimbursement liability insurance policy that (i) insures directors and officers
of the Company against losses (above a deductible amount) arising from certain
claims made against them by reason of certain acts done or attempted by such
directors or officers and (ii) insures the Company against losses (above a
deductible amount) arising from any such claims, but only if the Company is
required or permitted to indemnify such directors or officers for such losses
under statutory or common law or under provisions of the Company's Amended and
Restated Articles of Organization or Amended and Restated By-Laws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4.1 Specimen certificate for the Common Stock (included as Exhibit 4.1 to
the Company's Registration Statement on Form S-1, Registration Number
333-01758, and incorporated herein by reference)
4.2 Transition Systems, Inc. Amended and Restated 1995 Incentive and Non-
Statutory Stock Option Plan
5.1 Opinion of Counsel
23.1 Consent of Independent Accountants
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page)
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ITEM 9. UNDERTAKINGS.
1. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
2. The undersigned Registrant hereby undertakes:
(a) 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;
(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;
(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 paragraphs 2 (a)(1)(i) and 2 (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference herein.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of
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such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) 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.
3. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, 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 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 Act and will
be governed by the final adjudication of such issue.
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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 on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, Massachusetts, on this 16th day of August,
1996.
TRANSITION SYSTEMS, INC.
By: /s/ Robert F. Raco
---------------------------------------
Robert F. Raco
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Robert E. Kinney and Paula J. Malzone,
and each of them, true and lawful attorneys-in-fact and agents with full power
of substitution, for and in name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing which
they, or any of them, may deem necessary or advisable to be done in connection
with this Registration Statement, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or any substitute or substitutes
for any or all of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Robert F. Raco Chairman of the Board, August 16, 1996
- ------------------------ President and Chief
Robert F. Raco Executive Officer
(Principal Executive
Officer)
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Signature Title Date
- --------- ----- ----
/s/ Robert E. Kinney Chief Financial Officer August 16, 1996
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Robert E. Kinney
/s/ Paula J. Malzone Treasurer August 16, 1996
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Paula J. Malzone
/s/ Patrick T. Hackett Director August 14, 1996
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Patrick T. Hackett
/s/ Robert S. Hillas Director August 16, 1996
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Robert S. Hillas
/s/ Allen F. Wise Director August 14, 1996
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Allen F. Wise
/s/ Peter Van Etten Director August 14, 1996
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Peter Van Etten
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EXHIBIT INDEX
-------------
Exhibit
No. Description Page
- ------- ----------- ----
4.1 Specimen certificate for the Common Stock
(included as Exhibit 4.1 to the Company's
Registration Statement on Form S-1, Registration
Number 333-01758, and incorporated herein by
reference)
4.2 Transition Systems, Inc. Amended and Restated 1995
Incentive and Non-Statutory Stock Option Plan
5.1 Opinion of Counsel
23.1 Consent of Independent Accountants
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (contained on the signature
page)
<PAGE> 1
EXHIBIT 4.2
TRANSITION SYSTEMS, INC.
Amended and Restated
1995 Incentive and Non-Statutory Stock Option Plan
SECTION 1. PURPOSE
This 1995 Incentive and Non-Statutory Stock Option Plan (the "Plan") is
intended as a performance incentive for officers and employees of Transition
Systems, Inc., a Massachusetts corporation (the "Company"), or its Subsidiaries
(as hereinafter defined) and for certain other individuals providing services to
or acting as directors of the Company or its Subsidiaries, to enable the persons
to whom options are granted (an "Optionee" or "Optionees") to acquire or
increase a proprietary interest in the Company and its success. The Company
intends that this purpose will be effected by the granting of incentive stock
options ("Incentive Options") as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and other stock options ("Non-Statutory
Options") under the Plan. The term "Subsidiaries" means any corporations in
which stock possessing 50% or more of the total combined voting power of all
classes of stock of such corporation or corporations is owned directly or
indirectly by the Company.
SECTION 2. OPTIONS TO BE GRANTED AND ADMINISTRATION
2.1 OPTIONS TO BE GRANTED. Options granted under the Plan may be either
Incentive Options or Non-Statutory Options. If an option is intended to be an
Incentive Option, and if for any reason such option (or any portion thereof)
shall not qualify as an Incentive Option, then, to the extent of such
nonqualification, such option (or portion thereof) shall be regarded as a
Non-Statutory Option appropriately granted under the Plan provided that such
option (or portion thereof) otherwise meets the Plan's requirements relating to
Non-Statutory Options.
2.2 ADMINISTRATION. This Plan shall be administered by the Compensation
Committee or any other committee of the Board of Directors of the Company (the
"Board"), consisting of two or more "Outside Directors" (such committee may
hereinafter be referred to as the "Plan Administrator"). As used herein, the
term "Outside Director" means any director who: (i) is not an employee of the
Company or of any "affiliated group" (as such term is defined in Section 1504(a)
of the Code) which includes the Company (an "Affiliate"); (ii) is not a former
employee of the Company or any Affiliate who is receiving compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
Company's or any Affiliate's taxable year; (iii) has not been an officer of the
Company or any Affiliate; and (iv) does not receive remuneration from the
Company or any Affiliate, either directly or indirectly, in any capacity other
than as a director. None of the members of the committee serving as Plan
Administrator shall have been granted any incentive stock option or
non-statutory option under this Plan or any other stock option plan of the
Company within one year prior to service on the Committee. It is the intention
of the Company that the Plan shall be administered by "disinterested persons"
within the meaning of Rule 16b-3 under the Securities
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Exchange Act of 1934 (the "Exchange Act"), but the authority and validity of any
act taken or not taken by the Committee shall not be affected if any person
administering the Plan is not a disinterested person.
Except as specifically reserved to the Board under the terms of the
Plan, the Plan Administrator shall have full and final authority to operate,
manage and administer the Plan on behalf of the Company. This authority
includes, but is not limited to: (i) the power to grant options conditionally or
unconditionally; (ii) the power to prescribe the form or forms of the
instruments evidencing options granted under this Plan; (iii) the power to
interpret the Plan; (iv) the power to provide regulations for the operation of
the incentive features of the Plan, and otherwise to prescribe regulations for
interpretation, management and administration of the Plan; (v) the power to
delegate to other persons the responsibility for performing ministerial acts in
furtherance of the Plan's purpose; (vi) the power to make, in its sole
discretion, changes to any outstanding option granted under the Plan, including
the power to reduce the exercise price, to accelerate the vesting schedule, or
to extend the expiration date; and (vii) the power to engage the services of
persons or organizations in furtherance of the Plan's purpose, including but not
limited to banks, insurance companies, brokerage firms and consultants.
In addition, as to each option, the Plan Administrator shall have full
and final authority, in its sole discretion: (i) to determine the number of
shares subject to each option; (ii) to determine the time or times at which
options will be granted; (iii) to determine the conditions on which options will
be granted or may be exercised; (iv) to determine the option price for the
shares subject to each option, which price shall be subject to the applicable
requirements, if any, of Section 5.1(c) hereof; and (v) to determine the time or
times when each option shall become exercisable and the duration of the exercise
period, which shall not exceed the limitations specified in Section 5.1(a).
No member of the committee serving as Plan Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any option granted thereunder.
2.3 APPOINTMENT AND PROCEEDINGS OF COMMITTEE. The Board may, from time
to time, appoint members of the committee serving as Plan Administrator in
substitution for, or in addition to, members previously appointed and may fill
vacancies, however caused, in such committee; provided, however, that each such
appointee will be an Outside Director, as described in Section 2.2. The
committee serving as Plan Administrator shall hold its meetings at such times
and places as it shall deem advisable. A majority of its members shall
constitute a quorum, and all actions of such committee shall require the
affirmative vote of a majority of its members. Any action may be taken by a
written instrument signed by all of the members, and any action so taken shall
be as fully effective as if it had been taken by a vote of a majority of the
members at a meeting duly called and held.
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SECTION 3. STOCK
3.1 SHARES SUBJECT TO PLAN. The stock subject to the options granted
under the Plan shall be shares of the Company's authorized but unissued common
stock, par value $.01 per share ("Common Stock"), or shares of the Company's
Common Stock held in treasury. The total number of shares that may be issued
pursuant to options granted under the Plan shall not exceed an aggregate of
6,070,116 shares of Common Stock (giving effect to a 334-for-1 stock split
approved by the Board on February 26, 1996). Such number of shares shall be
subject to adjustment as provided in Section 7 hereof.
3.2 LAPSED OR UNEXERCISED OPTIONS. Whenever any outstanding option
under the Plan expires, is cancelled or is otherwise terminated (other than by
exercise), the shares of Common Stock allocable to the unexercised portion of
such option shall be restored to the Plan and shall again become available for
the grant of other options under the Plan.
3.3 LIMITATION ON GRANTS. In no event may any Plan participant be
granted options with respect to more than 1,250,000 shares of Common Stock in
any fiscal year. The number of shares of Common Stock issuable pursuant to an
option granted to a Plan participant in a fiscal year that is subsequently
forfeited, cancelled or otherwise terminated shall continue to count toward the
foregoing limitation in such fiscal year. In addition, if the exercise price of
an option is subsequently reduced, the transaction shall be deemed a
cancellation of the original option and the grant of a new one so that both
transactions shall count toward the maximum shares issuable in the fiscal year
of each respective transaction.
SECTION 4. ELIGIBILITY
4.1 ELIGIBLE OPTIONEES. Incentive Options may be granted only to
officers and other employees of the Company or its Subsidiaries, including
members of the Board who are also employees of the Company or a Subsidiary.
Non-Statutory Options may be granted to officers or other employees of the
Company or its Subsidiaries, to members of the Board or the board of directors
of any Subsidiary whether or not employees of the Company or such Subsidiary,
and to consultants and other individuals providing services to the Company or
its Subsidiaries.
4.2 LIMITATIONS ON 10% STOCKHOLDERS. No Incentive Option shall be
granted to an individual who, at the time the Incentive Option is granted, owns
(including ownership attributed pursuant to Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any parent or Subsidiary of the Company (a "greater-than-10%
stockholder"), unless such Incentive Option provides that (i) the purchase price
per share shall not be less than 110% of the fair market value of the Common
Stock at the time such Incentive Option is granted, and (ii) that such Incentive
Option shall not be exercisable to any extent after the expiration of five years
from the date on which it is granted.
4.3 LIMITATION ON EXERCISABLE OPTIONS. The aggregate fair market value
(determined at the time the Incentive Option is granted) of the Common Stock
with respect to which Incentive Options are exercisable for the first time by
any person during any calendar
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year under the Plan and under any other option plan of the Company (or a parent
or subsidiary as defined in Section 424 of the Code) shall not exceed $100,000.
Any option granted in excess of the foregoing limitation shall be specifically
designated as being a Non-Statutory Option.
SECTION 5. TERMS OF THE OPTION AGREEMENTS
5.1 MANDATORY TERMS. Each option agreement shall contain such
provisions as the Plan Administrator shall from time to time deem appropriate.
Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
(a) EXPIRATION. Notwithstanding any other provision of the Plan or
of any option agreement, each option shall expire on the date specified in the
option agreement, which date shall not be later than the tenth anniversary of
the date on which the option was granted (fifth anniversary in the case of an
Incentive Option granted to a greater-than-10% stockholder).
(b) EXERCISE. Each option shall be exercisable in full or in
installments (which need not be equal) and at such times as designated by the
Plan Administrator. To the extent not exercised, installments shall accumulate
and be exercisable, in whole or in part, at any time after becoming exercisable,
but not later than the date the option expires.
(c) PURCHASE PRICE. The purchase price per share of the Common
Stock under each Incentive Option shall be not less than the fair market value
of the Common Stock on the date the option is granted (110% of the fair market
value in the case of a greater-than-10% stockholder). For the purpose of the
Plan the fair market value of the Common Stock shall be determined by the Plan
Administrator. The price at which shares may be purchased pursuant to
Non-Statutory Options shall be specified by the Plan Administrator at the time
the option is granted, and may be less than, equal to or greater than the fair
market value of the shares of Common Stock on the date such Non-Statutory Option
is granted, but shall not be less than the par value of shares of Common Stock.
(d) TRANSFERABILITY OF OPTIONS. Options granted under the Plan and
the rights and privileges conferred thereby may not be transferred, assigned,
pledged or hypothecated in any manner (whether by operation of law or otherwise)
other than by will or by applicable laws of descent and distribution, and shall
not be subject to execution, attachment or similar process. Upon any attempt so
to transfer, assign, pledge, hypothecate or otherwise dispose of any option
under the Plan or any right or privilege conferred hereby, contrary to the
provisions of the Plan, or upon the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby, such option shall
thereupon terminate and become null and void.
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(e) TERMINATION OF EMPLOYMENT OR DISABILITY OR DEATH OF OPTIONEE.
Except as may be otherwise expressly provided in the terms and conditions of the
option granted to an Optionee:
(i) Options granted hereunder shall terminate on the earliest to
occur of:
(A) the date of expiration thereof;
(B) the date of termination of the Optionee's employment
with or performance of services for the Company by the Optionee for any reason
(other than as a result of death or permanent and total disability of the
Optionee) or by the Company for cause (as hereinafter defined);
(C) thirty days after the date of termination of the
Optionee's employment with or performance of services for the Company by the
Company without cause (other than as a result of death or permanent and total
disability of the Optionee);
(D) twelve months after the date of termination of the
Optionee's employment with or performance of services for the Company as a
result of the permanent and total disability of an Optionee. An Optionee is
permanently and totally disabled if he is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to last for a continuous period of not less
than twelve months; permanent and total disability shall be determined in
accordance with Section 22(e)(3) of the Code and the regulations issued
thereunder.
(ii) In the event of the termination of an Optionee's employment
with or performance of services for the Company by the Company without cause
(other than as a result of death or permanent and total disability of the
Optionee), the Optionee's option shall be exercisable during the thirty-day
post-termination period described in Paragraph 5.1(e)(i)(C) only to the extent
that it was exercisable at the time of such termination of employment or
performance of services. In the event of the termination of the Optionee's
employment with or performance of services for the Company as a result of the
permanent and total disability of an Optionee, the Optionee's option shall be
exercisable during the twelve-month posttermination period referred to in
Paragraph 5.1(e)(i)(D) only to the extent that it was exercisable at the time of
such termination of employment or performance of services. In the event of the
termination of the Optionee's employment with or performance of services for the
Company as a result of the death of the Optionee, the Optionee's executor,
administrator or any person or persons to whom his option may be transferred by
will or by laws of descent and distribution shall have the right at any time
prior to the expiration date of his option to exercise such option, but only to
the extent the Optionee was entitled to exercise such option at the time of such
termination of employment or performance of services.
(iii) An employment relationship between the Company and the
Optionee shall be deemed to exist during any period in which the Optionee is
employed in any capacity by the Company or by any Subsidiary. Whether authorized
leave of absence or absence on
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military or government service shall constitute termination of the employment
relationship between the Company and the Optionee shall be determined by the
Plan Administrator at the time thereof. For purposes of this Section 5.1(e), the
term "cause" shall mean (A) any material breach by the Optionee of any agreement
to which the Optionee and the Company are both parties, (B) any act (other than
retirement) or omission to act by the Optionee which may have a material and
adverse effect on the Company's business or on the Optionee's ability to perform
services for the Company, including, without limitation, the commission of any
crime (other than minor traffic violations), or (C) any material misconduct or
material neglect of duties by the Optionee in connection with the business or
affairs of the Company or any Subsidiary or affiliate of the Company.
(f) RIGHTS OF OPTIONEES. No Optionee shall be deemed for any
purpose to be the owner of any shares of Common Stock subject to any option
unless and until (i) the option shall have been exercised with respect to such
shares pursuant to the terms thereof, and (ii) the Company shall have issued and
delivered a certificate representing such shares. Thereupon, the Optionee shall
have full voting, dividend and other ownership rights with respect to such
shares of Common Stock.
5.2 CERTAIN OPTIONAL TERMS. The Plan Administrator may in its
discretion provide, upon the grant of any option hereunder, that the Company
shall have an option to repurchase all or any number of shares purchased upon
exercise of such option. The repurchase price per share payable by the Company
shall be such amount or be determined by such formula as is fixed by the Plan
Administrator at the time the option for the shares subject to repurchase was
granted. The Plan Administrator may also provide that the Company shall have a
right of first refusal with respect to the transfer or proposed transfer of any
shares purchased upon exercise of an option granted hereunder. In the event the
Plan Administrator shall grant options subject to the Company's repurchase
rights or rights of first refusal, the certificate or certificates representing
the shares purchased pursuant to the exercise of such option shall carry a
legend satisfactory to counsel for the Company referring to such rights.
SECTION 6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
6.1 NOTICE OF EXERCISE. Any option granted under the Plan may be
exercised by the Optionee by delivering to the Company on any business day a
written notice specifying the number of shares of Common Stock the Optionee then
desires to purchase and specifying the address to which the certificates for
such shares are to be mailed (the "Notice"), accompanied by payment for such
shares.
6.2 MEANS OF PAYMENT AND DELIVERY. Payment for the shares of Common
Stock purchased pursuant to the exercise of an option shall be made either (i)
in cash or by check in an amount equal to the option price for the number of
shares specified in the Notice (the "Total Option Price"), or (ii) if authorized
by the applicable option agreement, in shares of Common Stock of the Company
having a fair market value equal to or less than the Total Option Price, plus
cash or check in an amount equal to the excess, if any, of the Total Option
Price over the fair market value of such shares of Common Stock, or (iii) by any
other means
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the Plan Administrator determines to be consistent with the purposes of the Plan
and with applicable laws and regulations. For the purpose of the preceding
sentence, the fair market value of the shares of Common Stock so delivered to
the Company shall be determined in the manner specified in Section 5.1(c)
hereof. As promptly as practicable after receipt of such written notification
and payment, the Company shall deliver to the Optionee certificates for the
number of shares with respect to which such Option has been so exercised, issued
in the Optionee's name; provided, however, that such delivery shall be deemed
effected for all purposes when the Company or a stock transfer agent of the
Company shall have deposited such certificates in the United States mail,
addressed to the Optionee, at the address specified pursuant to Section 6.1.
6.3 SPECIAL LIMITS AFFECTING SECTION 16B OPTION HOLDERS. Shares
issuable upon exercise of options granted to a person who in the opinion of the
Plan Administrator may be deemed to be a director or officer of the Company
within the meaning of Section 16b of the Exchange Act and the rules and
regulations thereunder shall not be sold or disposed of until after the
expiration of six months following the date of grant.
SECTION 7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
7.1 NO EFFECT OF OPTIONS UPON CERTAIN CORPORATE TRANSACTIONS. The
existence of outstanding options shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of Common Stock, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or the rights thereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
7.2 STOCK DIVIDENDS, RECAPITALIZATIONS, ETC. If the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, without receiving compensation therefor
in money, services or property, then: (i) the number, class and per share price
of shares of stock subject to outstanding options hereunder shall be
appropriately adjusted in such a manner as to entitle an Optionee to receive
upon exercise of an option, for the same aggregate cash consideration, the same
total number and class of shares that the owner of an equal number of
outstanding shares of Common Stock would own as a result of the event requiring
the adjustment; and (ii) the number and class of shares with respect to which
options may be granted under the Plan shall be adjusted by substituting for the
total number of shares of Common Stock then reserved for issuance under the Plan
that number and class of shares of stock that the owner of an equal number of
outstanding shares of Common Stock would own as the result of the event
requiring the adjustment.
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<PAGE> 8
7.3 DETERMINATION OF ADJUSTMENTS. Adjustments under this Section 7
shall be determined by the Plan Administrator and such determinations shall be
conclusive. The Plan Administrator shall have the discretion and power in any
such event to determine and to make effective provision for acceleration of the
time or times at which any option or portion thereof shall become exercisable.
No fractional shares of Common Stock shall be issued under the Plan on account
of any adjustment specified above.
7.4 NO ADJUSTMENT IN CERTAIN CASES. Except as hereinbefore expressly
provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock then subject to outstanding options.
SECTION 8. EFFECT OF CERTAIN TRANSACTIONS
If the Company is a party to a reorganization or merger with one or
more other corporations, whether or not the Company is the surviving or
resulting corporation, or if the Company consolidates with or into one or more
other corporations, or if the Company is liquidated or sells or otherwise
disposes of substantially all of its assets to another corporation (each
hereinafter referred to as a "Transaction"), in any such event while unexercised
options remain outstanding under the Plan, then: (i) subject to the provisions
of clause (iii) below, after the effective date of such Transaction unexercised
options shall remain outstanding and shall be exercisable in shares of Common
Stock, or, if applicable, shares of such stock or other securities, cash or
property as the holders of shares of Common Stock received pursuant to the terms
of such Transaction; (ii) the Plan Administrator may accelerate the time for
exercise of all unexercised and unexpired options to and after a date prior to
the effective date of such Transaction; or (iii) any outstanding options may be
cancelled by the Plan Administrator as of the effective date of such
Transaction, provided that: (x) notice of such cancellation shall be given to
each holder of an option; (y) the Plan Administrator shall have accelerated the
time for exercise of all unexercised and unexpired options that it proposes to
cancel; and (z) each holder of an option shall have the right to exercise such
option in full.
SECTION 9. AMENDMENT OR TERMINATION OF THE PLAN
The Board may terminate the Plan at any time, and may amend the Plan at
any time and from time to time, subject to the limitation that, except as
provided in Sections 7 and 8 hereof, no amendment shall be effective unless
approved by the stockholders of the Company in accordance with applicable law
and regulations, at an annual or special meeting held within twelve months
before or after the date of adoption of such amendment, in any instance in which
such amendment would: (i) increase the number of shares of Common Stock as to
which options may be granted under the Plan; or (ii) change in substance the
provisions of Section 4 hereof relating to eligibility to participate in the
Plan.
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<PAGE> 9
Except as provided in Sections 7 and 8 hereof, rights and obligations
under any option granted before termination or amendment of the Plan shall not
be altered or impaired by such termination or amendment except with the consent
of the Optionee.
SECTION 10. NON-EXCLUSIVITY OF THE PLAN; NON-UNIFORM DETERMINATIONS
Neither the adoption of the Plan by the Board nor the approval of the
Plan by the stockholders of the Company shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including without limitation the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
The Plan Administrator's determinations under the Plan need not be
uniform and may be made by it selectively among persons who receive or are
eligible to receive options under the Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the Plan
Administrator shall be entitled, among other things, to make non-uniform and
selective determinations, and to enter into non-uniform and selective option
agreements, as to (i) the persons to receive options under the Plan, (ii) the
terms and provisions of options, (iii) the exercise by the Plan Administrator
of its discretion in respect of the exercise of options pursuant to the terms
of the Plan, and (iv) the treatment of leaves of absence pursuant to Section
5.1(e) hereof.
SECTION 11. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW; WITHHOLDING TAXES
The obligation of the Company to sell and deliver shares of Common
Stock with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by government
agencies as may be deemed necessary or appropriate by the Plan Administrator.
All shares sold under the Plan shall bear appropriate legends. The Company may,
but shall in no event be obligated to, register or qualify any shares covered by
options under applicable federal and state securities laws; and in the event
that any shares are so registered or qualified the Company may remove any legend
on certificates representing such shares. The Company shall not be obligated to
take any other affirmative action in order to cause the exercise of an option or
the issuance of shares pursuant thereto to comply with any law or regulation of
any governmental authority. The Plan shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
Whenever under the Plan shares are to be delivered upon exercise of an
option, the Company shall be entitled to require as a condition of delivery that
the Optionee remit an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto. An employee may elect
to have such tax withholding obligation satisfied, in whole or in part, by: (i)
authorizing the Company to withhold from shares of
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<PAGE> 10
Common Stock to be issued pursuant to the exercise of a Non-Statutory Option a
number of shares with an aggregate fair market value (as defined in Section
5.1(c) hereof determined as of the date the withholding is effected) that would
satisfy the withholding amount due with respect to such exercise; or (ii)
transferring to the Company shares of Common Stock owned by the employee with an
aggregate fair market value (as defined in Section 5.1(c) hereof determined as
of the date the withholding is effected) that would satisfy the withholding
amount due. With respect to any employee who is subject to Section 16 of the
Exchange Act, the following additional restrictions shall apply:
(a) the election to satisfy tax withholding obligations relating
to an option exercise in the manner permitted by this Section 11
shall be made either (1) during the period beginning on the third
business day following the date of release of quarterly or annual
summary statements of sales and earnings of the Company and ending
on the twelfth business day following such date or (2) at least
six months prior to the date of exercise of the option;
(b) such election shall be irrevocable;
(c) such election shall be subject to the consent or approval of
the Plan Administrator; and
(d) the Common Stock withheld to satisfy tax withholding, if
granted at the discretion of the Plan Administrator, must pertain
to an option which has been held by the employee for at least six
months from the date of grant of the option.
SECTION 12. "LOCKUP" AGREEMENT
The Plan Administrator may in its discretion specify upon granting an
option that the Optionee shall agree, for a period of time (not to exceed 180
days) from the effective date of any registration of securities of the Company,
upon request of the Company or the underwriter or underwriters managing any
underwritten offering of the Company's securities, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
shares issued pursuant to the exercise of such option, without the prior written
consent of the Company or such underwriter or underwriters, as the case may be.
SECTION 13. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon its adoption by the Board provided
that the stockholders of the Company shall have approved the Plan within twelve
months prior to or following the adoption of the Plan by the Board. No option
may be granted under the Plan after the tenth anniversary of the effective date.
The Plan shall terminate (i) when the total amount of the Stock with respect to
which options may be granted shall have been issued upon the exercise of options
or (ii) by action of the Board pursuant to Section 9 hereof, whichever shall
first occur.
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EXHIBIT 5.1
August 19, 1996
Transition Systems, Inc.
One Boston Place, 27th Floor
Boston, Massachusetts 02108
Ladies and Gentlemen:
We are familiar with the Registration Statement on Form S-8 (the "S-8
Registration Statement") filed today by Transition Systems, Inc., a
Massachusetts corporation (the "Company") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. The S-8 Registration
Statement relates to the proposed offering by the Company of 5,417,925 shares
(the "Shares") of its Common Stock, par value $0.01 per share (the "Common
Stock"), issuable pursuant to the Company's Amended and Restated 1995 Incentive
and Non-Statutory Stock Option Plan (the "Stock Option Plan").
In arriving at the opinion expressed below, we have examined and relied
upon the following documents:
(1) the Amended and Restated Articles of Organization of the Company;
(2) the Amended and Restated By-Laws of the Company;
(3) the records of meetings and consents of the Board of Directors and
stockholders of the Company provided to us by the Company; and
(4) the Stock Option Plan.
In addition, we have examined and relied upon the originals or copies certified
or otherwise identified to our satisfaction of all such corporate records of the
Company and such other instruments and other certificates of public officials,
officers and representatives of the Company and such other persons, and we have
made such investigations of law, as we have deemed appropriate as a basis for
the opinion expressed below.
<PAGE> 2
EXHIBIT 5.1
Transition Systems, Inc.
August 19, 1996
Page 2
Based upon the foregoing, it is our opinion that:
1. The Company has corporate power adequate for the issuance of the
Shares in accordance with the S-8 Registration Statement. The Company has taken
all necessary corporate action required to authorize the issuance and sale of
the Shares. When certificates for the Shares have been duly executed and
counter-signed, and delivered against due receipt of the exercise price for the
Shares as described in the options relating thereto and the Stock Option Plan,
the Shares will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
S-8 Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By: /s/ Robert W. Sweet, Jr.
-------------------------------
A Partner
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-8 of our report dated November 17, 1995 (except as to the information
presented in Notes 8 and 13 for which the dates are February 26, 1996 and
January 24, 1996, respectively) on our audit of the consolidated financial
statements of Transition Systems, Inc., which report is included in the
Registration Statement on Form S-1 (SEC File No. 333-01758) of Transition
Systems, Inc.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
August 15, 1996
