<PAGE>
As filed with the Securities and Exchange Commission on June 2, 1997
Registration No. 33-___________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
CHIRON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 94-2754624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4560 Horton St., Emeryville, California 94608
(510) 655-8730
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------
CHIRON 1991 STOCK OPTION PLAN
(Full title of the plan)
------------------
WILLIAM G. GREEN, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
CHIRON CORPORATION
4560 Horton Street, Emeryville, California 94608
(510) 655-8730
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Title of Securities Proposed Maximum Proposed Maximum Amount of
to be Registered Amount to be Registered Offering Price Per Share Aggregate Offering Price Registration Fee
- ------------------- ----------------------- ------------------------ ------------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 5,000,000 (1) $18.8125 (2) $94,062,500 (2) $28,504
par value (1991 Stock
Option Plan)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Chiron 1991 Stock Option Plan,
by reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration which
results in an increase in the number of the Registrant's outstanding shares
of Common Stock.
(2) Calculated solely for the purposes of this offering under Rule 457(h) of
the Securities Act of 1933 on the basis of the average of the high and low
selling prices per share of Common Stock of Chiron Corporation on May 28,
1997, as reported by the NASDAQ National Market System.
This Registration Statement shall become effective immediately upon filing with
the Securities and Exchange Commission, and sales of the registered securities
will begin as soon as reasonably practicable after such effective date.
------------------
Also relates to Registration File Nos. 33-35182, 33-20181, 2-90595, 33-44477,
33-65024, 33-65177 and 333-10419 pursuant to Rule 429 under the Securities Act
of 1933.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
The contents of the Registration Statement on Form S-8 (File No. 33-44477),
filed by Chiron Corporation (the "Registrant") with the Securities and Exchange
Commission on December 12, 1991, are hereby incorporated by reference herein.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
William G. Green, who has provided an opinion to the Registrant on the
validity of the securities being registered which is Exhibit 5 to this
registration statement, is Senior Vice President, General Counsel and
Secretary of the Registrant.
ITEM 8. EXHIBITS.
Exhibit Number Exhibit
- -------------- -------
5 Opinion of William G. Green.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2 Consent of William G. Green is contained in Exhibit 5.
24 Power of Attorney. Reference is made to pages II-2 and II-3
of this Registration Statement.
99.1 Chiron 1991 Stock Option Plan.
99.2 Form of Automatic Share Right Agreement.
99.3 Form of Performance Unit Agreement.
II-1
<PAGE>
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 Emeryville, State of California, on the 30th day of
May, 1997.
CHIRON CORPORATION
By /s/ Edward E. Penhoet
----------------------------------------
Edward E. Penhoet, Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officers and
directors of Chiron Corporation, a Delaware corporation, do hereby constitute
and appoint Edward E. Penhoet, Ph.D. and William J. Rutter, Ph.D., and each of
them, the lawful attorneys and agents or attorney and agent with full power and
authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, and any one of them, determine may
be necessary or advisable or required to enable said corporation to comply with
the Securities Act of 1933, as amended, and any rules or regulations or
requirements of the Securities and Exchange Commission in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below this Registration Statement, to any and all amendments, both pre-effective
and post-effective, and supplements to this Registration Statement, and to any
and all instruments or documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereof, and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents, or
any one of them shall do or cause to be done by virtue hereof. This Power of
Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
II-2
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ Edward E. Penhoet, Ph.D. President, Chief Executive May 30, 1997
- ------------------------------ Officer and Director (Principal
(Edward E. Penhoet, Ph.D.) Executive Officer)
/s/ William J. Rutter, Ph.D. Chairman of the Board May 30, 1997
- ------------------------------
(William J. Rutter, Ph.D.)
/s/ Dennis L. Winger Senior Vice President, Finance May 30, 1997
- ------------------------------ and Administration, Chief
(Dennis L. Winger) Financial Officer (Principal
Financial and Accounting
Officer)
/s/ Lewis W. Coleman Director May 30, 1997
- ------------------------------
(Lewis W. Coleman)
/s/ Pierre E. Douaze Director May 30, 1997
- ------------------------------
(Pierre E. Douaze)
/s/ Donald A. Glaser, Ph.D. Director May 30, 1997
- ------------------------------
(Donald A. Glaser, Ph.D.)
/s/ Alex Krauer, Ph.D. Director May 30, 1997
- ------------------------------
(Alex Krauer, Ph.D.)
/s/ Henri Schramek, Ph.D. Director May 30, 1997
- ------------------------------
(Henri Schramek, Ph.D.)
/s/ Jack W. Schuler Director May 30, 1997
- ------------------------------
(Jack W. Schuler)
/s/ Pieter J. Strijkert, Ph.D. Director May 30, 1997
- ------------------------------
(Pieter J. Strijkert, Ph.D.)
/s/ Paul L. Herrling Director May 30, 1997
- ------------------------------
(Paul L. Herrling, Ph.D.)
II-3
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER THE
SECURITIES ACT OF 1933
CHIRON CORPORATION
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit
- -------------- -------
5 Opinion of William G. Green.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2 Consent of William G. Green is contained in Exhibit 5.
24 Power of Attorney. Reference is made to pages II-2 and II-3
of this Registration Statement.
99.1 Chiron 1991 Stock Option Plan.
99.2 Form of Automatic Share Right Agreement.
99.3 Form of Performance Unit Agreement.
<PAGE>
EXHIBIT 5
May 30, 1997
Chiron Corporation
4560 Horton Street
Emeryville, CA 94608
Re: Chiron Corporation
Registration Statement for Offering of
Shares of Common Stock
Ladies and Gentlemen:
In connection with your registration of 5,000,000 shares of the Common Stock of
Chiron Corporation (the "Company") on Form S-8 under the Securities Act of 1933,
as amended, I advise you that, in my opinion, when such shares have been issued
and sold pursuant to the provisions of the Chiron 1991 Stock Option Plan, and in
accordance with the Registration Statement, such shares will be duly authorized,
validly issued, fully paid and non-assessable shares of the Company's Common
Stock.
I hereby consent to filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/William G. Green
William G. Green
Senior Vice President and
General Counsel
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
The Board of Directors
Chiron Corporation:
We consent to the use of our reports incorporated herein by reference.
KPMG Peat Marwick LLP
San Francisco, California
May 28, 1997
<PAGE>
CHIRON 1991 STOCK OPTION PLAN
[AS AMENDED AUGUST 14, 1993, APRIL 11, 1994,
FEBRUARY 24, 1995, MARCH 8, 1996, AND FEBRUARY 28, 1997]
I. PURPOSES
This Chiron 1991 Stock Option Plan ("Plan") is intended to enable Chiron
Corporation ("Corporation") to attract and retain the following individuals by
offering them incentives and rewards, in the form of options, restricted shares,
share rights, share units and performance units ("awards") which will encourage
them to acquire a proprietary interest in the Corporation, to continue in the
service of the Corporation or its subsidiaries, and to provide incentive to
build value for stockholders: (a) employees (including officers and directors)
of the Corporation and its subsidiaries, (b) non-employee members of the Board
of Directors of the Corporation ("Board"), and (c) consultants and independent
contractors who perform valuable services for the Corporation and its
subsidiaries.
In addition, the Plan is intended to permit the Corporation to satisfy its
obligations in connection with options it assumed pursuant to the terms of the
Agreement and Plan of Merger dated as of July 21, 1991 by and among the
Corporation, Chiron Acquisition Subsidiary, Inc., and Cetus Corporation
("Agreement"). Upon consummation of the transactions described in the Agreement
("Merger"), the Plan superseded Cetus Corporation's Amended and Restated Common
Stock Option Plan and Cetus Corporation's Non-Employee Directors' Stock Option
Plan ("Cetus Prior Plans"). Upon stockholder approval in December 1991, this
Plan superseded the following Chiron prior plans: the Protos Corporation 1988
Stock Option Plan (upon the merger of Protos into Chiron), the Chiron
Ophthalmics, Inc. 1986 Stock Option Plan (upon the merger of Chiron Ophthalmics
into a wholly owned subsidiary of Chiron), the Corporation's 1982 Stock Option
Plan and the Corporation's 1984 Non-Qualified Stock Option Plan (collectively,
"Chiron Prior Plans").
II. ADMINISTRATION
The Plan will be administered by a committee or committees appointed by the
Board and consisting of one or more members of the Board or a subcommittee or
subcommittees thereof. The Board may delegate the responsibility for
administration of the Plan with respect to designated classes of award holders
to different committees, subject to such limitations as the Board deems
appropriate, and each committee may similarly delegate its responsibilities to
one or more subcommittees. Members of a committee or subcommittee will serve for
such term as the Board or committee may determine, and will be subject to
removal by the Board at any time. With respect to any matter, the term
"Committee," when used in this Plan, will refer to the committee or subcommittee
that has been delegated authority with respect to such matter.
In determining the composition of any committee or subcommittee, the Board
or committee, as the case may be, shall consider the desirability of compliance
with the compositional requirements of (i) Rule 16b-3 of the Securities and
Exchange Commission with respect to award holders who are subject to the trading
restrictions of Section 16(b) of the Securities Exchange Act of 1934 ("1934
Act") with respect to securities of the Corporation and (ii) Section 162(m) of
the Internal Revenue Code ("Code") with respect to performance units, but shall
not be bound by such compliance.
(a) AUTHORITY. Each Committee will have full authority to administer the
Plan within the scope of its delegated responsibilities, including authority to
interpret and construe any relevant provision of the Plan, to adopt such rules
and regulations as it may deem necessary, and to determine the terms and
conditions of awards made under the Plan (which need not be identical).
Decisions of a Committee made within the discretion delegated to it by the Board
will be final and binding on all persons who have an interest in the Plan.
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<PAGE>
III. ELIGIBILITY FOR AWARDS
(a) DISCRETIONARY AWARDS. From time to time the Committee may, in its
discretion, select individuals from among the following categories to receive
awards under the Plan:
(1) EMPLOYEES. The Committee may select employees of the Corporation
or its parent or subsidiaries (including officers, whether or not they are
also members of the Board).
(2) CONSULTANTS AND INDEPENDENT CONTRACTORS. The Committee may select
consultants and independent contractors whose services tend to contribute
materially to the success of the Corporation or a parent or subsidiary or
whose services may reasonably be anticipated to so contribute.
(3) DIRECTORS. The Committee may select members of the Board or the
board of directors of a parent or subsidiary that are not employees of the
Corporation, parent or subsidiaries for awards in addition to awards made in
accordance with the Plan's automatic grant provisions.
(b) PERFORMANCE UNITS. Corporate vice-presidents and other executive
officers of the Corporation or a parent or subsidiary ("162(m) executives") will
be eligible to receive performance units in addition to, or in lieu of, other
discretionary awards granted under the Plan.
(c) AUTOMATIC GRANTS. Members of the Board who are not employees of the
Corporation or a subsidiary will receive awards in accordance with the Plan's
automatic grant provisions.
(d) SUBSTITUTE OPTIONS. Upon consummation of the Merger, outstanding
options under the Cetus Prior Plans (including related Limited Stock
Appreciation Rights) were converted, in the manner and at the exchange ratio
specified in the Agreement, into substitute options under this Plan to acquire
Common Stock (as defined below). Upon stockholder approval and, with regard to
the Protos prior plan options and the Chiron Ophthalmics prior plan options,
consummation of the relevant mergers, outstanding options under the Chiron Prior
Plans were converted into options under this Plan. These options preserved the
exercise price of the outstanding options as adjusted, in the case of options
under the Protos Corporation 1988 Stock Option Plan and the Chiron Ophthalmics,
Inc. 1986 Stock Option Plan, to reflect the substitution of Common Stock. These
options also preserved the other terms and conditions of the outstanding
options; provided, however, that on the Effective Date of this Plan, outstanding
automatic option grants under the Corporation's 1982 Stock Option Plan were
conformed, other than to extend the term, to the Automatic Option Grants under
this Plan. Collectively, these options are referred to as "Substitute Options."
IV. STOCK SUBJECT TO THE PLAN
(a) CLASS. The stock subject to awards under the Plan is (i) the
Corporation's authorized but unissued or reacquired Common Stock ("Common
Stock"), or (ii) shares of one or more series of the Corporation's authorized
but unissued or reacquired Restricted Common Stock, in the aggregate, "Company
Stock." In connection with the grant of awards under the Plan, the Corporation
may repurchase shares in the open market or otherwise.
(b) AGGREGATE AMOUNT
(1) SHARES. Subject to adjustment under Sections IV(c) and IV(b)(3),
the aggregate maximum number of shares of Company Stock that may be subject
to awards under the Plan is 50,262,347 (comprised of the original number of
shares authorized under the Plan, including the number of shares of Company
Stock remaining for issuance on the Effective Date of this Plan under the
Corporation's 1982 Stock Option Plan and the Corporation's 1984
Non-Qualified Stock Option Plan, plus all annual increases thereto through
January 1, 1997, plus an increase of 13,000,000 shares by amendment
effective February 28, 1997). Notwithstanding the foregoing, as of the first
day of each fiscal year beginning after January 1, 1997 the aggregate number
of shares of Company Stock that may be subject to awards under the Plan will
be increased by 1.50% of the number of Chiron Common
2
<PAGE>
Equivalent Shares outstanding as of last day of the preceding fiscal year.
Subject to adjustment under Section IV(c), the maximum number of shares of
Company Stock with respect to which awards may be granted to any employee
during the term of the Plan is 4,000,000 shares. Subject to adjustment under
Sections IV(c) and IV(b)(3), not more than 50,262,347 shares of Company
Stock, increased, as of the first day of each fiscal year beginning after
January 1, 1997, by 1.50% of the number of Chiron Common Equivalent Shares
outstanding as of December 31, 1996, may be subject to Incentive Options (as
defined below) granted under the Plan after the Effective Date. "Chiron
Common Equivalent Shares" are the total number of outstanding shares of
Common Stock plus the total number of shares of Common Stock issuable upon
conversion or exercise of outstanding warrants, options and convertible
securities. In no event will more than 2,000,000 shares of Restricted Common
Stock, whether in a single series or in multiple series, be subject to
awards under the Plan.
(2) RESTRICTED COMMON STOCK. Shares of Restricted Common Stock may be
issued under the Plan in one or more separate series. The rights,
preferences and privileges, together with the restrictions and limitations
and the number of shares, of each series of Restricted Common Stock issuable
under the Plan will be set forth in the Corporation's Certificate of
Determination of Preferences of Common Stock ("Certificate") as in effect
from time to time during the term of the Plan. Shares of each series of
Restricted Common Stock will be convertible or exchangeable into shares of
Common Stock in accordance with the terms and provisions of the Certificate
applicable to that series.
(3) REUSE OF SHARES. If any outstanding option under the Chiron Prior
Plans, the Cetus Prior Plans or this Plan (including the Substitute Options)
expires or is terminated or canceled for any reason (including pursuant to
Section X of the Plan but other than pursuant to surrender of the option for
a cash payment in accordance with Section XIII of the Plan) before being
exercised for the full number of shares to which it applies, then the shares
allocable to the unexercised portion of such option will not be charged
against the limitations of Section IV(b)(1) and will become available for
subsequent grants under the Plan. To the extent that a share right or share
unit expires or is terminated, or is canceled or forfeited for any reason
without being paid in cash or shares of Company Stock, any remaining shares
allocable to the unpaid portion of such share right or share unit shall not
be charged against the limitations of Section IV(b)(1) and will become
available again for subsequent grants under the Plan. Unvested shares issued
under the Plan and subsequently cancelled, forfeited or repurchased by the
Corporation at the original exercise or issue price paid per share pursuant
to the Corporation's repurchase rights under the Plan shall be added back to
the number of shares of Common Stock reserved for issuance under Section
IV(b)(1). Shares subject to any option or portion of an option surrendered
in accordance with the "Surrender of Options for Cash or Stock" provisions
of this Plan and shares for which a cash payment is made in lieu thereof
under a restricted share, share unit or share right will not be available
for subsequent awards under the Plan. If the exercise price of an option
under the Plan is paid with shares of Common Stock or if shares of Common
Stock otherwise issuable under the Plan are withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the
exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under
Section IV(b)(1) shall be reduced by the gross number of shares for which
the option is exercised or which vest under the stock issuance, and not by
the net number of shares of Common Stock issued to the holder of such option
or stock issuance.
(c) ADJUSTMENTS. In the event any change is made to the Company Stock
subject to the Plan (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, or other change in corporate or capital structure of the Corporation
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration) then, unless such change results in the termination of
all awards, the Committee will make appropriate adjustments to (i) the number
and/or class of securities available under the Plan, (ii) the
3
<PAGE>
number and/or class of securities for which any one person may be granted awards
under the Plan, (iii) the number and/or class of securities to be made under
automatic grants to non-employee directors, and (iv) the number and/or class of
securities and, where applicable, price per share of securities subject to
outstanding awards. Such adjustments are to be effected in a manner which shall
preclude the enlargement or dilution of rights and benefits of awards and shall
be final, binding and conclusive.
V. TERMS AND CONDITIONS OF DISCRETIONARY OPTIONS
Discretionary stock options granted under the Plan may, in the Committee's
discretion, be either incentive stock options ("Incentive Options") qualifying
under Section 422 of the Internal Revenue Code of 1986, as amended ("Internal
Revenue Code"), or nonstatutory options. Individuals who are not employees of
the Corporation or its subsidiaries may only be granted nonstatutory options.
Options will be evidenced by instruments in such form as the Committee may from
time to time approve. These instruments will conform to the following terms and
conditions and, in the discretion of the Committee, may contain such other
terms, conditions and restrictions as are not inconsistent with the following:
(a) OPTION PRICE. The option price per share will be fixed by the
Committee, but in no event will the option price per share be less than
eighty-five percent (85%) of the Fair Market Value of the option shares on the
date of the option grant; provided, however, that in no event will the option
price per share of an Incentive Option be less than one hundred percent (100%)
of the Fair Market Value of the option shares on the date of the option grant.
Notwithstanding the foregoing, Substitute Options will have an option price per
share determined pursuant to Section III(d) of this Plan.
(b) NUMBER OF SHARES, TERM AND EXERCISE
(1) TERM AND NUMBER. Each option granted under the Plan will be
exercisable on such date or dates, during such period, and for such number
of shares of Company Stock as the Committee determines and sets forth in the
instrument evidencing the option. No option granted under the Plan will have
an expiration date that is more than 10 years after the date of the option
grant.
(2) EXERCISE. After any option granted under the Plan becomes
exercisable, it may be exercised by notice to the Corporation at any time
prior to the termination of such option. Except as authorized by the
Committee in accordance with Section VIII, the option price for the number
of shares for which the option is exercised will become due and payable upon
exercise.
(3) PAYMENT. The option price will be payable in full in cash
(including cash equivalents); provided, however, that the Committee may,
either at the time the option is granted or at the time it is exercised and
subject to such limitations as it may determine, authorize payment of all or
a portion of the option price in one or a combination of the following
alternative forms:
(i) a promissory note authorized pursuant to Section VIII;
(ii) full payment in shares of Common Stock valued as of the
exercise date and held for the requisite period to avoid a charge to the
Corporation's earnings; or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
optionee shall concurrently provide irrevocable written instructions to
(a) a Corporation-approved brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required
to be withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
(c) TERMINATION OF SERVICES. The Committee will determine and set forth in
each option whether the option will continue to be exercisable, and the terms
and conditions of such exercise, on and after the date
4
<PAGE>
that an optionee ceases to be employed by, or to provide services to, the
Corporation or its subsidiaries. The date of termination of an optionee's
employment or services will be determined by the Committee, which determination
will be final.
(d) INCENTIVE OPTIONS. Options granted under the Plan that are intended to
be Incentive Options will be subject to the following additional terms and
conditions:
(1) DOLLAR LIMITATION. To the extent that the aggregate Fair Market
Value (determined as of the respective date or dates of grant) of shares
with respect to which options that are granted after 1986 and that would
otherwise be Incentive Options are exercisable for the first time by any
individual during any calendar year under the Plan (or any other plan of the
Corporation, a parent or subsidiary corporation or predecessor thereof)
exceeds the sum of $100,000 (or such greater amount as may be permitted
under the Internal Revenue Code), whether by reason of acceleration or
otherwise, such options will not be treated as Incentive Options. In making
such a determination, options will be taken into account in the order in
which they were granted.
(2) 10% STOCKHOLDER. If any employee to whom an Incentive Option is to
be granted pursuant to the provisions of the Plan is, on the date of grant,
the owner of stock (determined with application of the ownership attribution
rules of Section 424(d) of the Internal Revenue Code) possessing more than
ten percent (10%) of the total combined voting power of all classes of stock
of his or her employer corporation or of its parent or subsidiary
corporation ("10% Stockholder"), then the following special provisions will
apply to the option granted to such individual:
(i) The option price per share of the stock subject to such
Incentive Option will not be less than one hundred ten percent (110%) of
the Fair Market Value of the option shares on the date of grant; and
(ii) The option will not have a term in excess of five (5) years
from the date of grant.
(3) PARENT AND SUBSIDIARY. For purposes of this Section V(d), "parent
corporation" and "subsidiary corporation" will have the meaning attributed
to those terms, as they are used in Section 422(b) of the Internal Revenue
Code.
(e) WITHHOLDING
(1) OBLIGATION. The Corporation's obligation to deliver stock
certificates upon the exercise of an option will be subject to the option
holder's satisfaction of all applicable federal, state and local income and
employment tax withholding requirements.
(2) PAYMENT. In the event that an option holder is required to pay to
the Corporation an amount with respect to income and employment tax
withholding obligations in connection with exercise of an option, the
Committee may, in its discretion and subject to such limitations and rules
as it may adopt, permit the option holder to satisfy the obligation, in
whole or in part, by delivering shares of Common Stock already held by the
option holder or by making an irrevocable election that a portion of the
total value of the shares subject to the option be paid in the form of cash
in lieu of the issuance of Company Stock, and that such cash payment be
applied to the satisfaction of the withholding obligations.
VI. DISCRETIONARY RESTRICTED SHARES, SHARE RIGHTS, SHARE UNITS AND PERFORMANCE
UNITS
(a) NATURE OF AWARDS
(1) RESTRICTED SHARES. A restricted share granted under the Plan shall
consist of shares of Company Stock, the retention and transfer of which is
subject to such terms, conditions and restrictions (whether based on
performance standards or periods of service or otherwise and including
5
<PAGE>
repurchase and/or forfeiture rights in favor of the Corporation) as the
Committee shall determine. The terms, conditions and restrictions to which
restricted shares are subject shall be evidenced by instruments in such form
as the Committee may from time to time approve and may vary from grant to
grant. The Committee shall have the absolute discretion to determine whether
any consideration (other than the services of the potential award holder) is
to be received by the Corporation or its subsidiaries as a condition
precedent to the issuance of restricted shares.
(2) SHARE RIGHTS. A share right granted under the Plan shall consist
of the right, subject to such terms, conditions and restrictions (whether
based on performance standards or periods of service or otherwise), to
receive a share of Company Stock (together with cash dividend equivalents if
so determined by the Committee) as the Committee shall determine and shall
be evidenced by instruments in such form as the Committee may from time to
time approve. The Committee shall have the absolute discretion to determine
whether any consideration (other than the services of the potential award
holder) is to be received by the Corporation or its subsidiaries as a
condition precedent to the issuance of shares pursuant to share rights. The
terms, conditions and restrictions to which share rights are subject may
vary from grant to grant.
(3) SHARE UNITS. A share unit granted under the Plan shall consist of
the right to receive an amount in cash equal to the Fair Market Value of one
share of Company Stock on the date of valuation of the unit (together with
cash dividend equivalents if so determined by the Committee) less such
amount, if any, as the Committee shall specify. The date of valuation and
payment of cash under a share unit and the conditions, if any, to which such
payment will be subject (whether based on performance standards or periods
of service or otherwise) shall be determined by the Committee. The terms,
conditions and restrictions to which share units are subject may vary from
grant to grant.
(b) WITHHOLDING. The Committee may require, or permit an award holder to
elect, that a portion of the total value of the shares of Common Stock subject
to restricted shares or share rights held by one or more award holders be paid
in the form of cash in lieu of the issuance of Company Stock and that such cash
payment be applied to the satisfaction of the federal, state and local income
and employment tax withholding obligations that arise at the time the restricted
shares and share rights become free of all restrictions under the Plan.
(c) CASH PAYMENTS. The Committee may provide award holders with an
election to receive a percentage of the total value of the Company Stock subject
to restricted shares or share rights in the form of a cash payment, subject to
such terms, conditions and restrictions as the Committee shall specify.
(d) ELECTIVE AND TANDEM AWARDS. The Committee may award restricted shares,
share rights, and share units independently of other compensation or in lieu of
compensation that would otherwise be paid in cash or stock options, whether at
the election of the potential award holder or otherwise. The number of
restricted shares, share rights or share units to be awarded in lieu of any cash
compensation amount or number of stock options shall be determined by the
Committee in its sole discretion and need not be equal to such foregone
compensation in Fair Market Value. In addition, restricted shares, share rights,
and share units may be awarded in tandem with stock options, so that a portion
of such award becomes payable or becomes free of restrictions only if and to the
extent that the tandem options are not exercised or are forfeited, subject to
such terms and conditions as the Committee may specify.
(e) MODIFICATION OF AWARDS. Except to the extent an award is granted as a
performance unit, the Committee may, in its sole discretion, modify or waive any
or all of the terms, conditions or restrictions applicable to any outstanding
restricted share, share right or share unit; provided, however, that no such
modification or waiver shall, without the consent of the holder of an
outstanding award, adversely affect the holder's rights thereunder.
(f) PERFORMANCE UNITS. Effective March 8, 1996, the Committee may grant
restricted shares, share rights and share units to 162(m) executives that comply
with the requirements of Code Section 162(m).
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Performance units will become payable or vest upon attainment of specified
performance goals over a specified performance period.
(1) PERFORMANCE GOALS. The Committee will determine the Corporation
performance goal or goals that must be met to achieve the maximum payout
within the shorter of the first 90 days of the specified performance period
over which the performance goal or goals will be measured, or 25% of such
performance period. The Committee may establish a goal based on more than
one performance criteria, or may establish multiple goals, but any payout
must be based on the satisfaction of at least one goal. The Committee may
provide for different levels of payouts based on relative performance toward
a performance goal.
(2) PERFORMANCE CRITERIA. Performance units may be based on one or
more of the following performance criteria: total shareholder return; the
achievement of a specified closing or average closing price of Common Stock;
the absolute or percentage increase in the closing or average closing price
of Common Stock and/or one or more of the following measures of the
Corporation's net income for the specified performance period determined in
accordance with generally accepted accounting principles as consistently
applied by the Corporation: absolute net income or a percentage or absolute
dollar increase in net income, earnings per share or a percentage or
absolute dollar increase in earnings per share, or return on assets employed
or equity or a percentage or absolute dollar increase in return on assets
employed or equity; or the Corporation's absolute gross revenues or a
percentage or absolute dollar increase in gross revenues for the specified
performance period determined in accordance with generally accepted
accounting principles as consistently applied by the Corporation. The awards
may based on the Corporation's performance alone, or the Corporation's
performance may be measured against variously weighted published benchmark
indices that the Committee determines are representative of the
Corporation's peer group, which indices may include the Standard & Poor's
Health Care Composite Index, the Standard & Poor's Health Care Diversified
Index, and the AMEX Biotechnology Index, among others.
For purposes of this Plan, net income and gross revenues shall be net income
and gross revenues of the Corporation and its consolidated subsidiaries as
reported by the Corporation and certified by its independent public
accountants, but the Committee in fixing any goal may exclude any or all of
the following if they have a material effect on annual net income or gross
revenues: events or transactions that are either unusual in nature or
infrequent in occurrence (such as restructuring/reorganization charges, the
purchase or sale of in process technology, the sale or discontinuance of a
business segment, the sale of investment securities, losses from litigation,
the cumulative effect of changes in accounting principles and natural
disasters), depreciation, interest or taxes.
(3) REDUCTION OR CANCELLATION OF PERFORMANCE UNITS. Final payouts are
subject to the approval of the Committee, which may reserve the absolute
discretion to reduce or cancel any payout thereunder.
VII. AUTOMATIC AWARDS TO DIRECTORS
(a) OPTIONS. Effective March 8, 1996, non-employee members of the Board
("Eligible Directors") will automatically be granted nonstatutory options
("Automatic Options") to purchase the number of shares of Common Stock
determined as set forth below (subject to adjustment under Section IV(c) hereof)
on the dates and terms set forth below:
(1) OPTION GRANTS. On the last business day of the second quarter of
each fiscal year of the Corporation ("Automatic Grant Date"), each
continuing Eligible Director (including each Eligible Director who is newly
elected or appointed on the Automatic Grant Date) will receive an Automatic
Option to purchase that number of whole shares of Common Stock determined by
dividing $100,000 by the Average Stock Price on the Automatic Grant Date.
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(2) PRO-RATA OPTION GRANTS. Each person who is newly elected or
appointed as an Eligible Director on a date other than an Automatic Grant
Date, will receive, on the date of such election or appointment, an
Automatic Option to purchase a pro-rata number of whole shares of Common
Stock determined by multiplying $8,333.33 by the number of whole calendar
months between the date of the Eligible Director's election or appointment
and the next Automatic Grant Date, and dividing that number by the Average
Stock Price of a share of Common Stock on the grant date.
(3) ADVISORY COUNSELLORS. Advisory Counsellors of Cetus will not
qualify for Automatic Option Grants.
(4) TERMS AND CONDITIONS. The terms and conditions applicable to each
Automatic Option Grant will be as follows:
(i) PRICE. The option price per share will be equal to one hundred
percent (100%) of the Fair Market Value of one share of Common Stock on
the date of grant;
(ii) TERM. Each Automatic Option will have a term of ten (10)
years, measured from the date of grant, and will be exercisable at any
time during the term for all or any part of the covered shares; provided,
however, that no Automatic Options may be exercised prior to approval of
the Plan by the Corporation's stockholders.
(iii) REPURCHASE. The shares purchased under the Automatic Options
will be subject to repurchase by the Corporation at the original exercise
price in the event an optionee ceases to provide services to the
Corporation or its subsidiaries as a director, an employee, a consultant
or an independent contractor. The Corporation's repurchase rights will
lapse, and the optionee's interest in the purchased shares will vest, in
a series of equal annual installments over the five-year period measured
from the grant date, provided the optionee continues to provide such
services. In addition, the Corporation's repurchase right will lapse in
its entirety, and the Automatic Options will become fully vested, should
one or more of the following events occur while the optionee is providing
such services: (A) the optionee's death, or (B) the optionee's permanent
disability.
(iv) PAYMENT. Upon exercise of the Automatic Option, the option
price for the purchased shares will become payable immediately in cash or
in shares of Common Stock that the optionee has held for at least six (6)
months. Payment may also be made by delivery of a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Corporation the amount of sale or loan proceeds
to pay the option price.
(v) CESSATION. In the event the optionee ceases to provide services
to the Corporation or its subsidiaries as a director, an employee, a
consultant or an independent contractor, the Automatic Option may be
exercised, within the term of the Automatic Option, for a period of three
(3) months after the date of such cessation (twelve (12) months in the
case of cessation by reason of disability or death). In the case of
death, the Automatic Option may be exercised within such period by the
estate or heirs of the optionee.
(b) SHARE RIGHTS. Effective March 8, 1996, Eligible Directors will
automatically be granted share rights ("Automatic Share Rights") to receive the
number of shares of Common Stock determined as set forth below (subject to
adjustment under Section IV(c) hereof) on the dates and terms set forth below:
(1) NEW DIRECTORS. Each newly elected or appointed Eligible Director
will be granted, on the date of such election or appointment, an Automatic
Share Right to purchase that number of whole shares determined by dividing
$40,000 by the Average Stock Price on the grant date.
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(2) CONTINUING DIRECTORS.
(i) FULL GRANTS. Subject to Subsection VII(b)(2)(ii) below, on each
Automatic Grant Date, each incumbent, continuing Eligible Director will
be granted an Automatic Share Right to receive that number of whole
shares of Common Stock determined by dividing $25,000 by the Average
Stock Price on the Automatic Grant Date. Notwithstanding the foregoing,
on the Automatic Grant Date occurring in June 1996, each continuing
Eligible Director elected or appointed before March 8, 1996, will be
granted an Automatic Share Right to receive that number of whole shares
determined by using the $40,000 in lieu of the $25,000 figure.
(ii) PRO-RATA GRANTS. If an Eligible Director is newly elected or
appointed on a date other than an Automatic Grant Date, on the
immediately succeeding Automatic Grant Date, such Eligible Director will
be granted a pro-rata Automatic Share Right to receive the number of
whole shares of Common Stock determined by multiplying the number of
whole calendar months since the Eligible Director's election or
appointment by $2,083.33 and dividing the product by the Average Stock
Price on the Automatic Grant Date.
(3) ADVISORY COUNSELLORS. Advisory Counsellors of Cetus will not
qualify for Automatic Share Rights.
(4) TERMS AND CONDITIONS. The terms and conditions applicable to each
Automatic Share Right will be as follows:
(i) TERM. Each Automatic Share Right will have a term of five (5)
years, measured from the grant date.
(ii) VESTING. The Automatic Share Right will vest in a series of
equal annual installments over the five-year period measured from the
grant date, provided the Eligible Director continues to provide services
to the Corporation or its subsidiaries as a director, an employee, a
consultant or an independent contractor. Shares of Common Stock will be
issued in satisfaction of the Automatic Share Right as the Automatic
Share Right vests. In addition, full vesting will occur should one or
more of the following events occur while the Eligible Director is
providing such services: (A) the Eligible Director's death, or (B) the
Eligible Director's permanent disability.
(iii) CESSATION. In the event the Eligible Director ceases to
provide services to the Corporation or its subsidiaries as a director, an
employee, a consultant or an independent contractor, the Automatic Share
Right shall terminate with respect to the unvested portion of the Award.
(c) COST-OF-LIVING INCREASES. Each dollar value used in this Article VII
will be subject to annual cost-of-living increases. The increases will be based
on the Consumer Price Index, and will occur automatically beginning with the
1997 Automatic Grant Date.
(d) AVERAGE STOCK PRICE. Average Stock Price means the average closing
price of one share of Common Stock as reported on the Nasdaq National Market
System for the previous twelve month period ending on the last day of the month
before the grant date of the award.
VIII. LOANS AND INSTALLMENT PAYMENTS
In order to assist an award holder (including an employee who is an officer
or director of the Corporation) in the acquisition of shares of Company Stock
pursuant to an award granted under the Plan (other than pursuant to the
Automatic Option Grant provisions of this Plan), the Committee may authorize, at
either the time of the grant of an award or the time of the acquisition of
Company Stock pursuant to the award (i) the extension of a loan to the award
holder by the Corporation, (ii) the payment by the award holder of the purchase
price, if any, of the Company Stock in installments, or (iii) the guarantee by
the Corporation of a loan obtained by the award holder from a third party. The
terms of any
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loans, guarantees or installment payments, including the interest rate and terms
of repayment, will be subject to the discretion of the Committee. Loans,
installment payments and guarantees may be granted without security, the maximum
credit available being the purchase price, if any, of the Company Stock acquired
plus the maximum federal and state income and employment tax liability that may
be incurred in connection with the acquisition.
IX. ASSIGNABILITY
No award granted under the Plan is assignable or transferable by the award
holder other than by Will or by the laws of descent and distribution, and during
the lifetime of the award holder, only the award holder may exercise options or
exercise the rights provided under awards granted under the Plan. However, if
and to the extent that the Committee so authorizes at the time an award is
granted or amended, an option or other award may, in connection with the
holder's estate plan, be assigned in whole or in part during the grantee's
lifetime to one or more members of the grantee's immediate family or to a trust
established exclusively for one or more such family members. Rights under the
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the award pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
award immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Committee may deem appropriate.
X. CANCELLATION AND NEW GRANT OF OPTIONS
The Committee will have the authority to effect, at any time and from time
to time, with the consent of the affected option holders, the cancellation of
any or all outstanding options under the Plan, a Cetus Prior Plan or a Chiron
Prior Plan (other than options granted under automatic option grant provisions
of these plans) and to grant in substitution therefor new options under the Plan
covering the same or different numbers of shares, but having an option price per
share not less than eighty-five percent (85%) of the Fair Market Value on the
new grant date or, in the case of an Incentive Option, one hundred percent
(100%) of the Fair Market Value on the new grant date (or, in the case of an
Incentive Option granted to a 10% Stockholder, one hundred ten percent (110%) of
such Fair Market Value).
XI. ACCELERATION AND TERMINATION OF AWARDS
(a) ACCELERATION. In the event of an agreement to dispose of all or
substantially all of the assets or outstanding capital stock of the Corporation
by means of a sale, merger, reorganization, or liquidation, each award will be
automatically accelerated so that (1) options become fully exercisable with
respect to the total number of shares purchasable under the options; (2)
restrictions on restricted shares will be eliminated, and the shares will
immediately vest; and (3) share rights and share units will immediately vest and
become payable. The Committee may also provide for the automatic termination of
repurchase rights upon the occurrence of such an event.
(b) NO ACCELERATION. No acceleration of awards will occur if the terms of
the agreement require as a prerequisite to the consummation of any such sale,
merger, reorganization or liquidation that each such award will be either
assumed by the successor corporation or parent thereof or be replaced with a
comparable award subject to shares of the successor corporation or parent
thereof. The determination of such comparability will be made by the Committee,
and its determination will be final, binding and conclusive. Upon consummation
of the sale, merger, reorganization or liquidation contemplated by the
agreement, all awards, whether or not accelerated, will terminate unless assumed
pursuant to a written agreement by the successor corporation or parent thereof.
(c) CORPORATE STRUCTURE. The grant of awards under this Plan will in no
way affect the right of the Corporation to adjust, reclassify, reorganize, or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
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XII. VALUATION
With regard to all Substitute Options, Fair Market Value will be determined
in accordance with the relevant option plan documents on the date that the
outstanding options were granted. With regard to awards granted under this Plan,
for all valuation purposes under the Plan, the Fair Market Value of a share of
Common Stock or Restricted Common Stock (as the case may be) on any relevant
date will be determined in accordance with the following provisions:
(a) If the Common Stock or Restricted Common Stock is not at the time listed
or admitted to trading on any stock exchange, but is traded in the
over-the-counter market, the Fair Market Value will be the average between the
reported high price and the reported low price of one share of Common Stock or
Restricted Common Stock (as the case may be) on the date in question in the
over-the-counter market, as such prices are reported by the National Association
of Securities Dealers through its NASDAQ system or any successor system.
(b) If the Common Stock or Restricted Common Stock is at the time listed or
admitted to trading on any stock exchange, then the Fair Market Value will be
the average between the reported high price and the reported low price of one
share of Common Stock or Restricted Common Stock (as the case may be) on the
date in question on the stock exchange that is the primary market for the stock,
as such prices are officially quoted on such exchange.
(c) If the Common Stock or Restricted Common Stock (as the case may be) is
at the time neither listed nor admitted to trading on any stock exchange nor
traded in the over-the-counter market, or if the Committee determines that
neither subparagraph (a) nor subparagraph (b) above reflects Fair Market Value
of the stock and the award was not granted pursuant to the Plan's Automatic
Award provisions, then the Fair Market Value will be determined by the Committee
after taking into account such factors as the Committee deems appropriate, or in
the case of Automatic Awards, by an independent third party valuation.
XIII. SURRENDER OF OPTIONS FOR CASH OR STOCK
(a) STOCK APPRECIATION RIGHTS. If, and only if the Committee, in its
discretion, elects to implement an option surrender program under the Plan, one
or more option holders may, upon such terms and conditions as the Committee may
establish at the time of the option grant or at any time thereafter, be granted
the right to surrender all or part of an unexercised option in exchange for a
distribution equal in amount to the difference between (i) the Fair Market Value
(at date of surrender) of the shares for which the surrendered option or portion
thereof is at the time exercisable and (ii) the aggregate option price payable
for such shares. The distribution to which an option holder becomes entitled
under this Section may be made in shares of Common Stock or Restricted Common
Stock, valued at Fair Market Value at the date of surrender, in cash, or partly
in shares and partly in cash, as the Committee, in its sole discretion, deems
appropriate. The option surrender provisions of this Section will not apply to
options granted pursuant to the Automatic Option Grant provisions of this Plan.
(b) LIMITED STOCK APPRECIATION RIGHTS. If outstanding options of Cetus for
which Substitute Options are issued pursuant to Section III(d) have Limited
Stock Appreciation Rights ("LSARs") attached thereto, then each such LSAR shall
be honored by the Corporation in accordance with its terms and remain
exercisable for a period of 60 days following the date that stockholders of
Cetus approve the Merger; provided, however, that if the LSAR was originally
granted within 6 months of the date that Cetus stockholders approve the Merger,
then the LSAR will be exercisable for a period of 60 days following expiration
of such six-month period. Upon expiration of the applicable 60-day period, each
such LSAR not previously exercised shall expire. Upon exercise of an LSAR, the
related option will be cancelled, and Chiron will pay to the LSAR holder an
amount in cash for each share with respect to which the LSAR is exercised
determined in accordance with the terms of the Cetus Prior Plans.
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XIV. REPURCHASE RIGHTS
The Committee may, in its discretion, establish as a term of one or more
awards granted under the Plan that the Corporation (or its assigns) will have
the right, exercisable upon the award holder's termination of employment with,
or cessation of services for, the Corporation and its subsidiaries, to
repurchase at the original price paid, if any, for such shares of (1) Company
Stock acquired by the award holder pursuant to the granted award, or (2) Common
Stock into which acquired Restricted Common Stock may have been converted or for
which Restricted Common Stock may have been exchanged. Any such repurchase right
will be exercisable by the Corporation (or its assigns) upon such terms and
conditions (including provisions for the expiration of such right in one or more
installments) as the Committee may specify in the instrument evidencing such
right. The Committee will also have full power and authority to provide for the
automatic termination of the Corporation's repurchase rights, in whole or in
part, thereby accelerating the vesting of any or all of the purchased shares
(other than purchased shares obtained pursuant to the Automatic Award provisions
of this Plan) upon the occurrence of any change in control specified in Article
XI.
XV. RIGHT OF FIRST REFUSAL
The Committee may, in its discretion, establish as a term of one or more
awards granted under the Plan that the Corporation has a right of first refusal
with respect to the proposed disposition by the award holder (or any successor
in interest by reason of purchase, gift or other mode of transfer) of any shares
of (1) Company Stock acquired by the award holder pursuant to the granted award,
or (2) Common Stock into which purchased Restricted Common Stock may have been
converted or for which acquired Restricted Common Stock may have been exchanged.
Any such right of first refusal will be exercisable by the Corporation or its
assigns in accordance with the terms and conditions specified in the instrument
evidencing such right.
XVI. EFFECTIVE DATE AND TERM OF PLAN
(a) EFFECTIVE DATE. The Plan became effective on December 10, 1991, the
date that it was approved by the Corporation's stockholders. The Plan was
subsequently amended on several occasions and, as amended through March 8, 1996,
was approved by the Corporation's stockholders on May 16, 1996. The Plan was
further amended on February 28, 1997, subject to approval of the Corporation's
stockholders. Any awards granted under the amended provisions of the Plan
adopted February 28, 1997 will, solely to the extent that such amendments are
necessary to permit such grants, be granted subject to approval by the
Corporation's stockholders. If such stockholder approval of the amendments is
not obtained by February 28, 1998, the Plan will continue in accordance with the
Plan provisions in effect immediately prior to such amendments.
(b) TERM. Incentive Options may be granted under the Plan only within ten
years of the Effective Date of the Plan. Subject to this limitation, the
Committee may grant awards under the Plan at any time after the Effective Date
of the Plan and before the Plan is terminated by the Board.
XVII. AMENDMENT OR DISCONTINUANCE
(a) BOARD. The Board may amend, suspend or discontinue the Plan in whole
or in part at any time; provided, however, that (a) except to the extent
necessary to qualify as Incentive Options any or all options granted under the
Plan that are intended to so qualify, such action may not, without the consent
of the award holder, adversely affect rights and obligations with respect to
awards outstanding under the Plan; (b) certain amendments may, as determined by
the Board in its sole discretion, require stockholder approval pursuant to
applicable laws or regulations.
(b) COMMITTEE. The Committee will have full power and authority to modify
or waive any or all of the terms, conditions or restrictions applicable to any
outstanding award (other than Automatic Option Grants), to the extent not
inconsistent with the Plan.
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(c) SUBSTITUTE OPTIONS. Substitute Options will be subject to amendment in
accordance with the terms of this Plan.
XVIII. NO OBLIGATION
Nothing contained in the Plan (or in any award granted under this Plan, a
Chiron Prior Plan or a Cetus Prior Plan) shall confer upon any employee,
consultant, or independent contractor any right to continue in the employ of, or
to provide services to, the Corporation or any affiliate or constitute a
contract or agreement of employment or for the provision of services, or
interfere in any way with the right of the Corporation or an affiliate to reduce
such employee's, consultant's or independent contractor's compensation from the
rate in existence at the time of the granting of an award or to terminate such
employee's, consultant's or independent contractor's employment or services at
any time, with or without cause; but nothing contained in the Plan or in any
award granted under this Plan shall affect any contractual rights of an employee
pursuant to a written employment agreement.
XIX. USE OF PROCEEDS
The cash proceeds received by the Corporation pursuant to awards granted
under the Plan will be used for general corporate purposes.
XX. COMPLIANCE
(a) FEDERAL AND STATE LAWS. No option may be exercised, and the
Corporation will not be obligated to issue stock under any award unless, in the
opinion of counsel for the Corporation, such exercise and issuance is in
compliance with all applicable federal and state securities laws. As a condition
to the grant of any award, or to the issuance of stock under any award, the
Committee may require that the award holder agree to comply with such provisions
of federal and state securities laws as may be applicable to such grant, or to
the sale of stock acquired pursuant to the Plan, and that the award holder
deliver to the Corporation a written agreement, in form and substance
satisfactory to the Corporation and its counsel, implementing such agreement.
(b) INFORMATION. The Corporation will furnish to each award holder
participating in the Plan (other than a key employee or a director) a copy of
the Corporation's Annual Report to Stockholders for the most recent fiscal year,
and additional copies will be furnished, without charge, to such award holders
upon request to the Secretary of the Corporation.
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APPENDIX A
SPECIAL PROVISIONS RELATED TO 1995 CIBA-GEIGY TRANSACTION
Those persons holding options to acquire shares of Common Stock under the
Corporation's 1991 Stock Option Plan on November 20, 1994 are granted the
following rights ("Rights") with respect to each such option:
(i) the right to receive upon the closing of the tender offer contemplated
under the Investment Agreement entered into on such date among the Corporation
and Ciba-Geigy Limited, Ciba-Geigy Corporation and Ciba Biotech Partnership,
Inc. (the "Closing") a cash payment equal to (A) 37.33% of the number of shares
of Common Stock with respect to which each such option would first become
exercisable in calendar year 1995 multiplied by (B) the difference between $117
per share and the exercise price per share of such option with respect to such
shares and
(ii) with respect to the remaining shares of Common Stock subject to each
such option, the right, exercisable at any time after the later of the Closing
or the date that such an option first becomes exercisable with respect to such
shares, to surrender that portion of such option relating to 37.33% of such
shares in return for a cash payment equal (A) to the difference between $117 per
share and the exercise price per share of such option multiplied by (B) the
number of shares with respect to which such option is so surrendered. However,
the grant and exercise of any such right with respect to any officer or director
subject to Section 16 of the Securities Exchange Act of 1934 shall be subject to
stockholder approval of the grant of such rights at the Corporation's 1995
stockholder meeting. The grant of such rights, which are made with respect to
1,858,776 optioned shares shall be in addition to, and shall not count against,
the aggregate and annual limits on the number of shares with respect to which
other awards under the Plan may be made to all individuals and/or a single
individual.
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[Date]
[Director name and address]
Re: Automatic Share Right Grant
Dear [ ]:
Pursuant to the Chiron 1991 Stock Option Plan (the "Plan"),
Chiron Corporation (the "Company") hereby grants you [ ] restricted share
rights ("share rights") with respect to its Common Stock ("Common Stock")
effective[ ] ("Grant Date"). These share rights are granted to
you in accordance with the terms of this letter and the provisions of the Plan.
1. Each share right entitles you to receive one share of
Common Stock on the date that the share right vests in accordance with
paragraph 2 (the "Vesting Date"), if you continue to provide services to the
Company or its subsidiaries as a director, an employee, a consultant or an
independent contractor through such date. A certificate representing the
shares of Common Stock will be issued without restriction on or as soon as
practicable following the Vesting Date of the share right, provided that such
share right has not been terminated or canceled before such date.
Your share rights will vest in five equal annual installments on each of
the first five anniversaries of the Grant Date, provided that, in each case, you
continue to provide services to the Company or its subsidiaries as a director,
an employee, a consultant or an independent contractor through such date. In
addition, if you terminate your service with the Company by reason of death or
Permanent Disability (as defined below), all your outstanding share rights will
immediately vest in full. If you cease to provide services to the Company or
its subsidiaries as a director, an employee, a consultant or an independent
contractor for any reason other than death or Permanent Disability, any share
right held by you that has not vested before the date of your termination of
such services will be canceled automatically and will no longer be outstanding
and no shares of Common Stock will be issued hereunder. "Permanent Disability"
means your inability to engage in any substantial gainful activity by reason of
any medically determinable
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Page 2
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more. In the event of an agreement to dispose of all or substantially all of
the assets or outstanding capital stock of the Company by means of a sale,
merger, reorganization, or liquidation, all of your outstanding share rights
will immediately vest. However, no acceleration of vesting will occur if the
terms of the agreement require as a prerequisite to the consummation of any such
sale, merger, reorganization or liquidation that your share rights will be
either assumed by the successor corporation or parent thereof or be replaced
with a comparable award subject to shares of the successor corporation or parent
thereof. Upon consummation of the sale, merger, reorganization or liquidation
contemplated by the agreement, share rights, whether or not accelerated, will
terminate unless assumed pursuant to a written agreement by the successor
corporation or parent thereof.
Your share rights hereunder may not be sold, assigned,
transferred, alienated, subject to garnishment or otherwise encumbered in any
manner other than by transfer by will or the laws of descent and distribution.
In the event of your death before the issuance of shares of Common Stock under
your share rights, any shares issuable thereunder by reason of your death will
pass pursuant to your will or by the laws of descent and distribution.
The issuance of shares of Common Stock hereunder is subject to
the procurement by the Company of all approvals and permits required by
regulatory authorities having jurisdiction over the share rights and stock to be
issued hereunder. The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance of any Common Stock hereunder will relieve the Company of any
liability with respect to the non-issuance of the Common Stock as to which such
approval is not obtained. The Company, however, will use its best efforts to
obtain all such approvals.
If any change is made to the Common Stock issuable hereunder by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without receipt of consideration, the Compensation Committee of
the Board of Directors of the Company (the "Compensation Committee") will make
appropriate adjustments to such share rights to prevent the enlargement or
dilution of your rights thereunder.
Neither you nor, in the event of your death, your beneficiary
will have any rights as a shareholder with respect to the shares of Common Stock
issuable hereunder until you have been issued a stock certificate for such
shares. It is the intention of the parties that the Company's obligations under
your share rights are unfunded for purposes of the Internal Revenue Code and
that the Employee Retirement Income Security Act of 1974 does not apply to your
share rights.
This agreement does not constitute a contract of employment or
services. Neither the grant of this share right, nor any action taken under the
terms of this share right or the Plan, nor any provision of this share right or
the Plan will be construed to grant you the right to remain in the employ or
service of the Company (or any subsidiary or parent of the Company) for any
period of specific duration.
<PAGE>
Page 3
If the foregoing is satisfactory, please sign, date, and return the enclosed
copy of this letter to_______________________________________________
Very truly yours,
CHIRON CORPORATION
By
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AGREED AND ACCEPTED:
- ---------------------
[Director]
<PAGE>
CHIRON
[Letterhead]
[Date]
Re: Award of Performance Units
Dear _____________:
Pursuant to the Chiron 1991 Stock Option Plan (the "Plan"), Chiron
Corporation (the "Company") hereby confirms the award to you of performance
units ("Performance Units") with respect to its Common Stock ("Common
Stock"). Adjusted for the four-for-one stock split effective as of August 2,
1996, your award is ____ Performance Units. These Performance Units are
granted to you in accordance with the restrictions, terms, and conditions
hereinafter set forth and are in all respects limited and conditioned by the
provisions of the Plan.
1. Each Performance Unit entitles you to receive one share of Common
Stock multiplied by the Payout Multiple determined in accordance with
Paragraph 2 below, provided that your Performance Units have not been
terminated or canceled before December 31, 1998 (the "Determination Date") in
accordance with the provisions hereinafter set forth. However, the
Compensation Committee of the Board of Directors retains the right in
extraordinary circumstances at any time before payment would otherwise be
made under the Performance Units to reduce the Payout Multiple, or to
determine not to make any payment with respect generally to all Performance
Units with respect to this performance period.
<PAGE>
2. The Payout Multiple shall be determined as soon as practicable
following the Determination Date and will be the factor opposite the
Performance Factor for the three fiscal years of the Company ending on the
Determination Date (the "Performance Period"):
Performance Factor Payout Multiple
------------------ ---------------
Less than or equal to .85 0
.86 .50
1.00 .75
1.10 .88
1.20 1.00
1.30 1.25
1.40 1.50
1.70 1.85
1.90 2.15
2.20 2.50
2.50 or greater 3.00
If the Performance Factor falls in between two of the Performance Factors
listed in the above chart, the Payout Multiple will be determined by straight
line interpolation from the chart, rounding the Payout Multiple to the
nearest one one-hundredth. For example, if the Performance Factor is 1.80,
the Payout Multiple will be 2.00.
The Performance Factor is based on a series of calculations where the total
return of Chiron stock is compared to the total return earned on a chosen
stock-based benchmark. The Chiron Total Shareholder Return ("TSR") is the
total shareholder return on Common Stock rounded to the nearest one
one-hundredth. The Benchmark TSR is the average total shareholder return on
common stock of companies included in the S&P Healthcare Index (SPHLTC) and
the AMEX Biotechnology Index (BTK), weighted 75% to the former index and 25%
to the latter and including dividends. The relative return calculation
equals (i) the Chiron TSR LESS (ii) the Benchmark TSR PLUS (iii) one. The
Performance Factor for the three-year Performance Period will be calculated
by averaging each of the thirty-six month-end calculations as described in
the previous sentence. If the Performance Factor does not exceed .85, your
Performance Units will be cancelled and no amounts will be paid thereunder.
3. If your employment with the Company terminates for any reason before
the Determination Date, your Performance Units will be cancelled and no
amounts will be paid
<PAGE>
[DATE]
Page 3
thereunder; provided that if (i) your employment terminates by reason of
death, permanent disability, retirement (on or after age 65 or pursuant to a
uniform retirement policy or the retirement provisions of any defined benefit
pension plan adopted by the Company) at any time before the Determination
Date or (ii) the Company terminates your employment after December 31, 1997
but before the Determination Date for any reason other than cause, a reduced
number of Performance Units (determined by multiplying the total number of
Performance Units set forth in Paragraph 1 by a fraction, the numerator of
which is the number of whole months of your actual employment during the
Performance Period and the denominator of which is thirty-six (36)), will
remain outstanding and will be payable at the end of the Performance Period
as if you had remained employed through the Determination Date. For this
purpose, cause includes, but is not limited to, any act of dishonesty,
willful misconduct, fraud, embezzlement or any unauthorized disclosure of
confidential information or trade secrets. You will be deemed to be
permanently disabled if, by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration
of not less than 12 months, you are unable to engage in any substantial
gainful employment.
4. Any payment under your Performance Units shall be subject to
applicable tax withholding obligations. In order to satisfy those
obligations, the number of shares of Common Stock which you would otherwise
be entitled to receive under your Performance Units will be reduced by that
number of shares which, as of the date of payment, has an aggregate Fair
Market Value (as determined under the Plan) equal to the total amount of tax
withholding obligations applicable to the shares otherwise issuable on that
date.
5. Your Performance Units hereunder may not be sold, assigned,
transferred, alienated, subject to garnishment or otherwise encumbered in any
manner other than by transfer by Will or the laws of descent and
distribution. In the event of your death prior to the issuance of shares of
Common Stock or cash under your Performance Units, any shares or cash
issuable thereunder by reason of your death will pass pursuant to your Will
or by the laws of descent and distribution.
6. The issuance of shares of Common Stock or payment of cash
hereunder shall be subject to compliance by the Company and yourself or your
beneficiary with all applicable requirements of law relating thereto and with
all regulations of any stock exchange on which the Common Stock may be listed at
the time of such issuance. You should also be aware that for purposes of the
short-swing liability rules of Section 16(b) of the Securities Exchange Act of
1934 [which requires the forfeiture of any profit realized by an officer from
the purchase and sale (or sale and purchase) of Company Stock within six
months], the issuance of shares will be considered a non-exempt purchase if the
shares are sold or otherwise disposed of within six months after issuance.
7. In the event any change is made to the Common Stock issuable
hereunder after August 2, 1996 and while your Performance Units are outstanding
(whether
<PAGE>
[DATE]
Page 4
by reason of merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination of shares, exchange of shares, or other
change in capital structure without receipt of consideration), then the
Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") will make appropriate adjustments to such
Performance Units to prevent the enlargement or dilution of your rights
thereunder.
8. Neither you nor, in the event of your death, your beneficiary shall
have any rights as a shareholder with respect to shares of Common Stock
issuable hereunder until you shall have been issued a stock certificate for
such shares. It is the intention of the parties that the Company's
obligations under your Performance Units are unfunded for purposes of the
Internal Revenue Code and that the Employee Retirement Income Security Act of
1974 does not apply to your Performance Units.
9. The Compensation Committee has full authority to administer
the Plan, including authority to interpret and construe any provision thereof
and hereof and to adopt such rules and regulations for administering the Plan as
it may deem necessary. Decisions of the Compensation Committee are final and
binding on all persons who have an interest in the Plan.
10. This award shall not constitute a contract of employment.
The Company (or any subsidiary employing you) may terminate or change the terms
of your employment at any time and for any reason and whether or not such
termination or change causes a loss of rights under the Plan, except to the
extent that the terms of any employment contract or, with respect to changes in
your compensation, any written compensation agreement between the Company and
you may expressly provide otherwise.
Very truly yours,
CHIRON CORPORATION
By
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