As filed with the Securities and Exchange Commission on December 12, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-8
REGISTRATION STATEMENT
Under The Securities Act of 1933
------------------------
PROTOCOL SYSTEMS, INC.
(Exact name of registrant as specified in charter)
Oregon 93-0913130
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
------------------------
8500 S.W. Creekside Place, Beaverton, Oregon 97008
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(Address of principal executive offices) (Zip Code)
(503) 526-8500
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(Registrant's phone number, including area code)
-----------------------
PROTOCOL SYSTEMS, INC.
1992 STOCK INCENTIVE PLAN
------------------------
James B. Moon
President and Chief Executive Officer
Protocol Systems, Inc.
8500 S.W. Creekside Place, Beaverton, Oregon 97008
(503) 526-8500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
With copies to:
Gregory E. Struxness, Esq.
Ater Wynne Hewitt Dodson & Skerritt, LLP
222 S.W. Columbia, Suite 1800
Portland, Oregon 97201
(503) 226-1191
CALCULATION OF REGISTRATION FEE
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Title of Amount Proposed Proposed Amount
Securities to to Be Maximum Maximum of
to Be Registered Offering Aggregate Registration
Registered Price Per Offering Fee
Share (1) Price (1)
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Common Stock,
par value $.01 461,422 shares $12.50 $5,767,775.00 $1,747.81
per share (2)
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Including associated Preferred Stock Purchase Rights. Prior to the
occurrence of certain events, the Preferred Stock Purchase Rights
will not be evidenced or traded separately from the Common Stock.
==============================================================================
<PAGE>2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
This registration statement is filed in accordance with the provisions of
General Instruction E to Form S-8 for the purpose of registering additional
shares of common stock for offer and sale under the Protocol Systems, Inc.
1992 Stock Incentive Plan, for which a registration statement on Form S-8
(File No. 33-53992) is already effective. Except to the extent that exhibits
are filed herewith the contents of Protocol Systems, Inc.'s registration
statement on Form S-8 (File No. 33-53992) are hereby incorporated by
reference.
Item 8. Exhibits
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Number Description
------- -------------
4.1 Fourth Restated Articles of Incorporation of Protocol
Systems, Inc. (incorporated by reference from the
Company's Registration Statement on Form S-1 (File No.
33-45067))
4.2 Restated Bylaws of Protocol Systems, Inc.
(incorporated by reference from the Company's
Registration Statement on Form S-1 (File No. 33-
45067))
4.3 Rights Agreement dated March 20, 1992 between Protocol
Systems, Inc. and First Interstate Bank of Oregon, N.A
(incorporated by reference from the Company's
Registration Statement on Form S-1 (File No. 33-
45067))
5.0 Opinion of Ater Wynne Hewitt Dodson & Skerritt, LLP as
to the legality of the securities being registered
23.1 Consent of Ater Wynne Hewitt Dodson & Skerritt, LLP
(included in legal opinion filed as Exhibit 5.0)
23.2 Consent of KPMG Peat Marwick LLP
24.0 Powers of Attorney (included in signature page in Part
II of the Registration Statement)
99.0 Protocol Systems, Inc. 1992 Stock Incentive Plan, as
amended
<PAGE>3
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 authorized,
in the City of Portland, State of Oregon, on the 11th day of December,
1996.
PROTOCOL SYSTEMS, INC.
By: /s/ James B. Moon
-------------------------------------
James B. Moon
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints James B. Moon and Craig M. Swanson, and each of them
singly, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the registration statement filed herewith and
any or all amendments to said registration statement (including post-effective
amendments), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
granting unto said attorneys-in-fact and agents and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Witness our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
[Signatures on following page]
<PAGE>4
Signature Title Date
/s/ James B. Moon
- ------------------------------ Chairman of the Board, 12/11/96
James B. Moon President and Chief
Executive Officer
(Principal Executive
Officer)
/s/ Craig M. Swanson
- ------------------------------ Vice President, Chief 12/11/96
Craig M. Swanson Accounting Officer and
Secretary (Principal
Financial and Accounting
Officer)
/s/ David F. Bolender
- ------------------------------ Director 12/11/96
David F. Bolender
/s/ William New, Jr., M.D.
- ------------------------------ Director 12/11/96
William New, Jr., M.D.
/s/ Ronald S. Newbower
- ------------------------------ Director 12/11/96
Ronald S. Newbower
/s/ Frank E. Samuel, Jr.
- ------------------------------ Director 12/11/96
Frank E. Samuel, Jr.
/s/ Steven E. Wynne
- ----------------------------- Director 12/11/96
Steven E. Wynne
INDEX TO EXHIBITS
Exhibit
Number Exhibit
-------- --------
4.1 Fourth Restated Articles of Incorporation of Protocol
Systems, Inc. (incorporated by reference from the Company's
Registration Statement on Form S-1 (File No. 33-45067))
4.2 Restated Bylaws of Protocol Systems, Inc. (incorporated by
reference from the Company's Registration Statement on Form
S-1 (File No. 33-45067))
4.3 Rights Agreement dated March 20, 1992 between Protocol
Systems, Inc. and First Interstate Bank of Oregon, N.A
(incorporated by reference from the Company's Registration
Statement on Form S-1 (File No. 33-45067))
5.0 Opinion of Ater Wynne Hewitt Dodson & Skerritt, LLP as to
the legality of the securities being registered
23.1 Consent of Ater Wynne Hewitt Dodson & Skerritt, LLP
(included in legal opinion filed as Exhibit 5.0)
23.2 Consent of KPMG Peat Marwick LLP
24.0 Powers of Attorney (included in signature page in Part II of
the Registration Statement)
99.0 Protocol Systems, Inc. 1992 Stock Incentive Plan, as amended
PROTOCOL SYSTEMS, INC.
1992 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Consultants of the Company and to promote the success of the Company's
business.
Options granted hereunder may be either "incentive stock options," as defined
in Section 422A of the Internal Revenue Code of 1986, as amended, or
"nonqualified stock options," at the discretion of the Board and as reflected
in the terms of the written option agreement. In addition, shares of the
Company's Common Stock may be Sold hereunder independent of any Option grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Protocol Systems, Inc., an Oregon
corporation.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(f) "Consultant" shall mean any person who is engaged by the Company
or any Subsidiary to render consulting services and is compensated for such
consulting services and any director of the Company whether compensated for
such services or not.
(g) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board; provided that such leave is for a
period of not more than ninety days or reemployment upon the expiration of
such leave is guaranteed by contract or statute.
(h) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422A of the Code.
(j) "Maximum Annual Employee Grant" shall have the meaning set forth
in Section 5(e).
(k) "Nonqualified Stock Option" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422A of the
Code.
(l) "Option" shall mean a stock option granted pursuant to the Plan.
(m) "Optioned Stock" shall mean the Common Stock subject to an Option.
<PAGE>2
(n) "Optionee" shall mean an Employee or Consultant who receives an
Option.
(o) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(p) "Plan" shall mean this Stock Incentive Plan.
(q) "Sale" or "Sold" shall include, with respect to the sale of Shares
under the Plan, the sale of Shares for consideration in the form of cash or
notes, as well as a grant of Shares without consideration, except past or
future services.
(r) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(s) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 425(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and/or
Sold under the Plan is 1,336,422 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available
for future Option grants and/or Sales under the Plan. If Shares Sold under
the Plan are repurchased by the Company pursuant to restrictions applicable to
such Shares, the number of Shares repurchased shall, unless the Plan shall
have been terminated, become available for future Option grants and/or Sales
under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the Board of
Directors of the Company, if each member is a disinterested person, or a
committee of two or more directors, each of whom is a disinterested person,
i.e., a director who is not, during the one year prior to service as an
administrator of a plan, or during such service, granted or awarded equity
securities pursuant to the plan or any other plan of the Company or any of its
affiliates, except that:
(i) participation in the Company's 1993 Stock Option Plan for
Nonemployee Directors or any other formula plan meeting the conditions in
paragraph (c) (2) (ii) or SEC Rule 16b-3 shall not disqualify a director from
being a disinterested person;
(ii) participation in an ongoing securities acquisition plan meeting
the conditions in paragraph (d) (2) (i) of SEC Rule 16b-3 shall not disqualify
a director from being a disinterested person;
(iii) an election to receive an annual retainer fee in either cash or
an equivalent amount of securities, or partly in cash and partly in
securities, shall not disqualify a director from being a disinterested person;
and
(iv) participation in a plan shall not disqualify a director from
being a disinterested person for the purpose of administering another plan
that does not permit participation by directors.
<PAGE>3
(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion:
(i) to grant Incentive Stock Options in accordance with
Section 422A of the Code, or nonqualified stock Options;
(ii) to authorize Sales of Shares of Common Stock hereunder;
(iii) to determine, upon review of relevant information and in
accordance with Section 8(b) of the Plan, the fair market value of the Common
Stock;
(iv) to determine the exercise/purchase price per share of Options
to be granted or Shares to be Sold, which exercise/purchase price shall be
determined in accordance with Section 8(a) of the Plan;
(v) to determine the Employees or Consultants to whom, and the
time or times at which, Options shall be granted and the number of Shares to
be represented by each Option;
(vi) to determine the Employees or Consultants to whom, and the
time or times at which, Shares shall be Sold and the number of Shares to be
Sold;
(vii) to interpret the Plan; (viii) to prescribe, amend and rescind
rules and regulations relating to the Plan;
(ix) to determine the terms and provisions of each Option granted
(which need not be identical) and, with the consent of the holder thereof,
modify or amend each Option;
(x) to determine the terms and provisions of each Sale of Shares
(which need not be identical) and, with the consent of the purchaser thereof,
modify or amend each Sale;
(xi) to accelerate or defer (with the consent of the Optionee) the
exercise date of any Option, consistent with the provisions of Section 9 of
the Plan;
(xii) to accelerate or defer (with the consent of the Optionee or
purchaser of Shares) the vesting restrictions applicable to Shares Sold under
the Plan or pursuant to Options granted under the Plan;
(xiii) to authorize any person to execute on behalf of the Company
any instrument required to effectuate the grant of an Option or Sale of Shares
previously granted or authorized by the Board;
(xiv) to determine the restrictions on transfer, vesting
restrictions, repurchase rights, or other restrictions applicable to Shares
issued under the Plan;
(xv) to effect, at any time and from time to time, with the consent
of the affected Optionees, the cancellation of any or all outstanding Options
under the Plan 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 consistent with the provisions of Section 8 of this Plan as of
the date of the new Option grant; and
(xvi) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan or Shares Sold under
the Plan.
5. Eligibility.
(a) Persons Eligible. Options may be granted and/or Shares Sold only
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Sold
Shares may, if he is otherwise eligible, be granted an additional Option or
Options or Sold additional Shares.
(b) ISO Limitation. No Incentive Stock Option may be granted to an
<PAGE>4
Employee which, when aggregated with all other Incentive Stock Options granted
to such Employee by the Company or any Parent or Subsidiary, would result in
Shares having an aggregate fair market value (determined for each Share as of
the date of grant of the Option covering such Share) in excess of $100,000
becoming first available for purchase upon exercise of one or more Incentive
Stock Options during any calendar year.
(c) Section 5(b) Limitations. Section 5(b) of the Plan shall apply
only to an Incentive Stock Option evidenced by an "Incentive Stock Option
Agreement" which sets forth the intention of the Company and the Optionee that
such Option shall qualify as an Incentive Stock Option. Section 5(b) of the
Plan shall not apply to any Option evidenced by a "Nonqualified Stock Option
Agreement" which sets forth the intention of the Company and the Optionee that
such Option shall be a Nonqualified Stock Option.
(d) No Right to Continued Employment. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or
consulting relationship with the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment or
consulting relationship at any time.
(e) Maximum Option Grant. The maximum number of Shares with respect
to which an option or options may be granted to any employee in any one
calendar year of the Company shall not exceed 50,000 shares (the "Maximum
Annual Employee Grant").
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders
of the Company as described in Section 17 of the Plan. It shall continue in
effect for a term of ten (10) years, unless sooner terminated under Section 13
of the Plan.
7. Term of Option. The term of each Incentive Stock Option shall be ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Stock Option Agreement. The term of each Nonqualified Stock
Option shall be ten (10) years and one (1) day from the date of grant thereof
or such shorter term as may be provided in the Stock Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
time as may be provided in the Stock Option Agreement, or (b) if the Option is
a Nonqualified Stock Option, the term of the Option shall be five (5) years
and one (1) day from the date of grant thereof or such shorter term as may be
provided in the Stock Option Agreement.
8. Exercise/Purchase Price and Consideration.
(a) Exercise/Purchase Price. The per Share exercise/purchase price
for the Shares to be issued pursuant to exercise of an Option or a Sale (other
than a Sale which is a grant for which no purchase price is payable) shall be
such price as is determined by the Board, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
<PAGE>5
Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the fair market value per Share on the date of the grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than one hundred percent (100%) of the fair market value per
Share on the date of grant.
(ii) In the case of a Nonqualified Stock Option or Sale:
(A) granted or Sold to a person who, at the time of the grant of
such Option or authorization of such Sale, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise/purchase price shall be no
less than one hundred ten percent (110%) of the fair market value per Share on
the date of the grant or authorization of Sale.
(B) granted or Sold to any other person, the per Share
exercise/purchase price shall be no less than eighty-five percent (85%) of the
fair market value per Share on the date of grant or authorization of Sale.
(iii) In the case of an Option granted or Sale authorized on or after
the effective date of registration of any class of equity security of the
Company pursuant to Section 12 of the Exchange Act and prior to six (6) months
after the termination of such registration, the per Share exercise/purchase
price shall be no less than one hundred percent (100%) of the fair market
value per Share on the date of grant or authorization of Sale.
(b) Fair Market Value. The fair market value per share shall be
determined by the Board in its discretion; provided, however, that where there
is a public market for the Common Stock, the fair market value per Share shall
be the mean of the bid and asked prices of the Common Stock for the date of
grant or authorization of Sale, as reported in The Wall Street Journal (or, if
not so reported, as otherwise reported by the National Association of
Securities Dealers Automated Quotation (NASDAQ) System) or, in the event the
Common Stock is listed on a stock exchange (including NASDAQ), the fair market
value per Share shall be the closing price on such exchange on the date of
grant of the Option or authorization of Sale, as reported in The Wall Street
Journal.
(c) Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option or pursuant to a Sale, including the method
of payment, shall be determined by the Board and may consist entirely of cash,
check, promissory note, other Shares of Common Stock having a fair market
value on the date of surrender equal to the aggregate exercise/purchase price
of the Shares as to which said option shall be exercised or Sale consummated,
or any combination of such methods of payment for the issuance of Shares.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the Option by
the person entitled to exercise the Option and full payment for the Shares
<PAGE>6
with respect to which the Option is exercised has been received by the Com-
pany. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Each Optionee who exercises an Option shall, upon notification of the amount
due (if any) and prior to or concurrent with delivery of the certificate
representing the Shares, pay to the Company amounts necessary to satisfy
applicable federal, state and local tax withholding requirements. An Optionee
must also provide a duly executed copy of any stock transfer agreement then in
effect and determined to be applicable by the Board. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number
of Shares which thereafter may be available, both for purposes of the Plan and
for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Status as an Employee or Consultant. If an Employee
or Consultant ceases to serve as an Employee or Consultant (as the case may
be), he may, but only within three (3) months (or with respect to Nonqualified
Stock Options, such other period of time not exceeding the limitations of
Section 7 above as is determined by the Board at the time of grant of the
Nonqualified Stock Option) or such shorter period determined by the Board
pursuant to Section 11, after the date he ceases to be an Employee or
Consultant (as the case may be) of the Company, exercise his Option to the
extent that he was entitled to exercise it at the date of such termination.
To the extent that he was not entitled to exercise the Option at the date of
such termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event an Employee or Consultant is unable to continue his
employment or consulting relationship (as the case may be) with the Company as
a result of his total and permanent disability (as defined in Section 22(e)(3)
of the Code), he may, but only within twelve (12) months (or with respect to
Nonqualified Stock Options, such other period of time not exceeding the
limitations of Section 7 above as is determined by the Board at the time of
grant of the Nonqualified Stock Option) or such shorter period determined by
the Board pursuant to Section 11, from the date of termination, exercise his
Option to the extent he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee
during the term of the Option who is at the time of his death an Employee or
Consultant of the Company and who shall have been in Continuous Status as an
Employee or Consultant since the date of grant of the Option, the Option may
be exercised, at any time within twelve (12) months (or such other period of
time not exceeding the limitations of Section 7 above as is determined by the
Board at the time of grant of the Option) or such shorter period determined by
the Board pursuant to Section 11, following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
<PAGE>7
by bequest or inheritance, but only to the extent of the right to exercise as
of the date of death.
10. Nontransferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of the Optionee only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or sales made or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number
of issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock, or
any other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such adjust-
ment shall be made by the Board, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the
right to exercise his Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
In the event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the Company with or into another corporation,
the Option shall be assumed or an equivalent option shall be substituted by
such successor corporation or a parent or subsidiary of such successor
corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, that the Optionee
shall have the right to exercise the Option as to all of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
If the Board makes an Option fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall
notify the Optionee that the Option shall be fully exercisable for such
shorter period as the Board may specify in the notice, but in no event less
than 20 days, and the Option will terminate upon the expiration of such
period.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the
<PAGE>8
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the stockholders of the Company in the manner described in Section 17 of the
Plan:
(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 11 of the Plan;
(ii) any change in the designation of the class of Employees or
Consultants eligible to be granted Options; or
(iii) if the Company has a class of equity security registered under
Section 12 of the Exchange Act at the time of such revision or amendment, any
material increase in the benefits accruing to participants under the Plan.
(b) Stockholder Approval. If any amendment requiring stockholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity security by the Company under Section 12
of the Exchange Act, such stockholder approval shall be solicited as described
in Section 17(a) of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or a Sale unless the exercise of such
Option or consummation of the Sale and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended,
applicable state securities laws, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option or a Sale, the Company may
require the person exercising such Option or to whom Shares are being Sold to
represent and warrant at the time of any such exercise or Sale that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
<PAGE>9
17. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve months before or
after the date the Plan is adopted. If such stockholder approval is obtained
at a duly held stockholders' meeting, it may be obtained by the affirmative
vote of the holders of a majority of the outstanding shares of the Company,
such holders being present or represented and entitled to vote thereon. If and
in the event that the Company registers any class of any equity security
pursuant to Section 12 of the Exchange Act, the approval of such stockholders
of the Company shall be:
(a) Solicitation.
(i) solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, or
(ii) solicited after the Company has furnished in writing to the
holders entitled to vote substantially the same information concerning the
Plan as that which would be required by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(b) Time. Obtained at or prior to the first annual meeting of
stockholders held subsequent to the first registration of any class of equity
securities of the Company under Section 12 of the Exchange Act.
If such stockholder approval is obtained by written consent, it must be
obtained by the written consent of stockholders of the Company in compliance
with the requirements of applicable state law.
PROTOCOL SYSTEMS, INC.
/s/ Craig M. Swanson, Secretary
By:------------------------------------
Craig M. Swanson, Secretary
ATER WYNNE HEWITT DODSON & SKERRITT, LLP
222 S.W. Columbia, Suite 1800
Portland, Oregon 97201
(503)226-1191 (phone)
(503)226-0079 (fax)
December 11,1996
Board of Directors
Protocol Systems, Inc.
8500 S.W. Creekside Place
Beaverton, Oregon 97008
Gentlemen:
In connection with the registration of 461,422 shares of common stock, par
value $.01 per share (the "Common Stock"), of Protocol Systems, Inc., an
Oregon corporation (the "Company"), under the Registration Statement on Form
S-8 to be filed with the Securities and Exchange Commission on December 12,
1996, and the proposed offer and sale of the Common Stock pursuant to the
terms of the Company's 1992 Stock Incentive Plan (the "1992 Plan"), we have
examined such corporate records, certificates of public officials and officers
of the Company and other documents as we have considered necessary or proper
for the purpose of this opinion.
Based on the foregoing and having regard to legal issues which we deem
relevant, it is our opinion that the shares of Common Stock to be offered
pursuant to the 1992 Plan, when such shares have been delivered against
payment therefor as contemplated by the 1992 Plan, will be validly issued,
fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the above-
mentioned registration statement.
Very truly yours,
Ater Wynne Hewitt Dodson & Skerritt, LLP
Consent of Independent Certified Public Accountants
The Board of Directors
Protocol Systems, Inc.:
We consent to incorporation by reference in the Registration Statement on Form
S-8 dated December 12, 1996 of Protocol Systems, Inc. of our reports dated
January 25, 1996, except for note 9 to the financial statements, as to which
the date is February 20, 1996, relating to the consolidated balance sheets of
Protocol Systems, Inc. and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1995, and all related financial statement schedules, which reports appear in
the December 31, 1995 annual report on Form 10-K of Protocol Systems, Inc.
Our reports refer to changes in the method of accounting for income taxes to
adopt the provisions of the Financial Accounting Standards Board's Statements
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes," and the method of accounting for certain investments in debt and
equity securities to adopt the provisions of Financial Accounting Standards
Board's Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
KPMG PEAT MARWICK LLP
Portland, Oregon
December 12, 1996
