Registration No. 333-___________
As filed with the Securities and Exchange Commission on July 28, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CNS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1580270
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4400 WEST 78TH STREET
BLOOMINGTON, MINNESOTA 55435
(Address of Principal Executive Offices and Zip Code)
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CNS, INC. 1994 AMENDED STOCK OPTION PLAN
(Full title of the Plan)
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DANIEL E. COHEN, M.D.
CHIEF EXECUTIVE OFFICER
CNS, INC.
4400 WEST 78TH STREET
BLOOMINGTON, MINNESOTA 55435
(612) 820-6696
(Name, address and telephone number of agent for service)
COPY TO:
Patrick Delaney
Lindquist & Vennum P.L.L.P.
4200 IDS Center
Minneapolis, MN 55402
(612) 371-3211
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<PAGE>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Share(1) Price(1) Fee
- -------------------------------------------------------------------------------
Common Stock 750,000 shares(2) $4.43750 $3,328,125 $982
$.01 Par Value
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) and (h) and based upon the last sale prices of the
Company's Common Stock on the Nasdaq National Market on July 27, 1998.
(2) 500,000 shares were originally registered on Form S-8 (File No. 33-59719)
filed with the Securities and Exchange Commission on May 31, 1995 (1,000,000
shares as adjusted for a two-for-one stock split effected in June 1995) and
750,000 additional shares are being registered herewith.
INCORPORATION OF CONTENTS OF REGISTRATION STATEMENT
BY REFERENCE
A Registration Statement on Form S-8 (File No. 33-59719) was filed with
the Securities and Exchange Commission on May 31, 1995 covering the registration
of 500,000 shares (1,000,000 shares as adjusted for a June 1995 two-for-one
stock split) of the Common Stock under the CNS, Inc. 1994 Stock Option Plan (the
"1994 Plan"). A filing fee of $5,743.53 was paid at the time that the S-8
Registration Statement was filed. Pursuant to General Instruction E of Form S-8
and Rule 429, this Registration Statement is being filed to register an
additional 750,000 shares authorized under the Plan. An amendment to the 1994
Plan to increase the reserved and authorized number of shares under the Plan by
750,000 shares was authorized by the Company's Board of Directors on February
10, 1997 and such amendment was ratified and approved by the stockholders on
April 23, 1997. This Registration Statement should also be considered a
post-effective amendment to the prior Registration Statement. The contents of
the prior Registration Statement are incorporated herein by reference.
PART I
Pursuant to the Note to Part I of Form S-8, the information required by
Items 1 and 2 of Form S-8 is not filed as a part of this Registration Statement.
<PAGE>
PART II
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Securities and Exchange
Commission are hereby incorporated by reference herein:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
(b) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998.
(c) The Company's Definitive Proxy Statement dated March 18, 1998
for the Annual Meeting of Stockholders held on April 22, 1998.
(d) The description of the Company's Common Stock as set forth in
the Company's Common Stock as set forth in the Company's Form
8-A/A Registration Statement filed on May 31, 1995, including
any amendment or report filed for the purpose of updating such
description.
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 a 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.
Lindquist & Vennum P.L.L.P. is rendering its opinion as to the validity
of the shares being registered hereby. Patrick Delaney, a partner of Lindquist &
Vennum P.L.L.P., is a director and holder of Common Stock of the Company.
Item 6. Indemnification of Directors and Officers.
The Company's Bylaws require indemnification of directors and officers
of the Company in accordance with, and to the fullest extent permitted by,
Delaware law, as it may be amended from time to time.
<PAGE>
Section 145 of the Delaware General Corporation Law generally provides
that any person who was or is a director or officer may be indemnified against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with the defense or
settlement of any threatened, pending or completed legal proceedings in which he
is involved by reason of the fact that he is or was a director or officer if he
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe that his
conduct was unlawful. However, if the legal proceeding is by or in the right of
the corporation, the director or officer may not be indemnified in respect of
any claim, issue or matter as to which he shall have been adjudged to be liable
to the corporation unless the court in which such action was brought deems it
proper.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit (filed electronically herewith)
4 CNS, Inc. 1994 Amended Stock Option Plan
5 Opinion and Consent of Lindquist & Vennum P.L.L.P. as to the
legality of the securities being registered
23(a) Consent of Lindquist & Vennum P.L.L.P. (included in Exhibit 5)
23(b) Consent of KPMG Peat Marwick LLP, independent public accountants
24 Power of Attorney (included in Signature Page)
Item 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(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,
<PAGE>
individually or in the aggregate, represents 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 (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and 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 in the registration statement.
(2) 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 therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act 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 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) 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 connected 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.
<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 Bloomington, State of Minnesota, on July 16, 1998.
CNS, Inc.
By /s/ Daniel E. Cohen
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Daniel E. Cohen, M.D.
Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
The undersigned officers and directors of CNS, Inc. hereby constitute
and appoint Daniel E. Cohen, M.D. and Marti Morfitt, or either of them, with
power to act one without the other, our true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for us and in our
stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this Registration Statement and all documents
relating thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons on
July 16, 1998 in the capacities indicated.
Signature Title
/s/ Daniel E. Cohen, M.D. Chief Executive Officer, Treasurer
- ----------------------------- Chairman of the Board of Directors and
Daniel E. Cohen, M.D. Director (principal executive officer)
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/s/ Marti Morfitt President and Director
- -----------------------------
Marti Morfitt
/s/ David J. Byrd Vice President of Finance and
- ----------------------------- Chief Financial Officer (principal
David J. Byrd financial and accounting officer)
/s/ Patrick Delaney Secretary and Director
- -----------------------------
Patrick Delaney
/s/ R. Hunt Greene Director
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R. Hunt Greene
/s/ Andrew J. Greenshields Director
- -----------------------------
Andrew J. Greenshields
/s/ Richard W. Perkins Director
- -----------------------------
Richard W. Perkins
Exhibit 4
CNS, INC.
1994 AMENDED STOCK PLAN
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TABLE OF CONTENTS
PAGE
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SECTION 1. General Purpose of Plan; Definitions............................ 1
SECTION 2. Administration.................................................. 3
SECTION 3. Stock Subject to Plan........................................... 4
SECTION 4. Eligibility..................................................... 5
SECTION 5. Stock Options................................................... 5
SECTION 6. Stock Appreciation Rights....................................... 9
SECTION 7. Restricted Stock............................................... 10
SECTION 8. Deferred Stock Awards.......................................... 12
SECTION 9. Other Awards. ................................................ 13
SECTION 10. Transfer, Leave of Absence, etc................................ 13
SECTION 11. Amendments and Termination....................................... 13
SECTION 12. Unfunded Status of Plan.......................................... 14
SECTION 13. General Provisions............................................... 14
SECTION 14. Effective Date of Plan........................................... 15
<PAGE>
CNS, INC.
1994 AMENDED STOCK PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the CNS, Inc. 1994 Amended Stock Plan (the
"Plan"). The purpose of the Plan is to enable CNS, Inc. (the "Company") and its
Subsidiaries to retain and attract executives, other key employees and members
of the Board of Directors who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such individuals to participate
in the long-term success and growth of the Company by giving them a proprietary
interest in the Company.
For purposes of the Plan, the following terms shall be defined as
set forth below:
a. "Agreement" means an agreement by and between the
Company and an optionee or recipient of an award under
the Plan setting forth the terms and conditions of the
option or award.
b. "Board" means the Board of Directors of the Company.
c. "Cause" means a felony conviction of a participant or
the failure of a participant to contest prosecution for
a felony, or a participant's willful misconduct or
dishonesty, any of which is directly and materially
harmful to the business or reputation of the Company.
d. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
e. "Committee" means the Committee referred to in Section 2
of the Plan. If at any time no Committee shall be in
office, then the functions of the Committee specified in
the Plan shall be exercised by the Board, unless the
Plan specifically states otherwise.
f. "Company" means CNS, Inc., a corporation organized under
the laws of the State of Delaware (or any successor
corporation).
g. "Deferred Stock" means an award made pursuant to Section
8 below of the right to receive Stock at the end of a
specified deferral period.
h. "Disability" means total and permanent disability as
determined by the Committee.
i. "Early Retirement" means retirement, with consent of the
Committee at the time of retirement, from active
employment with the Company and any Subsidiary or Parent
Corporation of the Company.
<PAGE>
j. "Fair Market Value" of Stock on any given date shall be
determined by a Committee as follows: (a) if the Stock
is listed for trading on one or more national securities
exchanges, or is traded on the Nasdaq Stock Market, the
last reported sales price on the principal such exchange
or the Nasdaq Stock Market on the date in question, or
if such Stock shall not have been traded on such
principal exchange on such date, the last reported sales
price on such principal exchange or the Nasdaq Stock
Market on the first day prior thereto on which such
Stock was so traded; or (b) if the Stock is not listed
for trading on a national securities exchange or the
Nasdaq Stock Market, but is traded in the
over-the-counter market, including the Nasdaq Small Cap
Market, the closing bid price for such Stock on the date
in question, or if there is no such bid price for such
Stock on such date, the closing bid price on the first
day prior thereto on which such price existed; or (c) if
neither (a) nor (b) is applicable, by any means fair and
reasonable by the Committee, which determination shall
be final and binding on all parties.
k. "Incentive Stock Option" means any Stock Option intended
to be and designated as an "Incentive Stock Option"
within the meaning of Section 422 of the Code.
l. "Non-Employee Director" means a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934.
m. "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option, and is intended to be
and is designated as a "Non-Qualified Stock Option."
n. "Normal Retirement" means retirement from active
employment with the Company and any Subsidiary or Parent
Corporation of the Company on or after age 60.
o. "Other Awards" means those awards granted pursuant to
Section 9 hereof.
p. "Outside Director" means a Director who: (a) is not a
current employee of the Company or any member of an
affiliated group which includes the Company; (b) is not
a former employee of the Company who receives
compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the
taxable year; (c) has not been an officer of the
Company; (d) does not receive remuneration from the
Company, either directly or indirectly, in any capacity
other than as a director, except as otherwise permitted
under Code Section 162(m) and regulations thereunder.
For this purpose, remuneration includes any payment in
exchange for goods or services. This definition shall be
further governed by the provisions of Code Section
162(m) and regulations promulgated thereunder.
q. "Parent Corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending
with the Company if each of the corporations (other than
the Company) owns stock possessing 50% or more of the
total combined voting power of all classes of stock in
one of the other corporations in the chain.
<PAGE>
r. "Restricted Stock" means an award of shares of Stock
that are subject to restrictions under Section 7 below.
s. "Retirement" means Normal Retirement or Early
Retirement.
t. "Stock" means the Common Stock, $.01 par value per
share, of the Company.
u. "Stock Appreciation Right" means the right pursuant to
an award granted under Section 6 below to surrender to
the Company all or a portion of a Stock Option in
exchange for an amount equal to the difference between
(i) the Fair Market Value, as of the date such Stock
Option or such portion thereof is surrendered, of the
shares of Stock covered by such Stock Option or such
portion thereof, and (ii) the aggregate exercise price
of such Stock Option or such portion thereof.
v. "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5 below.
w. "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning
with the Company if each of the corporations (other than
the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting
power of all classes of stock in one of the other
corporations in the chain.
SECTION 2. Administration.
The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board of Directors of the Company consisting of at
least two Directors, all of whom shall be Outside Directors and Non-Employee
Directors, who shall serve at the pleasure of the Board.
The Committee shall have the power and authority to grant to
eligible employees and members of the Board, pursuant to the terms of the Plan:
(i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv)
Deferred Stock awards, or (v) Other Awards.
In particular, the Committee shall have the authority:
(i) to select the members of the Board, officers and other
key employees of the Company and its Subsidiaries and
other eligible persons to whom Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock
awards and/or Other Awards may from time to time be
granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non- Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock,
<PAGE>
Deferred Stock awards and/or Other Awards, or a
combination of the foregoing, are to be granted
hereunder;
(iii) to determine the number of shares to be covered by each
such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted
hereunder (including, but not limited to, any
restriction on any Stock Option or other award and/or
the shares of Stock relating thereto), which authority
shall be exclusively vested in the Committee (and not
the Board) for purposes of establishing performance
criteria used with Restricted Stock and Deferred Stock
awards and Other Awards; provided, however, that in the
event of a merger or asset sale, the applicable
provisions of Sections 5(c) and 7(c) of the Plan shall
govern the acceleration of vesting of any Stock Option
or awards; and
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with
respect to an award under this Plan shall be deferred
either automatically or at the election of the
participant.
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable; to interpret the terms and provisions
of the Plan and any award issued under the Plan (and any agreements relating
thereto); and to otherwise supervise the administration of the Plan. The
Committee may delegate to executive officers of the Company the authority to
exercise the powers specified in (i), (ii), (iii), (iv) and (v) above with
respect to persons who are not either the chief executive officer of the Company
or the four highest paid officers of the Company other than the chief executive
officer.
All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
Plan participants.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 1,750,000. Such shares may consist, in
whole or in part, of authorized and unissued shares.
Subject to paragraph (b)(iv) of Section 6 below, if any shares that
have been optioned ceased to be subject to Stock Options, or if any shares
subject to any Restricted Stock or Deferred Stock award or Other Award granted
hereunder are forfeited or such award otherwise terminates without a payment
being made to the participant, such shares shall again be available for
distribution in connection with future awards under the Plan.
<PAGE>
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, other change in corporate
structure affecting the Stock, or spin-off or other distribution of assets to
shareholders, such substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding options granted under the Plan, and in
the number of shares subject to Restricted Stock or Deferred Stock awards
granted under the Plan as may be determined to be appropriate by the Committee,
in its sole discretion, provided that the number of shares subject to any award
shall always be a whole number. Such adjusted option price shall also be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Option.
SECTION 4. Eligibility.
Officers, other key employees of the Company and Subsidiaries and
members of the Board who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company and its Subsidiaries
are eligible to be granted Stock Options, Stock Appreciation Rights, Restricted
Stock or Deferred Stock awards or Other Awards under the Plan. The optionees and
participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible, and the Committee
shall determine, in its sole discretion, the number of shares covered by each
award.
Notwithstanding the foregoing, no person shall receive awards under
this Plan which exceed 150,000 shares during any fiscal year of the Company.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after June 17, 2004.
The Committee shall have the authority to grant any optionee
Incentive Stock Options, NonQualified Stock Options, or both types of options
(in each case with or without Stock Appreciation Rights). To the extent that any
option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of
this Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in
<PAGE>
disqualification of such Option as an Incentive Stock Option, provided the
optionee consents in writing to the modification or amendment.
Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
In no event shall the option price per share of Stock purchasable under an
Incentive Stock Option or a Non-Qualified Stock Option be less than 100% of the
Fair Market Value of the Stock on the date of the option is granted. If an
employee owns or is deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code) more than 10% of the combined voting power of
all classes of stock of the Company or any Parent Corporation or Subsidiary and
an Incentive Stock Option is granted to such employee, the option price shall be
no less than 110% of the Fair Market Value of the Stock on the date the option
is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time
or times as determined by the Committee at or after grant, subject to the
restrictions stated in Section 5(b) above. If the Committee provides, in its
discretion, that any option is exercisable only in installments, the Committee
may waive such installment exercise provisions at any time. Notwithstanding
anything contained in the Plan to the contrary, the Committee may, in its
discretion extend or vary the term of any Stock Option or any installment
thereof, whether or not the optionee is then employed by the Company, if such
action is deemed to be in the best interests of the Company; provided, however,
that in the event of a merger or sale of assets, the provisions of this Section
5(c) shall govern vesting acceleration. Notwithstanding the foregoing, unless
the Stock Option Agreement provides otherwise, any Stock Option granted under
this Plan shall be exercisable in full, without regard to any installment
exercise provisions, for a period specified by the Committee, but not to exceed
sixty (60) days prior to or subsequent to the occurrence of any of the following
events: (i) dissolution or liquidation of the Company other than in conjunction
with a bankruptcy of the Company or any similar occurrence, (ii) any merger,
consolidation, acquisition, separation, reorganization, or similar occurrence,
where the Company will not be the surviving entity or (iii) the transfer of
substantially all of the assets of the Company or 20% or more of the outstanding
Stock of the Company.
The grant of an option pursuant to the Plan shall not limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business
<PAGE>
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
(d) Method of Exercise. Stock Options may be exercised in whole or
in part at any time during the option period by giving written notice of
exercise to the Company specifying the number of shares to be purchased. Such
notice shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of Stock
already owned by the optionee (which in the case of Stock acquired upon exercise
of an option have been owned for more than six months on the date of surrender)
or, in the case of the exercise of a Non-Qualified Stock Option, Restricted
Stock or Deferred Stock subject to an award hereunder (based, in each case, on
the Fair Market Value of the Stock on the date immediately preceding the date
the option is exercised, as determined by the Committee), provided, however,
that, in the case of an Incentive Stock Option, the right to make a payment in
the form of already owned shares may be authorized only at the time the option
is granted, and provided further that in the event payment is made in the form
of shares of Restricted Stock or a Deferred Stock award, the optionee will
receive a portion of the option shares in the form of, and in an amount equal
to, the Restricted Stock or Deferred Stock award tendered as payment by the
optionee. If the terms of an option so permit, an optionee may elect to pay all
or part of the option exercise price by having the Company withhold from the
shares of Stock that would otherwise be issued upon exercise that number of
shares of Stock having a Fair Market Value equal to the aggregate option
exercise price for the shares with respect to which such election is made. No
shares of Stock shall be issued until full payment therefor has been made. An
optionee shall generally have the rights to dividends and other rights of a
shareholder with respect to shares subject to the option when the optionee has
given written notice of exercise, has paid in full for such shares.
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of three months (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter. In the event of termination of employment by reason of death, if any
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.
<PAGE>
(g) Termination by Reason of Disability. If an optionee's employment
by the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after one year (or such shorter period as the
Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment
by the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement and the terms of the Stock Option so provide, any Stock Option held
by such optionee may thereafter be exercised to the extent it was exercisable at
the time of such Retirement, but may not be exercised after three months (or
such shorter period as the Committee shall specify at grant) from the date of
such termination of employment or the expiration of the stated term of the
option, whichever period is the shorter. In the event of termination of
employment by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, the option will thereafter be treated as a Non-Qualified Stock
Option.
(i) Other Termination. Unless otherwise determined by the Committee,
if an optionee's employment by the Company and any Subsidiary or Parent
Corporation terminates for any reason other than death, Disability or
Retirement, the Stock Option may be exercised to the extent it was exercisable
at such termination for the lesser of three months or the balance of the
option's term, except that if the optionee is terminated for Cause by the
Company or any Subsidiary or Parent Corporation, the Stock Option shall
thereupon terminate immediately.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair
Market Value (determined as of the time the Option is granted) of the Common
Stock with respect to which an Incentive Stock Option under this Plan or any
other plan of the Company and any Subsidiary or Parent Corporation is
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.
<PAGE>
SECTION 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of the option.
A Stock Appreciation Right or applicable portion thereof granted
with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by a related stock Option shall not be reduced until
the exercise or termination of the related Stock Option exceeds the number of
shares not covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with paragraph (b) of this Section 6, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in paragraph (b) of this Section 6. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions, not inconsistent with the provisions of the Plan,
as shall be determined from time to time by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only
at such time or times and to the extent that the Stock Options to
which they relate shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an
amount in cash or shares of Stock equal in value to the excess of
the Fair Market Value of one share of Stock over the option price
per share specified in the related option multiplied by the number
of shares in respect of which the Stock Appreciation Right shall
have been exercised, with the Committee having the right to
determine the form of payment; provided the Committee may not
require the optionee to receive more than 50% of the aggregate value
of such Stock Appreciation Rights in shares of Stock.
(iii) Stock Appreciation Rights shall be transferable
only when and to the extent that the underlying Stock Option would
be transferable under Section 5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right,
the Stock Option or part thereof to which such Stock Appreciation
Right is related shall be deemed to have been exercised for the
purpose of the limitation set forth in Sections 3 and 4 of the Plan
on the total number of shares of Stock to be issued under the Plan
and the maximum number of shares to
<PAGE>
be awarded to any one person in a fiscal year, but only to the
extent of the number of shares issued or issuable under the Stock
Appreciation Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.
(v) A Stock Appreciation Right granted in connection
with an Incentive Stock Option may be exercised only if and when the
market price of the Stock subject to the Incentive Stock Option
exceeds the exercise price of such Option.
(vi) Each award shall be confirmed by, and subject to
the terms of, a Stock Appreciation Rights Agreement executed by the
Company and the participant.
SECTION 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of an award
of shares of Restricted Stock shall not have any rights with respect to such
award, unless and until such recipient has executed an Agreement evidencing the
award and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate
in respect of shares of Restricted Stock awarded under the Plan.
Such certificate shall be registered in the name of the participant,
and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially
in the following form:
"The transferability of this certificate and
the shares of stock represented hereby are
subject to the terms and conditions (including
forfeiture) of the CNS, Inc. 1994 Amended
Stock Plan and an Agreement entered into
between the registered owner and CNS, Inc.
Copies of such Plan and Agreement are on file
in the offices of CNS, Inc., P.O. Box 39802,
Minneapolis, MN 55439."
(ii) The Committee shall require that the stock
certificates evidencing such shares be held in custody by the
Company until the restrictions thereon shall have lapsed, and that,
as a condition of any Restricted Stock award, the participant shall
have delivered a stock power, endorsed in blank, relating to the
Stock covered by such award.
<PAGE>
(c) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
Agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. In no event shall the
Restriction Period be less than one (1) year. Within these limits,
the Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this
Section 7, the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares and the right to receive any
cash dividends. The Committee, in its sole discretion, may permit or
require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional shares of
Restricted Stock (to the extent shares are available under Section 3
and subject to paragraph (f) of Section 13). Certificates for shares
of unrestricted Stock shall be delivered to the grantee promptly
after, and only after, the period of forfeiture shall have expired
without forfeiture in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the award Agreement
and paragraph (c)(iv) of this Section 7, upon termination of
employment for any reason during the Restriction Period, all shares
still subject to restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in
part any or all remaining restrictions with respect to such
participant's shares of Restricted Stock.
(v) Notwithstanding the foregoing, all restrictions with
respect to any participant's shares of Restricted Stock shall lapse
on the date determined by the Committee, but in no event more than
sixty (60) days prior to or subsequent to the occurrence of any of
the following events: (i) dissolution or liquidation of the Company
other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition,
separation, reorganization, or similar occurrence, where the Company
will not be the surviving entity or (iii) the transfer of
substantially all of the assets of the Company or 20% or more of the
outstanding Stock of the Company.
<PAGE>
SECTION 8. Deferred Stock Awards.
(a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers and key employees of the Company and Subsidiaries to whom and the
time or times at which Deferred Stock shall be awarded, the number of Shares of
Deferred Stock to be awarded to any participant or group of participants, the
duration of the period (the "Deferral Period") during which, and the conditions
under which, receipt of the Stock will be deferred, and the terms and conditions
of the award in addition to those contained in paragraph (b) of this Section 8.
The Committee may also condition the grant of Deferred Stock upon the attainment
of specified performance goals. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.
(b) Terms and Conditions.
(i) Subject to the provisions of this Plan and the award
agreement, Deferred Stock awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral
Period. In no event shall the Deferral Period be less than one (1)
year. At the expiration of the Deferral Period (or Elective Deferral
Period, where applicable), share certificates shall be delivered to
the participant, or his legal representative, in a number equal to
the shares covered by the Deferred Stock award.
(ii) Amounts equal to any dividends declared during the
Deferral Period with respect to the number of shares covered by a
Deferred Stock award will be paid to the participant currently or
deferred and deemed to be reinvested in additional Deferred Stock or
otherwise reinvested, all as determined at the time of the award by
the Committee, in its sole discretion.
(iii) Subject to the provisions of the award Agreement
and paragraph (b)(iv) of this Section 8, upon termination of
employment for any reason during the Deferral Period for a given
award, the Deferred Stock in question shall be forfeited by the
participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause)
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in
part any or all of the remaining deferral limitations imposed
hereunder with respect to any or all of the participant's Deferred
Stock.
(v) A participant may elect to further defer receipt of
the award for a specified period or until a specified event (the
"Elective Deferral Period"), subject in each case to the Committee's
approval and to such terms as are determined by the Committee, all
in its sole
<PAGE>
discretion. Subject to any exceptions adopted by the Committee, such
election must generally be made prior to completion of one half of
the Deferral Period for a Deferred Stock award (or for an
installment of such an award).
(vi) Each award shall be confirmed by, and subject to
the terms of, a Deferred Stock Agreement executed by the Company and
the participant.
SECTION 9. Other Awards.
The Committee may from time to time grant Stock, other Stock based
and non-Stock based awards under this Plan including without limitations those
awards pursuant to which shares of Stock are or in the future may be acquired,
awards denominated in Stock units, securities convertible into Stock, phantom
securities and dividend equivalents. The Committee shall determine the terms and
conditions of such Stock, Stock based and non-Stock based awards provided that
such awards shall not be inconsistent with the terms of this Plan.
SECTION 10. Transfer, Leave of Absence, etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent
Corporation or Subsidiary, or from a Parent Corporation or Subsidiary to the
Company, or from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 11. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made (i) which would impair
the rights of an optionee or participant under a Stock Option, Stock
Appreciation Right, Restricted Stock, Deferred Stock or other Stock-based award
theretofore granted, without the optionee's or participant's consent, or (ii)
which without the approval of the stockholders of the Company would cause the
Plan to no longer comply with Rule 16b-3 under the Securities Exchange Act of
1934, Section 422 of the Code or any other regulatory requirements.
<PAGE>
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively to the extent such amendment is
consistent with the terms of this Plan, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan. The Committee may also substitute new Stock Options for
previously granted options, including previously granted options having higher
option prices.
SECTION 12. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
SECTION 13. General Provisions.
(a) All certificates for shares of Stock delivered under the Plan
pursuant to any Restricted Stock, Deferred Stock or other Stock-based awards
shall be subject to such stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable Federal or state securities
laws, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other Stock-based awards under the Plan (other than Stock
Options) are not required to make any payment or provide consideration other
than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional compensation arrangements, subject
to stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases. The
adoption of the Plan shall not confer upon any employee of the Company or any
Subsidiary any right to continued employment with the Company or a Subsidiary,
as the case may be, nor shall it interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of any of its employees at
any time.
(d) Each participant shall, no later than the date as of which any
part of the value of an award first becomes includable as compensation in the
gross income of the participant for Federal income tax purposes, pay to the
Company, or make arrangements satisfactory to the Committee regarding payment
of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to the award. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company and
Subsidiaries shall, to the extent permitted by law, have
<PAGE>
the right to deduct any such taxes from any payment of any kind otherwise due to
the participant. With respect to any award under the Plan, if the terms of such
award so permit, a participant may elect by written notice to the Company to
satisfy part or all of the withholding tax requirements associated with the
award by (i) authorizing the Company to retain from the number of shares of
Stock that would otherwise be deliverable to the participant, or (ii) delivering
to the Company from shares of Stock already owned by the participant, that
number of shares having an aggregate Fair Market Value equal to part or all of
the tax payable by the participant under this Section 13(d). Any such election
shall be in accordance with, and subject to, applicable tax and securities laws,
regulations and rulings.
(e) At the time of grant, the Committee may provide in connection
with any grant made under this Plan that the shares of Stock received as a
result of such grant shall be subject to a repurchase right in favor of the
Company pursuant to which any participant shall be required to offer to the
Company upon termination of employment for any reason any shares that the
participant acquired under the Plan, with the price being the then Fair Market
Value of the Stock or, in the case of a termination for Cause, an amount equal
to the cash consideration paid for the Stock, subject to such other terms and
conditions as the Committee may specify at the time of grant. The Committee may,
at the time of grant of an award under the Plan, provide the Company with the
right to repurchase, or require forfeiture of, shares of Stock acquired pursuant
to the Plan by any participant who, at any time within one year after
termination of employment with the Company, directly or indirectly, competes
with, or is employed by a competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock (or
in Deferred Stock or other types of Plan awards) at the time of any dividend
payment shall only be permissible if the Committee (or the Company's chief
financial officer) certifies in writing that under Section 3 sufficient shares
are available for such reinvestment (taking into account then outstanding Stock
Options and other Plan awards).
SECTION 14. Effective Date of Plan.
The Plan is expressly made subject to the approval by the
shareholders of the Company. If the Plan is not so approved by the shareholders
on or before one year after this Plan's adoption by the Board of Directors, this
Plan shall not come into effect. The offering of the shares hereunder shall be
also subject to the effecting by the Company of any registration or
qualification of the shares under any federal or state law or the obtaining of
the consent or approval of any governmental regulatory body which the Company
shall determine, in its sole discretion, is necessary or desirable as a
condition to or in connection with, the offering or the issue or purchase of the
shares covered thereby. The Company shall make every reasonable effort to effect
such registration or qualification or to obtain such consent or approval.
- --------------------------
Adopted by the Board of Directors: June 17, 1994.
Ratified and Approved by the Shareholders: May 11, 1995.
Amended by the Board of Directors: February 10, 1997.
Amendment Ratified and Approved by the Shareholders: April 23, 1997.
Exhibit 5
July 27, 1998
CNS, Inc.
4400 West 78th Street
Bloomington, Minnesota 55435
Re: Opinion of Counsel as to Legality of 750,000 Shares of Common
Stock to be registered under the Securities Act of 1933
Ladies and Gentlemen:
This opinion is furnished in connection with the registration under
the Securities Act of 1933 on Form S-8 of 750,000 shares of Common Stock, $.01
par value, of CNS, Inc. (the "Company") offered to officers, employees and
members of the Board of Directors of the Company pursuant to the CNS, Inc. 1994
Amended Stock Option Plan (the "1994 Amended Plan").
As general counsel for the Company, we advise you that it is our
opinion, based on our familiarity with the affairs of the Company and upon our
examination of pertinent documents, that the 750,000 shares of Common Stock to
be offered to officers, employees and members of the Board of directors by the
Company under the 1994 Amended Plan will, when paid for and issued, be validly
issued and lawfully outstanding, fully paid and nonassessable shares of Common
Stock of the Company.
The undersigned hereby consent to the filing of this opinion with
the Securities and Exchange Commission as an Exhibit to the Registration
Statement with respect to said shares of Common Stock under the Securities Act
of 1933.
Very truly yours,
/s/ LINDQUIST & VENNUM P.L.L.P.
Exhibit 23(b)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CNS, Inc.:
We consent to the use of our reports incorporated herein by
reference in this Form S-8 Registration Statement.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 28, 1998
