<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------------------------
CELL THERAPEUTICS, INC.
(Exact name of Registrant as specified in its charter)
---------------------------------------
WASHINGTON 91-1533912
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
201 ELLIOTT AVENUE WEST, SUITE 400
SEATTLE, WASHINGTON 98119
(Address of principal executive offices) (Zip code)
----------------------------------------
CELL THERAPEUTICS, INC.
1994 EQUITY INCENTIVE PLAN
AND
1996 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plans)
-----------------------------------------
JAMES A. BIANCO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CELL THERAPEUTICS, INC.
201 ELLIOTT AVENUE WEST, SUITE 400
SEATTLE, WASHINGTON 98119
(206) 282-7100
(Telephone number, including area code, of agent for service)
---------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
---------- ------------- ------------ -------- ---
<S> <C> <C> <C> <C>
1994 EQUITY INCENTIVE PLAN
- --------------------------
Options to purchase
Common Stock, no par value
(including associated
Preferred Stock Purchase Rights) 2,330,006 N/A N/A N/A
Common Stock, no par value
(including associated
Preferred Stock Purchase Rights) 2,330,006 shares $13.2813 $30,945,508.68 $9,377.42
1996 EMPLOYEE STOCK PURCHASE PLAN
- ---------------------------------
Common Stock, no par value
(including associated
Preferred Stock Purchase Rights) 285,714 shares $13.2813 $ 3,794,653.34 $1,149.89
Aggregate Filing Fee $10,527.31
===================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the Registrant's 1994 Equity Incentive
Plan or the Registrant's 1996 Employee Stock Purchase Plan by reason of any
stock dividend, stock split, recapitalization or any other similar
transaction without receipt of consideration which results in an increase in
the number of outstanding shares of Common Stock of Cell Therapeutics, Inc.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of Common Stock of Cell Therapeutics, Inc.
on September 15, 1997, as reported on the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
---------------------------------------
Cell Therapeutics, Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the SEC on March 31, 1997;
(b) The Registrant's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1997 and June 30, 1997, filed with the SEC on May 15,
1997 and August 14, 1997, respectively; and
(c) The Registrant's Registration Statement on Form 10 filed on April 29,
1996 (as amended on June 27, 1996 and June 28, 1996) and the Registrant's
Registration Statement on Form 8-A filed on November 15, 1996.
All reports and definitive proxy or information statements filed pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
"1934 Act") after the date of this Registration Statement and prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities then remaining unsold
shall be deemed to be incorporated by reference into this Registration Statement
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Registration Statement to the extent that a statement contained herein or
in any subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
-------------------------
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
--------------------------------------
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
Sections 23B.08.500 through 23B.08.600 of the Washington Business Corporation
Act (The "WBCA") authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article IX of the Registrant's Restated Bylaws (Exhibit 3.7
hereto) provides for indemnification of the Registrant's directors, officers,
employees and agents to the maximum extent permitted by Washington law. The
directors and officers of the Registrant also may be indemnified against
liability they may incur for serving in such capacity pursuant to a liability
insurance policy maintained by the Company for such purpose.
II-1
<PAGE>
Section 23B.08.320 of the WBCA authorizes a corporation to limit a director's
liability to the corporation or its shareholders for monetary damages for acts
or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate losses or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article VI of the Registrant's Restated Articles of Incorporation
contains provisions implementing, to the fullest extent permitted by Washington
law, such limitations on a director's liability to the Registrant and its
shareholders.
The Registrant has entered into an indemnification agreement with each of its
executive officers and directors in which the Registrant agrees to hold harmless
and indemnify the officer or director to the fullest extent permitted by
Washington law. The Registrant agrees to indemnify the officer or director
against any and all losses, claims, damages, liabilities or expenses incurred
in connection with any actual, pending or threatened action, suit, claim or
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal, in which the officer or director is, was or becomes involved
by reason of the fact that the officer or director is or was a director,
officer, employee, trustee or agent of the Registrant or any related company,
partnership or enterprise, including service with respect to an employee benefit
plan, whether the basis of such proceeding is alleged action (or inaction) by
the officer or director in an official capacity and any action, suit, claim or
proceeding instructed by or at the direction of the officer or director unless
such action, suit, claim or proceeding is or was authorized by the Registrant's
Board of Directors. No indemnity pursuant to the indemnification agreements
shall be provided by the Registrant on account of any suit in which a final,
unappealable judgment is rendered against the officer or director for an
accounting of profits made from the purchase or sale by the officer or director
of securities of the Registrant in violation of the provisions of Section 16(b)
of the Securities Exchange Act of 1934, as amended, and amendments thereto, or
for damages that have been paid directly to the officer or director by an
insurance carrier under a policy of directors' and officers' liability insurance
maintained by the Registrant.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
-----------------------------------
Not applicable.
ITEM 8. EXHIBITS
--------
Exhibit No. Exhibit
- ----------- -------
4.1 Registrant's Restated Articles of Incorporation (incorporated by
reference to exhibits to the Registrant's Registration Statement
on Form S-1, No. 330-04154).
4.2 Registrant's Restated Bylaws (incorporated by reference to
exhibits to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1996, filed on November
14, 1996).
4.3 Specimen Common Stock Certificate (incorporated by reference to
exhibits to the Registrant's Registration Statement on Form 10
filed on April 29, 1996 (as amended on June 27, 1996 and June 28,
1996)).
4.4 Form of Rights Agreement dated as of November 11, 1996, between
the Registrant and Harris Trust Company of California, which
includes the Form of Rights Certificate as Exhibit A, the Summary
of Rights to Purchase Preferred Stock as Exhibit B and the Form
of Certificate of Designation of the Series C Preferred Stock as
Exhibit C (incorporated by reference to exhibits to the
Registrant's Registration Statement on Form 8-A filed on November
15, 1996).
5 Opinion and Consent of Davis Wright Tremaine LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Davis Wright Tremaine LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Registrant's 1994 Equity Incentive Plan.
II-2
<PAGE>
Exhibit No. Exhibit
- ----------- -------
99.2 Registrant's 1992 Stock Option Plan (incorporated by reference to
exhibits to the Registrant's Registration Statement on Form S-1,
No. 333-04154).
99.3 Form of Incentive Stock Option Agreement (1992 Stock Option
Plan).
99.4 Form of Non-Qualified Stock Option Agreement (1992 Stock Option
Plan).
99.5 Registrant's 1996 Employee Stock Purchase Plan.
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, as amended (the "1933 Act"), (ii) to
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement, and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement; provided, however, that clauses
--------
(1)(i) and (1)(ii) shall not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference into this Registration Statement; (2) that
for the purpose of determining any liability under the 1933 Act, 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; and (3) to
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold upon the termination of the
Registrant's 1994 Equity Incentive Plan or the Registrant's 1996 Employee Stock
Purchase Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this 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.
C. Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or controlling persons of the Registrant
pursuant to the indemnity provisions summarized in Item 6 or otherwise, the
Registrant has been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Seattle, State of Washington on September 18, 1997.
CELL THERAPEUTICS, INC.
By: /s/ James A. Bianco, M.D.
-------------------------
James A. Bianco, M.D.
President and Chief Executive Officer
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of Cell Therapeutics, Inc., a
Washington corporation, do hereby constitute and appoint James A. Bianco and
Louis A. Bianco and each of them, the lawful attorneys-in-fact and agents, each
with full power of substitution or resubstitution, with full power and authority
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, or either one of them, determine may be necessary or
advisable or required to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules or regulation or requirements of the
Securities and Exchange Commission in connection with this Registration
Statement. Without limiting the generality of the foregoing power and
authority, the powers granted include the power and authority to sign the names
of the undersigned officers and directors in the capacities indicated below to
this Registration Statement, to any and all amendments, both pre-effective and
post-effective, and supplements to this Registration Statement and to any and
all instruments or documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereto, and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents, or
either one of them, shall do or cause to be done by virtue hereof. This Power
of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Max E. Link, Ph.D. Chairman of the Board and Director September 18, 1997
- ----------------------
Max E. Link, Ph.D.
/s/ James A. Bianco, M.D. President, Chief Executive Officer September 18, 1997
- ------------------------- and Director (Principal Executive
James A. Bianco, M.D. Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Louis A. Bianco Executive Vice President, September 18, 1997
- --------------------------------- Finance and Administration
Louis A. Bianco (Principal Financial Officer and
Principal Accounting Officer)
/s/ Jack W. Singer, M.D. Director September 18, 1997
- ---------------------------------
Jack W. Singer, M.D.
/s/ Jack L. Bowman Director September 18, 1997
- ---------------------------------
Jack L. Bowman
/s/ Jeremy L. Curnock Cook Director September 18, 1997
- ---------------------------------
Jeremy L. Curnock Cook
/s/ Wilfred E. Jaeger, M.D. Director September 18, 1997
- ---------------------------------
Wilfred E. Jaeger, M.D.
/s/ Terrence M. Morris Director September 18, 1997
- ---------------------------------
Terrence M. Morris
/s/ Mary O'Neil Mundinger, D.P.H. Director September 18, 1997
- ---------------------------------
Mary O'Neil Mundinger, D.P.H.
/s/ Phillip M. Nudelman, Ph.D. Director September 18, 1997
- ---------------------------------
Phillip M. Nudelman, Ph.D.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No. Exhibit
------- -------
4.1 Registrant's Restated Articles of Incorporation (incorporated by
reference to exhibits to the Registrant's Registration Statement
on Form S-1, No. 333-04154).
4.2 Registrant's Restated Bylaws (incorporated by reference to
exhibits to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996, filed on
November 14, 1996).
4.3 Specimen Common Stock Certificate (incorporated by reference to
exhibits to the Registrant's Registration Statement on Form 10
filed on April 29, 1996 (as amended on June 27, 1996 and June 28,
1996)).
4.4 Form of Rights Agreement dated as of November 11, 1996, between
the Registrant and Harris Trust Company of California, which
includes the Form of Rights Certificate as Exhibit A, the Summary
of Rights to Purchase Preferred Stock as Exhibit B and the Form of
Certificate of Designation of the Series C Preferred Stock as
Exhibit C (incorporated by reference to exhibits to the
Registrant's Registration Statement on Form 8-A filed on November
15, 1996).
5 Opinion and Consent of Davis Wright Tremaine LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Davis Wright Tremaine LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Registrant's 1994 Equity Incentive Plan.
99.2 Registrant's 1992 Stock Option Plan (incorporated by reference to
exhibits to Registrant's Registration Statement on Form S-1, No.
333-04154).
99.3 Form of Incentive Stock Option Agreement (1992 Stock Option Plan).
99.4 Form of Non-Qualified Stock Option Agreement (1992 Stock Option
Plan).
99.5 Registrant's 1996 Employee Stock Purchase Plan.
<PAGE>
EXHIBIT 5
[LETTERHEAD OF DAVIS WRIGHT TREMAINE LLP]
September 18, 1997
Cell Therapeutics, Inc.
201 Elliot Avenue West
Suite 400
Seattle, WA 98119
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters described
below relating to (i) 2,330,006 shares of common stock (the "Common Stock") of
Cell Therapeutics, Inc. (the "Company") to be issued pursuant to the exercise of
options issued under the Company's 1994 Equity Incentive Plan (the "Option
Plan") and (ii) an additional 285,714 shares of Common Stock to be issued
pursuant to the Company's 1996 Employee Stock Purchase Plan (the "Purchase
Plan") pursuant to the Registration Statement on Form S-8 (the "Registration
Statement") filed by the Company on this date with the Securities and Exchange
Commission.
As special local Washington counsel for the Company and in connection
with the opinions expressed below, we have examined copies of (a) the
Registration Statement and (b) the originals, or copies identified to our
satisfaction, of such corporate records of the Company, certificates of public
officials, officers of the Company and other persons, and such other documents,
agreements and instruments as we have deemed necessary as a basis for the
opinions hereinafter expressed. In our examinations, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies. In expressing the opinions set forth below, we have also relied on
certain certificates of officers of the Company and certificates of public
officials.
Our opinions expressed below are limited to the laws of the State of
Washington.
Based on such examination and subject to the foregoing, we are of the
opinion that the shares of Common Stock, when issued and sold pursuant to the
applicable provisions of the Option Plan and/or the Purchase Plan and in
accordance with the Registration Statement will be legally and validly issued,
fully paid and nonassessable.
We hereby consent to the use of this opinion letter as an exhibit to the
Registration Statement.
Very truly yours,
DAVIS WRIGHT TREMAINE LLP
<PAGE>
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1994 Equity Incentive Plan and 1996 Employee
Stock Purchase Plan of Cell Therapeutics, Inc. of our report dated January 24,
1997, except for paragraphs 2 through 4 of Note 12, as to which the date is
March 26, 1997, with respect to the financial statements of Cell Therapeutics,
Inc. included in its Annual Report on Form 10-K for the year ended December
31, 1996 filed with the Securities and Exchange Commission on March 31, 1997.
ERNST & YOUNG LLP
Seattle, Washington
September 18, 1997
<PAGE>
EXHIBIT 99.1
CELL THERAPEUTICS, INC.
1994 EQUITY INCENTIVE PLAN
AS AMENDED AND RESTATED MAY 7, 1997
1. PURPOSE. The purpose of this 1994 Equity Incentive Plan (the
"Plan") is to enable Cell Therapeutics, Inc., a Washington corporation (the
"Company"), to attract and retain the services of (a) selected employees,
officers and directors of the Company or of any parent or subsidiary corporation
of the Company, (b) non-employee members of the Company's Board of Directors and
(c) other selected non-employee agents, consultants, advisers and independent
contractors of the Company or any parent or subsidiary (together, "Eligible
Persons").
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided
below and in paragraph 11, up to 2,336,715 shares of the Company's Common Stock
(inclusive of the 1,000,000-share increase authorized by the Board on May 5,
1997, subject to shareholder approval at the Company's 1997 annual meeting of
shareholders), plus such shares of Common Stock for which options previously
granted under the Company's 1992 Stock Option Plan may expire, terminate or be
cancelled (the "Shares") shall be offered and issued under the Plan. To the
fullest extent permitted under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), (a) if an option or a stock appreciation
right granted under the Plan expires, terminates or is cancelled, the unissued
Shares subject to such option or stock appreciation right shall again be
available under the Plan, and (b) if Shares sold under the Plan are forfeited to
the Company or repurchased by the Company at the purchase price paid per share,
the number of Shares forfeited or repurchased shall again be available under the
Plan. In accordance with the requirements of Section 162(m) of the Code, no
eligible employee shall receive stock options, separately exercisable stock
appreciation rights and direct stock awards for more than 233,671 shares in the
aggregate per calendar year under the Plan.
3. EFFECTIVE DATE AND DURATION OF PLAN.
(a) Effective Date. The Plan shall become effective when adopted
--------------
by the Board of Directors of the Company (the "Board") and approved by the
affirmative vote of the holders of a majority of the Common Stock of the Company
represented at a shareholder meeting at which a quorum is present. Options and
stock appreciation rights may be granted and Shares may be awarded as bonuses or
sold under the Plan at any time after the effective date and before termination
of the Plan.
(b) Duration. No options or stock appreciation rights may be
--------
granted under the Plan, no stock bonuses may be awarded under the Plan, and no
Shares may be sold pursuant to paragraph 8 of the Plan on or after January 1,
2004. However, the Plan shall continue in effect until all Shares available for
issuance under the Plan have been issued and all restrictions on such Shares
have lapsed. The Board may suspend or terminate the Plan at any time, except
with respect to options, stock appreciation rights and Shares subject to
restrictions
A-1
<PAGE>
then outstanding under the Plan. Termination shall not affect any outstanding
options, stock appreciation rights, any right of the Company to repurchase
Shares or the forfeitability of Shares issued under the Plan.
4. ADMINISTRATION.
(a) The Plan shall be administered by a committee appointed by the
Board consisting of not less than two directors (the "Committee"). The
Committee shall determine and designate from time to time the Eligible Persons
to whom awards shall be made, the amount of the awards, and the other terms and
conditions of the awards; provided, however, that only the Board may amend or
-------- -------
terminate the Plan as provided in paragraphs 3 and 15. At any time when the
officers and directors of the Company are subject to Section 16(b) of the
Exchange Act, the Committee shall consist solely of "non-employee directors"
as such term is defined from time to time in Rule 16b-3 under the Exchange
Act. In addition, at any time when the Company is subject to Section 162(m) of
the Code, the Committee shall consist solely of "outside directors", as
defined in the regulations promulgated pursuant to Section 162(m) of the Code.
Notwithstanding the provisions of this Section 4(a) and Section 4(b) below,
all discretionary actions to be taken with respect to the options granted to
Non-Employee Directors pursuant to Section 10 below shall be made by the
Board.
(b) Subject to the provisions of the Plan, the Committee may from
time to time adopt and amend rules and regulations relating to administration of
the Plan, advance the lapse of any waiting period, accelerate any exercise date,
waive or modify any restriction applicable to Shares (except those restrictions
imposed by law) and make all other determinations in the judgment of the
Committee necessary or desirable for the administration of the Plan. The
interpretation and construction of the provisions of the Plan and related
agreements by the Committee shall be final and conclusive. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any related agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect, and it shall be the sole and final
judge of such expediency.
5. TYPES OF AWARDS; ELIGIBILITY. The Committee may, from time to
time, take the following actions under the Plan: (i) grant Incentive Stock
Options, as defined in Section 422 of the Code, as provided in paragraph 6(b);
(ii) grant options other than Incentive Stock Options ("Nonstatutory Stock
Options") as provided in paragraph 6(c); (iii) award stock bonuses as provided
in paragraph 7; (iv) sell Shares as provided in paragraph 8; and (v) grant stock
appreciation rights as provided in paragraph 9. Any such awards may be made to
employees (including employees who are officers or directors of the Company or
of any parent or subsidiary corporation of the Company, and to other Eligible
Persons described in paragraph 1 who the Committee believes have made or will
make an important contribution to the Company or its parent or subsidiaries;
provided, however, that only employees of the Company or a parent or subsidiary
- -------- -------
shall be eligible to receive Incentive Stock Options under the Plan. The
Committee shall select the Eligible Persons to whom awards shall be made and
shall specify the action taken with respect to each Eligible Person to whom an
award is made under the Plan. At the discretion
A-2
<PAGE>
of the Committee, an Eligible Person may be given an election to surrender an
award in exchange for the grant of a new award.
6. OPTION GRANTS
(a) Grant. Each option granted under the Plan shall be
-----
evidenced by a stock option agreement in such form as the Committee shall
prescribe from time to time in accordance with the Plan. With respect to each
option grant, the Committee shall determine the number of Shares subject to
the option, the option price, the period of the option, and the time or times
at which the option may be exercised and whether the option is an Incentive
Stock Option or a Nonstatutory Stock Option.
(b) Incentive Stock Options. Incentive Stock Options granted
-----------------------
under the Plan shall be subject to the following terms and conditions:
(i) No employee may be granted Incentive Stock Options
under the Plan such that the aggregate fair market value, on the date of grant,
of the Shares with respect to which Incentive Stock Options are exercisable for
the first time by that employee during any calendar year under the Plan and
under any other incentive stock option plan (within the meaning of Section 422
of the Code) of the Company or of any parent or subsidiary corporation of the
Company exceeds $100,000.
(ii) An Incentive Stock Option may be granted under the
Plan to an employee possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or of any parent or subsidiary
corporation of the Company only if the option price is at least 110 percent of
the fair market value, as described in paragraph 6(b)(iv), of the Shares subject
to the option on the date it is granted, and the option by its terms is not
exercisable more than five years from the date of grant.
(iii) Subject to paragraphs 6(b)(ii) and 6(d), Incentive
Stock Options granted under the Plan shall continue in effect for the period
fixed by the Committee, except that no Incentive Stock Option shall be
exercisable more than 10 years from the date of grant.
A-3
<PAGE>
(iv) The option price per Share shall be determined by
the Committee at the time of grant. Subject to paragraph 6(b)(ii), the option
price shall not less than 100 percent of the fair market value of the Shares
covered by the Incentive Stock Option at the date the option is granted. The
fair market value shall be fixed by the Committee at whatever price the
Committee may determine in the exercise of its sole discretion; provided, that
--------
the per share exercise price for any option granted following the effective date
of registration of any of the Company's securities under Section 12 of the
Exchange Act shall be deemed to be the average of the closing bid and asked
prices for the Common Stock of the Company as reported on the National
Association of Securities Dealers, Inc. Automated Quotation System on the day
preceding the day the option is granted, or if there has been no sale on that
date, on the last preceding date on which a sale occurred, or such other
reported value of the Common Stock of the Company as shall be specified by the
Committee.
(v) The Committee may at any time without the consent
of the optionee convert an Incentive Stock Option into a Nonstatutory Stock
Option.
(c) Nonstatutory Stock Options. Nonstatutory Stock Options shall
--------------------------
be subject to the following additional terms and conditions:
(i) The option price for Nonstatutory Stock Options
shall be determined by the Committee at the time of grant. The option price may
not be less than the fair market value of the Shares covered by the Nonstatutory
Stock Option on the date of grant. The fair market value of the Shares covered
by a Nonstatutory Stock Option shall be determined pursuant to paragraph
6(b)(iv).
(ii) Nonstatutory Stock Options granted under the Plan
shall continue in effect for the period fixed by the Committee.
(d) Exercise of Options. Except as provided in paragraph 6(f) or
-------------------
as determined by the Committee, no option granted under the Plan may be
exercised unless at the time of such exercise the optionee is employed by or in
the service of the Company or any parent or subsidiary corporation of the
Company and shall have been so employed or have provided such service
continuously since the date such option was granted. Absence on leave or on
account of illness or disability under rules established by the Committee shall
not, however, be deemed an interruption of employment for purposes of the Plan.
Unless otherwise determined by the Committee, vesting of options shall not
continue during an absence on leave (including an extended illness) or on
account of disability. Except as provided in paragraphs 6(f), 11 and 13, options
granted under the Plan may be exercised from time to time over the period stated
in each option in such amounts and at such times as shall be prescribed by the
Committee; provided that options shall not be exercised for fractional shares.
--------
Unless otherwise determined by the Committee, if the optionee does not exercise
an option in any one year with respect to the full number of Shares to which the
optionee is entitled in that year, the optionee's right shall be cumulative and
the optionee may purchase those Shares in any subsequent year during the term of
the option.
A-4
<PAGE>
(e) Limited Transferability. During the lifetime of the optionee,
-----------------------
options under the Plan shall be exercisable only by the optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the optionee's death. However, with the consent of the
Committee, Nonstatutory Stock Options may, in connection with the optionee's
estate plan, be assigned in whole or in part during the optionee's lifetime to
one or more members of the optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee by
the Committee. Nonstatutory Stock Options may also be assigned or transferred
pursuant to a qualified domestic relations order.
(f) Termination of Employment or Service.
------------------------------------
(i) In the event the employment or service of the
optionee by the Company or a parent or subsidiary corporation of the Company
terminates for any reason other than because of death or physical disability,
the option may be exercised at any time prior to the expiration date of the
option or the expiration of three months after the date of such termination,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such termination.
(ii) In the event of the termination of the optionee's
employment or service with the Company or a parent or subsidiary corporation of
the Company because the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code), the option may be exercised at any time prior to the
expiration date of the option or the expiration of one year after the date of
such termination, whichever is the shorter period, but only if and to the extent
the optionee was entitled to exercise the option at the date of such
termination.
(iii) In the event of the death of an optionee while
employed by or providing service to the Company or a parent or subsidiary
corporation of the Company, the option may be exercised at any time prior to the
expiration date of the option or the expiration of one year after the date of
such death, whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option on the date of death, and only by
the person or persons to whom such optionee's rights under the option shall pass
by the optionee's will or by the laws of descent and distribution of the state
or country of domicile at the time of death.
A-5
<PAGE>
(iv) The Committee, at the time of grant or at any time
thereafter, may extend the three-month and one-year expiration periods any
length of time not later than the original expiration date of the option, and
may increase the portion of an option that is exercisable, subject to such terms
and conditions as the Committee may determine .
(v) To the extent that the option of any deceased
optionee or of any optionee whose employment or service terminates is not
exercised within the applicable period, all further rights to purchase Shares
pursuant to such option shall cease and terminate.
(g) Purchase of Shares. Unless the Committee determines
------------------
otherwise, Shares may be acquired pursuant to an option only upon receipt by the
Company of notice in writing from the optionee of the optionee's intention to
exercise, specifying the number of Shares as to which the optionee desires to
exercise the option and the date on which the optionee desires to complete the
transaction, and, if required to comply with the Securities Act of 1933, as
amended, or state securities laws, the notice shall include a representation
that it is the optionee's present intention to acquire the Shares for investment
and not with a view to distribution. The certificates representing the Shares
shall bear any legends required by the Committee. Unless the Committee
determines otherwise, on or before the date specified for completion of the
purchase of Shares pursuant to an option, the optionee must have paid the
Company the full purchase price of such Shares in cash (including, with the
consent of the Committee, cash that may be the proceeds of a loan from the
Company), or, with the consent of the Committee, in whole or in part, in Shares
valued at fair market value, as determined pursuant to paragraph 6(b)(iv).
Unless the Committee determines otherwise, all payments made to the Company in
connection with the exercise of an option must be made by a certified or
cashier's bank check or by the transfer of immediately available federal funds.
No Shares shall be issued until full payment therefor has been made. With the
consent of the Committee, an optionee may request the Company to apply
automatically the Shares to be received upon the exercise of a portion of a
stock option (even though stock certificates have not yet been issued) to
satisfy the purchase price for additional portions of the option. Each optionee
who has exercised an option shall immediately upon notification of the amount
due, if any, pay to the Company in cash amounts necessary to satisfy any
applicable federal, state and local tax withholding requirements. If additional
withholding is or becomes required beyond any amount deposited before delivery
of the certificates, the optionee shall pay such amount to the Company on
demand. If the optionee fails to pay the amount demanded, the Company or any
parent or subsidiary corporation of the Company may withhold that amount from
other amounts payable to the optionee by the Company or the parent or subsidiary
corporation, including salary, subject to applicable law. With the consent of
the Committee, an optionee may deliver Shares to the Company to satisfy the
withholding obligation.
7. STOCK BONUSES. The Committee may award Shares to Eligible Persons
under the Plan as stock bonuses. Shares awarded as a stock bonus shall be
subject to such terms, conditions, and restrictions as shall be determined by
the Committee, all of which shall be evidenced in a writing signed by the
recipient prior to receiving the bonus Shares. The Committee may not require
the recipient to pay any monetary consideration other than amounts
A-6
<PAGE>
necessary to satisfy tax withholding requirements. The certificates
representing the Shares awarded shall bear any legends required by the
Committee. The Company may require any recipient of a stock bonus to pay to the
Company in cash upon demand amounts necessary to satisfy any applicable federal,
state or local tax withholding requirements. If the recipient fails to pay the
amount demanded, the Company or any parent or subsidiary corporation of the
Company may withhold that amount from other amounts payable to the recipient by
the Company or the parent or subsidiary corporation, including salary, subject
to applicable law. With the consent of the Committee, a recipient may deliver
Shares to the Company to satisfy the withholding obligation.
8. STOCK SALES. The Committee may issue Shares to Eligible Persons
under the Plan for such consideration (including promissory notes and services)
as determined by the Committee, provided that in no event shall the
--------
consideration be less than 75 percent of the fair market value of the Shares at
the time of issuance, determined pursuant to paragraph 6(b)(iv). Shares issued
under this paragraph 8 shall be subject to the terms, conditions and
restrictions determined by the Committee. The restrictions may include
restrictions concerning transferability, repurchase by the Company and
forfeiture of the Shares issued, together with such other restrictions as may be
determined by the Committee. The certificates representing the Shares shall
bear any legends required by the Committee. The Company may require any
purchaser of stock issued under this paragraph 8 to pay to the Company in cash
upon demand amounts necessary to satisfy any applicable federal, state or local
tax withholding requirements. If the purchaser fails to pay the amount
demanded, the Company or any parent or subsidiary corporation of the Company may
withhold that amount from other amounts payable to the purchaser by the Company
or any parent or subsidiary corporation, including salary, subject to applicable
law. With the consent of the Committee, a purchaser may deliver Shares to the
Company to satisfy the withholding obligation.
9. STOCK APPRECIATION RIGHTS.
(a) Grant. Stock appreciation rights may be granted under the
-----
Plan by the Committee, subject to such rules, terms, and conditions as the
Committee prescribes. The Committee shall pre-approve, at the time any such
right is granted to an officer or director subject to Section 16 of the Exchange
Act, the subsequent exercise of that right in accordance with the terms of the
grant and the provisions of this paragraph 9. Accordingly, no additional
approval of the Committee or the Board shall be required at the time the right
is actually exercised.
(b) Exercise.
--------
(i) A stock appreciation right shall be exercisable
only at the time or times established by the Committee. If a stock appreciation
right is granted in connection with an option, the stock appreciation right
shall be exercisable only to the extent and on the same conditions that the
related option could be exercised. Upon exercise of a stock appreciation right,
any option or portion thereof to which the stock appreciation right relates
terminates. If
A-7
<PAGE>
a stock appreciation right is granted in connection with an option, upon
exercise of the option, the stock appreciation right or portion thereof to which
the option relates terminates.
(ii) The Committee may withdraw any stock appreciation
right granted under the Plan at any time and may impose any conditions upon the
exercise of a stock appreciation right (including conditions designed to ensure
compliance with the requirements for an exemption pursuant to Rule 16b-3 under
the Exchange Act) or adopt rules and regulations from time to time affecting the
rights of holders of stock appreciation rights. Such rules and regulations may
govern the right to exercise stock appreciation rights granted before adoption
or amendment of such rules and regulations as well as stock appreciation rights
granted thereafter.
(iii) Each stock appreciation right shall entitle the
holder, upon exercise, to receive from the Company in exchange therefor an
amount equal in value to the excess of the fair market value on the date of
exercise of one Share over its fair market value on the date of grant (or, in
the case of a stock appreciation right granted in connection with an option, the
option price per Share under the option to which the stock appreciation right
relates), multiplied by the number of Shares covered by the stock appreciation
right or the option, or portion thereof, that is surrendered. No stock
appreciation right shall be exercisable at a time that the amount determined
under this subparagraph is negative. Payment by the Company upon exercise of a
stock appreciation right may be made in Shares valued at fair market value, in
cash, or partly in Shares and partly in cash, all as determined by the
Committee.
(iv) For purposes of this paragraph 9, the fair market
value of the Shares shall be determined pursuant to paragraph 6(b)(iv), on the
trading day preceding the date the stock appreciation right is exercised.
(v) No fractional Shares shall be issued upon exercise
of a stock appreciation right. In lieu thereof, cash may be paid in an amount
equal to the value of the fraction or, if the Committee shall determine, the
number of Shares may be rounded downward to the next whole Share.
(vi) Each participant who has exercised a stock
appreciation right shall, upon notification of the amount due, pay to the
Company in cash amounts necessary to satisfy any applicable federal, state or
local tax withholding requirements. If the participant fails to pay the amount
demanded, the Company or any parent or subsidiary corporation of the Company may
withhold that amount from other amounts payable to the participant by the
Company or any parent or subsidiary corporation, including salary, subject to
applicable law. With the consent of the Committee, a participant may satisfy
this obligation, in whole or in part, by having the Company withhold from any
Shares to be issued upon the exercise that number of Shares that would satisfy
the withholding amount due or by delivering Shares to the Company to satisfy the
withholding amount.
(vii) Upon the exercise of a stock appreciation right
for Shares, the number of Shares reserved for issuance under the Plan shall be
reduced by the number of
A-8
<PAGE>
Shares issued. Cash payments of stock appreciation rights shall not reduce the
number of Shares reserved for issuance under the Plan.
10. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.
(a) Automatic Grants. Each Non-Employee Director shall
----------------
automatically be granted a fully vested Nonstatutory Stock Option to purchase
2,858 Shares upon his or her election to the Board of Directors for the first
time. In addition, on each anniversary of each Non-Employee Director's
immediately preceding election or appointment to the Board, such Non-Employee
Director who is a member of the Board on such anniversary date shall
automatically be granted, effective as of such anniversary date, a fully vested
Nonstatutory Stock Option to purchase 1,905 shares. A "Non-Employee Director" is
a director of the Company who is not an employee of the Company or of any parent
or subsidiary corporation of the Company on the date the option is granted.
(b) Terms of Options. The exercise price for options granted
----------------
under this paragraph 10 shall be the fair market value of the Shares on the
date of grant, determined pursuant to paragraph 6(b)(iv). Each such option
shall have a 10 year term from the date of grant, unless earlier terminated as
provided in paragraph 6(f).
11. CHANGES IN CAPITAL STRUCTURE. If the outstanding shares of
Common Stock of the Company are hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any recapitalization,
reclassification, stock split, combination of shares or dividend payable in
shares, the Committee shall make appropriate adjustments to (i) the number and
kind of securities available for awards under the Plan; (ii) the number and kind
of securities as to which outstanding options and stock appreciation rights, or
portions thereof then unexercised, shall be exercisable, so that the
participant's proportionate interest before and after the occurrence of the
event is maintained, provided that this paragraph 11 shall not apply with
--------
respect to transactions referred to in paragraph 13; (iii) the maximum number
and kind of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock awards per
calendar year; and (iv) the number and kind of securities for which automatic
option grants are to be made to newly-elected or continuing Non-Employee
Directors pursuant to paragraph 10 hereof. Appropriate adjustments to reflect
any such transaction shall also be made to the exercise price per share in
effect under each outstanding stock option or stock appreciation right, provided
the aggregate exercise price of each grant shall remain the same. The Committee
may also require that any securities issued in respect of or exchanged for
Shares issued hereunder that are subject to restrictions be subject to similar
restrictions. Notwithstanding the foregoing, the Committee shall have no
obligation to effect any adjustment that would or might result in the issuance
of fractional shares, and any fractional shares resulting from any adjustment
may be disregarded or provided for in any manner determined by the Committee.
Any such adjustment made by the Committee shall be conclusive.
A-9
<PAGE>
12. OTHER AWARDS. The Committee shall have the authority to specify
the terms and provisions of other equity-based or equity-related awards not
described herein which the Committee determines to be consistent with the
purpose of the Plan and the interests of the Company.
13. EFFECT OF REORGANIZATION OR LIQUIDATION.
(a) Cash, Stock or Other Property for Stock. Except as provided
---------------------------------------
in paragraph 13(b), upon a merger, consolidation, reorganization, plan of
exchange or liquidation involving the Company, as a result of which the
shareholders of the Company receive cash, stock or other property in exchange
for or in connection with their Common Stock (any such transaction to be
referred to in this paragraph 13 as an "Accelerating Event"), any option or
stock appreciation right granted hereunder shall terminate, but the optionee
shall have the right during a 30-day period immediately prior to any such
Accelerating Event to exercise his or her option or stock appreciation right, in
whole or in part, without any limitation on exercisability.
(b) Stock for Stock. If the shareholders of the Company receive
---------------
capital stock of another corporation ("Exchange Stock") in exchange for their
Common Stock in any transaction involving a merger, consolidation,
reorganization, or plan of exchange, all options granted hereunder shall be
converted into options to purchase shares of Exchange Stock and all stock
appreciation rights granted hereunder shall be converted into stock appreciation
rights measured by the Exchange Stock, unless the Committee, in its sole
discretion, determines that any or all such options or stock appreciation rights
granted hereunder shall not be converted, but instead shall terminate in
accordance with the provisions of paragraph 13(a). The amount and price of
converted options and stock appreciation rights shall be determined by adjusting
the amount and price of the options or stock appreciation rights granted
hereunder to take into account the relative values of the Exchange Stock and the
Common Stock in the transaction.
(c) Change in Control. In the event of a Change in Control and
-----------------
except as the Committee (as constituted immediately prior to such Change in
Control) may otherwise determine in its sole discretion, (i) all options and
stock appreciation rights granted hereunder (including options and stock
appreciation rights granted to officers or directors less than six months prior
to any such Change in Control) shall become fully exercisable as of the date of
the Change in Control, whether or not then exercisable, and (ii) all
restrictions and conditions of all bonus Shares then outstanding shall lapse as
of the date of the Change in Control. A "Change in Control" means:
(i) The acquisition, directly or indirectly, by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of securities representing 50.1 percent or more of
either (a) the then outstanding shares of Common Stock (the "Outstanding Company
Common Stock") or (b) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
-------- -------
the following
A-10
<PAGE>
acquisitions shall not constitute a Change of Control: (A) any acquisition
directly from the Company (excluding an acquisition by virtue of the exercise of
a conversion privilege, (B) any acquisition by the Company, (C) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (D) any acquisition by
any corporation pursuant to a reorganization, merger or consolidation which
would not be a Change of Control under paragraph (iii) below; or
(ii) Individuals who, as of the effective date of the
Plan, constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
-------- -------
individual becoming a director subsequent to the effective date of the Plan
whose election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board will be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless following such
reorganization, merger or consolidation, (a) more than 50 percent of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such reorganization,
merger or consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, and (b) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of the execution
of the initial agreement providing for such reorganization, merger or
consolidation; or
(iv) Approval by the shareholders of the Company of (a)
a complete liquidation or dissolution of the Company or (b) the sale or other
disposition of all or substantially all of the assets of the Company, other than
to a corporation, with respect to which following such sale or other
disposition, (A) more than 50 percent of the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other
A-11
<PAGE>
disposition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, and (B) at least a majority of the
members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of the
Company.
(d) The rights set forth in this paragraph 13 shall be
transferable only to the extent the related option or stock appreciation right
is transferable.
14. CORPORATE MERGERS, ACQUISITIONS, ETC. The Committee may also
grant options, grant stock appreciation rights, award stock bonuses and sell
stock under the Plan having terms, conditions and provisions that vary from
those specified in the Plan; provided that any such awards are granted in
--------
substitution for, or in connection with the assumption of, existing options,
stock appreciation rights, stock bonuses and stock sold or awarded by another
corporation and assumed or otherwise agreed to be provided for by the Company
pursuant to or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a parent or subsidiary corporation of the
Company is a party.
15. AMENDMENT OF PLAN.
(a) The Board may at any time, and from time to time, modify or
amend the Plan in such respects as it shall deem advisable because of changes in
the law while the Plan is in effect or for any other reason; except that no such
modification or amendment shall be effective without shareholders approval if
such approval is required to comply with any applicable law, rule or regulation.
Except as provided in paragraphs 6(b)(v), 10, 11 and 13, however, no change in
an award already granted shall be made without the written consent of the holder
of such award.
(b) The Plan was amended and restated by the Board on May 7, 1997
(the "1997 Restatement") to effect the following changes: (i) increase the
maximum number of shares of Common Stock authorized for issuance over the term
of the Plan by an additional 1,000,000 shares, (ii) render the Non-Employee
Directors who are serving as members of the Committee eligible to receive option
grants, stock appreciation rights and direct stock awards under the Plan during
their period of service on the Committee, and (iii) effect a series of
additional changes to the provisions of the Plan (including the stockholder
approval requirements, the transferability of Nonstatutory Stock Options and the
elimination of the six (6)-month holding period requirement as a condition to
the exercise of stock options and stock appreciation rights held by officers and
directors subject to Section 16 of the Exchange Act) in order to take advantage
of the recent amendments to Rule 16b-3 under the Act which exempts certain
officer and director transactions under the Plan from the short-swing liability
provisions of the Federal securities laws. The 1997 Restatement is subject to
shareholder approval at the Company's 1997 annual meeting of shareholders, and
no option grants made on the basis of the 1,000,000-share increase shall become
exercisable in whole or in part unless and until the 1997 Restatement is
A-12
<PAGE>
approved by the shareholders. Should such shareholder approval not be obtained,
then any options granted on the basis of the 1,000,000-share increase shall
terminate without ever becoming exercisable for those shares, and no further
option grants, stock appreciation rights or direct stock issuances shall be made
on the basis of such share increase. However, option grants, stock appreciation
rights and direct stock issuances may continue to be made pursuant to the
provisions of the Plan as in effect immediately prior to the 1997 Restatement.
All option grants, stock appreciation rights and direct stock issuances made
prior to the 1997 Restatement shall remain outstanding in accordance with the
terms and conditions of the respective instruments evidencing those options,
rights or issuances, and nothing in the 1997 Restatement shall be deemed to
modify or in any way affect those outstanding options, rights or issuances.
Subject to the foregoing limitations, the Committee may grant stock options and
stock appreciation rights and make direct stock issuances under the Plan at any
time before the date fixed herein for the termination of the Plan.
16. APPROVALS. The obligations of the Company under the Plan are
subject to the approval of state and federal authorities or agencies with
jurisdiction in the matter. The Company shall not be obligated to issue or
deliver Shares under the Plan if such issuance or delivery would violate
applicable state or federal securities laws, or if compliance with such laws
would, in the opinion of the Company, be unduly burdensome or require the
disclosure of information which would not be in the Company's best interests.
17. EMPLOYMENT AND SERVICE RIGHTS. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any parent or subsidiary
corporation of the Company or shall interfere in any way with the right of the
Company or any parent or subsidiary corporation of the Company by whom such
employee is employed to terminate such employee's employment at any time, for
any reason, with or without cause, or to increase or decrease such employee's
compensation or benefits; or (ii) confer upon any person engaged by the Company
or any parent or subsidiary corporation of the Company any right to be retained
or employed by the Company or the parent or subsidiary or to the continuation,
extension, renewal, or modification of any compensation, contract, or
arrangement with or by the Company or the parent or subsidiary.
18. RIGHTS AS A SHAREHOLDER. The recipient of any award under the
Plan shall have no right as a shareholder with respect to any Shares until the
date of issue to the recipient of a stock certificate for such Shares. Except
as otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
A-13
<PAGE>
EXHIBIT 99.3
THE OPTION EVIDENCED BY THIS AGREEMENT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF SUCH OPTION HAVE NOT BEEN REGISTERED UNDER STATE OR FEDERAL
SECURITIES LAWS. THIS NON-QUALIFIED STOCK OPTION AGREEMENT MAY NOT BE
TRANSFERRED EXCEPT BY WILL OR UNDER THE LAWS OF DESCENT AND DISTRIBUTION, THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE OPTION MAY NOT BE OFFERED,
SOLD OR PLEDGED (EXCEPT A PLEDGE PURSUANT TO THE TERMS OF WHICH ANY OFFER OR
SALE UPON FORECLOSURE WOULD BE MADE IN A MANNER THAT WOULD NOT VIOLATE THE
REGISTRATION PROVISIONS OF FEDERAL OR STATE SECURITIES LAWS) OR OTHERWISE
DISTRIBUTED FOR VALUE, NOR MAY THE SHARES OF COMMON STOCK ISSUED UPON EXERCISE
OF THE OPTION BE TRANSFERRED ON THE BOOKS OF THE COMPANY, WITHOUT AN OPINION OF
COUNSEL, CONCURRED IN BY COUNSEL FOR THE COMPANY, THAT NO VIOLATION OF SAID
REGISTRATION PROVISIONS WOULD RESULT THEREFROM.
CELL THERAPEUTICS, INC.
1992 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
THIS AGREEMENT is entered into as of [GRANT DATE] (hereinafter referred to
as the "Date of Grant") between CELL THERAPEUTICS, INC., a Washington State
corporation (hereinafter referred to as the "Company"), and [FIRSTNAME] [NAME]
(hereinafter referred to as the "Optionee").
RECITALS
--------
A. The Company has approved and adopted the Cell Therapeutics, Inc. 1992
Stock Option Plan (hereinafter referred to as the "Plan"), pursuant to which the
Plan Administrator is authorized to grant to employees of the Company and other
persons also selected by the Plan Administrator, options to purchase common
stock, without par value, of the Company (hereinafter referred to as "Common
Stock"); and
B. The options granted hereunder are intended to be Incentive Stock
Options under the Internal Revenue Code of 1986, as amended (hereinafter
referred to as the "Code").
AGREEMENT
---------
NOW, THEREFORE, the Company hereby grants to Optionee the option to
purchase, upon the terms and conditions set forth herein and in the Plan,
[SHARES] shares of Common Stock (hereinafter referred to as the "Option").
<PAGE>
1. EXERCISE PRICE. The exercise price for the Option shall be
--------------
[OPTIONPRICE] per share.
2. VESTING SCHEDULE. The Option shall not be exercisable until it has
----------------
vested. The Option shall vest according to the following schedule:
<TABLE>
<CAPTION>
Number of Options
Vesting Date Eligible for Exercise Vesting Type
------------ --------------------- ------------
<S> <C> <C>
[p1vestdate] [p1shares] [p1vesttype]
[p2vestdate] [p2shares] [p2vesttype]
[p3vestdate] [p3shares] [p3vesttype]
[p4vestdate] [p4shares] [p4vesttype]
</TABLE>
3. OPTION NOT TRANSFERABLE. The Option is not transferable except by will
-----------------------
or the laws of descent and distribution.
4. COMPLIANCE WITH SECURITIES LAWS. By accepting the Option, Optionee
-------------------------------
represents and agrees for himself/herself and all persons who acquire rights in
the Option through Optionee, that none of the shares of Common Stock purchased
upon exercise of the Option will be distributed in violation of applicable
federal and state laws and regulations. If requested by the Company, Optionee
shall furnish evidence satisfactory to the Company (including a written and
signed representation letter and a consent to be bound by all transfer
restrictions imposed by applicable law, legend condition or otherwise) to that
effect, prior to delivery of the purchased shares of Common Stock.
5. TERMINATION OF OPTION. A vested Option shall terminate, to the
---------------------
extent not previously exercised, upon the occurrence of one of the following
events:
(i) ten (10) years from the date of grant; or [p1expiredate];
(ii) the expiration of ninety (90) days from the date of
Optionee's termination of employment with the Company for
any reason other than death or disability (as defined in the
Plan), (unless the exercise period is extended by the Plan
Administrator until a date not later than the expiration
date of the Option); or
(iii) the expiration of one (1) year from the date of death of
Optionee or the cessation of employment of Optionee from the
Company by reason of disability (as defined in the Plan),
(unless the exercise period is extended by the Plan
Administrator until a date not later than the expiration
date of the Option).
2.
<PAGE>
If Optionee's employment or contractual relationship is terminated
from the Company by death, any Option held by Optionee shall be exercisable only
by the person or persons to whom such Optionee's rights under such Option shall
pass by Optionee's will or by the laws of descent and distribution of the state
or country of Optionee's domicile at the time of death. Unless accelerated
pursuant to Section 5(f) of the Plan, each unvested Option granted pursuant
hereto shall terminate upon Optionee's termination of employment or contractual
relationship with the Company, for any reason whatsoever, including death or
disability.
6. STOCK. In the case of any stock split, stock dividend or likely
-----
change in the nature of shares granted by this Agreement, the number of shares
and Option price shall be proportionately adjusted as set forth in Section 5(m)
of the Plan.
7. EXERCISE OF OPTION. Each exercise of the Option shall be by
------------------
means of delivery of a Notice of Election to Exercise (attached hereto and
marked Exhibit "A") to the Secretary of the Company at his/her principal
executive office, specifying the number in shares of Common Stock to be
purchased and accompanied by payment in cash, or by certified or cashier's check
payable to the order of the Company, of the full exercise price for the Common
Stock to be purchased. Upon approval of the Plan Administrator, Optionee may
pay for all or any portion of the exercise price by (i) delivery of previously
held shares of Common Stock, (ii) having shares withheld from the amount of
shares of Common Stock to be received by Optionee or (iii) delivery of an
irrevocable subscription agreement obligating Optionee to take and pay for the
shares of Common Stock to be purchased within one (1) year of the date of such
exercise. The shares of Common Stock received or withheld by the Company as
payment shall have a fair market value equal to or greater than the aggregate
exercise price (or portion thereof) to be paid by Optionee upon such exercise.
Optionee agrees to also pay to the Company the amount necessary for the Company
to satisfy its withholding obligations under the Code.
8. OPTIONEE ACKNOWLEDGMENTS. Optionee acknowledges that he or she
------------------------
has read and understands the terms of this Stock Option Agreement and the Plan,
and that:
(a) The issuance of shares of Common Stock pursuant to the exercise of
the Option, and any resale of the shares of Common Stock, may only be effected
in compliance with applicable state and federal laws and regulations, and that
Optionee may be required to execute and deliver representations and warranties
to that effect prior to the exercise of any portion of the Option;
(b) Optionee is not entitled to any rights as a shareholder with
respect to any shares of Common Stock issuable hereunder until Optionee becomes
a shareholder of record;
3.
<PAGE>
(c) The shares of Common Stock subject hereto may be adjusted in the
event of certain changes in the capital structure of the Company or for any
other reason required or permitted by the Plan;
(d) As a condition to the exercise of the Option, Optionee may be
required to make such arrangements as the Plan Administrator requires for the
satisfaction of any federal, state or local withholding tax obligations; and
(e) This Agreement does not constitute an employment agreement nor
does it entitle Optionee to any specific employment or contractual relationship
or to any employment or contractual relationship for a period of time, and that
Optionee's continued employment or contractual relationship with the Company, if
any, shall be at will and is subject to termination in accordance with the
Company's prevailing policies and any other agreement between the Optionee and
the Company.
9. PROFESSIONAL ADVICE. The acceptance and exercise of the Option
-------------------
and the sale of Common Stock issued pursuant to the exercise of the Option may
have consequences under federal and state tax and securities laws which may vary
depending on the individual circumstances of Optionee. Accordingly, Optionee
acknowledges that Optionee has been advised to consult his or her personal legal
and tax advisor in connection with this Agreement and Optionee's dealings with
respect to the Option or the Common Stock.
10. NOTICES. Any notice required or permitted to be made or given
-------
hereunder shall be mailed or delivered personally to the addresses set forth
below, or as changed from time-to-time by written notice to the other:
If to the Company: Cell Therapeutics, Inc.
201 Elliott Avenue West, Suite 400
Seattle, Washington 98119
Attn.: Legal Affairs Dept.
If to the Optionee: [firstname] [name]
[address1]
[address2]
[address3]
[address4]
11. AGREEMENT SUBJECT TO PLAN. The Option and this Agreement
-------------------------
evidencing and confirming the same are subject to the terms and conditions set
forth in the Plan in any amendments to the Plan existing now or in the future,
which terms and conditions are incorporated herein by reference. A copy of the
Plan previously has been delivered to Optionee. Should any conflict exist
between the provisions of the Plan and those of this
4.
<PAGE>
Agreement, those of the Plan comprise the entire understanding between the
Company and Optionee with respect to the Option and shall be construed and
enforced under the Laws of the State of Washington.
12. OPTIONS IN EXCESS OF ANNUAL LIMIT. The aggregate fair market
---------------------------------
value (determined at the date of grant) of the stock with respect to which
incentive stock options are exercisable for the first time by Optionee during
any calendar year (granted under the Plan and all other Incentive Stock Options
plans of the Company, related corporations or a predecessor corporation) shall
not exceed $100,000, or such other limit as may be prescribed by the Code as it
may be amended from time to time. Any portion of the Option which exceeds
Optionee's annual limit shall not be void but rather shall automatically be
deemed non-qualified stock options (i.e., stock options that do not qualify
under Section 422A of the Code).
CELL THERAPEUTICS, INC. COMPANY
By:
---------------------------------------
Its:
---------------------------------------
OPTIONEE
By:
---------------------------------------
[firstname] [name]
5.
<PAGE>
EXHIBIT "A"
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Cell Therapeutics, Inc. 1992 Stock Option Plan
(hereinafter referred to as the "Plan") and Section 7 of that certain
Nonqualified Stock Option Agreement (hereinafter referred to as the "Agreement")
dated as of ________________________ between Cell Therapeutics, Inc.
(hereinafter referred to as the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase __________ shares of common stock of the Company at a purchase price of
$___________ per share, for aggregate consideration of $___________, on the
terms and conditions set forth in the Agreement and the Plan. Such aggregate
consideration, in the form specified in Section 7 of the Agreement, accompanies
this Notice.
The undersigned has executed this Notice this _____day of ___________,
________.
------------------------------------------------
[firstname] [name]
6.
<PAGE>
EXHIBIT 99.4
THE OPTION EVIDENCED BY THIS AGREEMENT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF SUCH OPTION HAVE NOT BEEN REGISTERED UNDER STATE OR FEDERAL
SECURITIES LAWS. THIS NON-QUALIFIED STOCK OPTION AGREEMENT MAY NOT BE
TRANSFERRED EXCEPT BY WILL OR UNDER THE LAWS OF DESCENT AND DISTRIBUTION, THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE OPTION MAY NOT BE OFFERED
,SOLD OR PLEDGED (EXCEPT A PLEDGE PURSUANT TO THE TERMS OF WHICH ANY OFFER OR
SALE UPON FORECLOSURE WOULD BE MADE IN A MANNER THAT WOULD NOT VIOLATE THE
REGISTRATION PROVISIONS OF FEDERAL OR STATE SECURITIES LAWS) OR OTHERWISE
DISTRIBUTED FOR VALUE, NOR MAY THE SHARES OF COMMON STOCK ISSUED UPON EXERCISE
OF THE OPTION BE TRANSFERRED ON THE BOOKS OF THE COMPANY, WITHOUT AN OPINION OF
COUNSEL, CONCURRED IN BY COUNSEL FOR THE COMPANY, THAT NO VIOLATION OF SAID
REGISTRATION PROVISIONS WOULD RESULT THEREFROM.
CELL THERAPEUTICS, INC.
1992 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
THIS AGREEMENT is entered into as of [GRANT DATE] (hereinafter referred
to as the "Date of Grant") between CELL THERAPEUTICS, INC., a Washington State
corporation (hereinafter referred to as the "Company"), and [FIRST NAME] [NAME]
(hereinafter referred to as the "Optionee").
RECITALS
--------
A. The options granted hereunder are intended to be nonstatutory stock
options under the Internal Revenue Code of 1986, as amended (hereinafter
referred to as the "Code").
AGREEMENT
---------
NOW, THEREFORE, the company hereby grants to Optionee the option to
purchase, upon the terms and conditions set forth herein and in the Plan,
[shares] shares of Common Stock (hereinafter referred to as the "Option").
1. EXERCISE PRICE. The exercise price for the Option shall be
--------------
[optionprice] per share.
2. VESTING SCHEDULE. The Option shall not be exercisable until it has
----------------
vested. The Option shall vest according to the following schedule:
<PAGE>
Number of Years Following Date of Percentage of Total Option to be
Commencement of Employment Exercisable
-------------------------- -----------
1 33%
2 33%
3 33%
3. OPTION NOT TRANSFERABLE. The Option is not transferable except by
will or the laws of descent and distribution.
4. COMPLIANCE WITH SECURITIES LAWS. By accepting the Option, Optionee
represents and agrees for himself/herself and all persons who acquire rights in
the Option through Optionee, that none of the shares of Common Stock purchased
upon exercise of the Option will be distributed in violation of applicable
federal and state laws and regulations. If requested by the Company, Optionee
shall furnish evidence satisfactory to the Company (including a written and
signed representation letter and a consent to be bound by all transfer
restrictions imposed by applicable law, legend condition or otherwise) to that
effect, prior to delivery of the purchased shares of Common Stock.
5. TERMINATION OF OPTION. A vested Option shall terminate, to the
---------------------
extent not previously exercised, upon the occurrence of one of the following
events:
(i) ten (10) years from the date of grant; or
[p1expiredate];
(ii) the expiration of ninety (90) days from the date of
Optionee's termination of employment with the Company
for any reason other than death or disability (as
defined in the Plan), (unless the exercise period is
extended by the Plan Administrator until a date not
later than the expiration date of the Option); or
(iii) the expiration of one (1) year from the date of death of
Optionee or the cessation of employment of Optionee from
the Company by reason of disability (as defined in the
Plan), (unless the exercise period is extended by the
Plan Administrator until a date not later than the
expiration date of the Option).
If Optionee's employment or contractual relationship is terminated from
the Company by death, any Option held by Optionee shall be exercisable only by
the person or persons to whom such Optionee's rights under such Option shall
pass by Optionee's will or by the laws of descent and distribution of the state
or country of Optionee's domicile at the time of death. Unless accelerated
pursuant to Section 5(f) of the Plan, each unvested Option granted pursuant
hereto shall terminate upon Optionee's termination of employment or
2.
<PAGE>
contractual relationship with the Company, for any reason whatsoever, including
death or disability.
6. STOCK. In the case of any stock split, stock dividend or likely
-----
change in the nature of shares granted by this Agreement, the number of shares
and Option price shall be proportionately adjusted as set forth in Section 5(m)
of the Plan.
7. EXERCISE OF OPTION. Each exercise of the Option shall be by means
------------------
of delivery of a Notice of Election to Exercise (attached hereto and marked
Exhibit "A") to the Secretary of the Company at his/her principal executive
office, specifying the number of shares of Common Stock to be purchased and
accompanied by payment in cash, or by certified or cashier's check payable to
the order of the Company, of the full exercise price for the Common Stock to be
purchased. Upon approval of the Plan Administrator, Optionee may pay for all or
any portion of the exercise price by (i) delivery of previously held shares of
Common Stock, (ii) having shares withheld from the amount of shares of Common
Stock to be received by Optionee of (iii) delivery of an irrevocable
subscription agreement obligating Optionee to take and pay for the shares of
Common Stock to be purchased within one (1) year of the date of such exercise.
The shares of Common Stock received or withheld by the Company as payment shall
have a fair market value equal to or greater than the aggregate exercise price
(or portion thereof) to be paid by Optionee upon such exercise. Optionee agrees
to also pay to the Company the amount necessary for the Company to satisfy its
withholding obligations under the Code.
8. OPTIONEE ACKNOWLEDGEMENTS. Optionee acknowledges that he or she
-------------------------
has read and understands the terms of this Non-Qualified Stock Option Agreement
and the Plan, and that:
(a) The issuance of shares of Common Stock pursuant to the exercise of
the Option, and any resale of the shares of Common Stock, may only be effected
in compliance with applicable state and federal laws and regulations, and that
Optionee may be required to execute and deliver representations and warranties
to that effect prior to the exercise of any portion of the Option;
(b) Optionee is not entitled to any rights as a shareholder with
respect to any shares of Common Stock issuable hereunder until Optionee becomes
a shareholder of record;
(c) The shares of Common Stock subject hereto may be adjusted in the
event of certain changes in the capital structure of the Company or for any
other reason required or permitted by the Plan;
(d) As a condition to the exercise of the Option, Optionee may be
required to make such arrangements as the Plan Administrator requires for the
satisfaction of any federal, state or local withholding tax obligations; and
3.
<PAGE>
(e) This Agreement does not constitute an employment agreement nor
does it entitle Optionee to any specific employment or contractual relationship
or to any employment or contractual relationship for a period of time, and that
Optionee's continued employment or contractual relationship with the Company, if
any, shall be at will and is subject to termination in accordance with the
Company's prevailing policies and any other agreement between the Optionee and
the Company.
9. PROFESSIONAL ADVICE. The acceptance and exercise of the Option
-------------------
and the sale of Common Stock issued pursuant to the exercise of the Option may
have consequences under federal and state tax and securities laws which may vary
depending on the individual circumstances of Optionee. Accordingly, Optionee
acknowledges that Optionee has been advised to consult his or her personal legal
and tax advisor in connection with this Agreement and Optionee's dealings with
respect to the Option or the Common Stock.
10. NOTICES. Any notice required or permitted to be made or given
-------
hereunder shall be mailed or delivered personally to the addresses set forth
below, or as changed from time-to-time by written notice to the other:
If to the Company: Cell Therapeutics, Inc.
201 Elliott Avenue West, Suite 400
Seattle, Washington 98119
Attn.: Legal Affairs Dept.
If to the Optionee: [firstname] [name]
[address1]
[address2]
[address3]
[address4]
11. AGREEMENT SUBJECT TO PLAN. The Option and this Agreement
-------------------------
evidencing and confirming the same are subject to the terms and conditions set
forth in the Plan in any amendments to the Plan existing now or in the future,
which terms and conditions are incorporated herein by reference. A copy of the
Plan previously has been delivered to Optionee. Should any conflict exist
between the provisions of the Plan and those of this Agreement, those of the
Plan shall govern and control. The Agreement and the Plan comprise the entire
understanding between the Company and Optionee with respect to the Option and
shall be construed and enforced under the Laws of the State of Washington.
CELL THERAPEUTICS, INC. COMPANY
By:
-----------------------------------------------
Its:
----------------------------------------------
4.
<PAGE>
OPTIONEE
By:
-----------------------------------------------
[firstname] [name]
5.
<PAGE>
EXHIBIT "A"
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Cell Therapeutics, Inc. 1992 Stock Option Plan
(hereinafter referred to as the "Plan") and Section 7 of that certain
Nonqualified Stock Option Agreement (hereinafter referred to as the "Agreement")
dated as of between Cell Therapeutics, Inc.
------------------------------------
(hereinafter referred to as the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of common stock of the Company at a purchase price of
----------
$ per share, for aggregate consideration of $ , on the
------------- ---------------
terms and conditions set forth in the Agreement and the Plan. Such aggregate
consideration, in the form specified in Section 7 of the Agreement, accompanies
this Notice.
The undersigned has executed this Notice this day of ,
------ -----------
.
- ------------
[firstname] [name]
<PAGE>
EXHIBIT 99.5
CELL THERAPEUTICS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The Cell Therapeutics, Inc. 1996 Employee Stock Purchase Plan
-------
(the "Plan") is intended to encourage ownership of stock by employees of Cell
----
Therapeutics, Inc., a Washington corporation (the "Company"), and certain
-------
affiliates, and to provide additional incentive for the employees to promote
the success of the business of the Company and any such affiliates. It is
intended that the Plan shall be an "employee stock purchase plan" within the
meaning of Section 423 of the Code.
2. Definitions. As used in this Plan, the following terms shall have the
-----------
meanings set forth below:
(a) "Base Salary" means the regular gross base salary paid to a Participant
-----------
by one or more Participating Employers during such individual's period of
participation in the Plan, plus any pre-tax contributions made by the
Participant to any Code Section 401(k) salary deferral plan or any Code Section
125 cafeteria benefit program now or hereafter established by the Company or any
Related Corporation. The following items of compensation shall not be included
in Base Salary: (i) all overtime payments, bonuses, commissions (other than
those functioning as base salary equivalents), profit-sharing distributions and
other incentive-type payments and (ii) any and all contributions (other than
Code Section 401(k) or Code Section 125 contributions) made on the Participant's
behalf by the Corporation or any Related Corporation under any employee benefit
or welfare plan now or hereafter established.
(b) "Beneficiary" means the person designated as beneficiary on the
-----------
Optionee's Enrollment Agreement or, if no such beneficiary is named or no such
agreement is in effect at the Optionee's death, his or her beneficiary as
determined under the provisions of the Company's program of life insurance for
employees.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Change in Control" means any of the following:
-----------------
(i) the direct or indirect sale or exchange by the shareholders of the
Company of all or substantially all of the Stock where the shareholders of the
Company before such sale or exchange do not retain, directly or indirectly, at
least a majority of the beneficial interest in the voting stock of the Company;
(ii) a merger in which the shareholders of the Company before such
merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company;
B-1
<PAGE>
(iii) the sale, exchange or transfer of all or substantially all of the
Company's assets (other than a sale, exchange or transfer to one or more
corporations or other entities where the shareholders of the Company before such
sale, exchange or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) or other
entities to which the assets were transferred).
(e) "Code" means the Internal Revenue Code of 1986, as amended, or any
----
statute successor thereto, and any regulations issued from time to time
thereunder.
(f) "Committee" means a committee of the Board consisting of not less than
---------
two directors of the Company who are not employees of the Company or any Related
Corporation, each appointed by the Board from time to time to serve at its
pleasure for the purpose of carrying out the responsibilities of the Committee
under the Plan. Each member of the Committee will be "disinterested" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended. For
any period during which no such committee is in existence, all authority and
responsibility assigned to the Committee under this Plan shall be exercised, if
at all, by the Board.
(g) "Eligible Employee" means a person who is eligible under the provisions
-----------------
of Section 7 to receive an Option as of a particular Offering Commencement Date.
(h) "Enrollment Agreement" means an agreement whereby an Optionee
--------------------
authorizes a Participating Employer to withhold payroll deductions from his or
her Base Salary and otherwise is in such form as the Committee may specify.
(i) "Fair Market Value" means, as of any given date, the last reported
-----------------
sales price of the Stock as reported in The Wall Street Journal for such date
-----------------------
or, if either no such sale is reported or the Stock is not publicly traded on or
as of such date, the fair market value of the Stock as determined by the
Committee in good faith based on the available facts and circumstances at the
time.
(j) "Offering Commencement Date" means any date on which Options are
--------------------------
granted under the Plan as determined by the Committee pursuant to Section 8.
(k) "Offering Period" means a period of approximately six months' duration,
---------------
beginning on an Offering Commencement Date and ending, subject to Section 9.6,
on the last business day of the sixth calendar month ending after such date,
during which Options are granted and outstanding under the Plan pursuant to a
determination by the Committee under Section 4.
(l) "Offering Termination Date" means the last business day of an Offering
-------------------------
Period, on which Options must, if ever, be exercised.
B-2
<PAGE>
(m) "Option" means an option to purchase shares of Stock granted under the
------
Plan.
(n) "Optionee" means an Eligible Employee to whom an Option is granted.
--------
(o) "Option Shares" means shares of Stock purchasable under an Option.
-------------
(p) "Participant" means any Eligible Employee of a Participating Employer
-----------
who is actively participating in the Plan.
(q) "Participating Employer" means the Company or any Related Corporation
----------------------
which is designated by the Committee as a corporation whose Eligible Employees
are to receive Options as of a particular Offering Commencement Date.
(r) "Related Corporation" means any corporation which is or during the term
-------------------
of the Plan becomes a parent corporation of the Company, as defined in Section
424(e) of the Code, or a subsidiary corporation of the Company, as defined in
Section 424(f) of the Code.
(s) "Stock" means the common stock, without par value, of the Company.
-----
3. Term of Plan. The Plan shall become effective upon (a) the adoption of
------------
the Plan by the Board, subject to the approval of the Plan by the shareholders
of the Company within 12 months of such adoption, and (b) the effectiveness of a
registration statement on Form S-8 under the Securities Act of 1933, as amended,
covering the shares of Stock subject to the Plan. No Option shall be granted
under the Plan on or after the tenth anniversary of such approval but Options
theretofore granted may extend beyond that date.
4. Administration. The Plan shall be administered by the Committee, which
--------------
shall determine from time to time whether to grant Options under the Plan as of
any date otherwise qualifying as an Offering Commencement Date. The Committee
shall further determine which (if any) Related Corporation shall be
Participating Employers as of each Offering Commencement Date. The Committee
shall have authority in its discretion to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to determining the terms of
Options granted under the Plan, and to make all other determinations necessary
or advisable for the administration of the Plan. Any determination of the
Committee shall be final and binding upon all persons having or claiming any
interest under the Plan or under any Option granted pursuant to the Plan.
5. Amendment and Termination. The Board may terminate or amend the Plan
-------------------------
at any time and from time to time. No termination of or amendment to the Plan
may
B-3
<PAGE>
materially adversely affect the rights of an Optionee with respect to any Option
held by the Optionee as of the date of such termination or amendment without the
Optionee's consent.
6. Shares of Stock Subject to the Plan. No more than an aggregate of
-----------------------------------
1,000,000 shares of Stock may be issued or delivered pursuant to the exercise of
Options granted under the Plan. Shares to be delivered upon the exercise of
Options may be either shares of Stock which are authorized but unissued or
shares of Stock held by the Company in its treasury. If an Option expires or
terminates for any reason without having been exercised in full, the unpurchased
shares subject to the Option shall become available for other Options granted
under the Plan. The Company shall, at all times during which Options are
outstanding, reserve and keep available shares of Stock sufficient to satisfy
such Options, and shall pay all fees and expenses incurred by the Company in
connection therewith. In the event of any capital change in the outstanding
Stock as contemplated by Section 9.6, the number and kind of shares of Stock
reserved and kept available by the Company shall be appropriately adjusted.
7. Eligibility. Each employee of a Participating Employer shall be
-----------
granted an Option on each Offering Commencement Date on which such employee
meets all of the following requirements:
(a) The employee is customarily employed by a Participating Employer for
more than twenty hours per week and for more than five months per calendar year
and has been employed by one or more Participating Employers for at least twelve
months (consecutive or nonconsecutive) prior to the applicable Offering
Commencement Date.
(b) The employee will not, after grant of the Option, own stock possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company or of any Related Corporation. For purposes of this subparagraph
(b), the rules of Section 424(d) of the Code shall apply in determining the
stock ownership of the employee, and stock which the employee may purchase under
outstanding options shall be treated as stock owned by the employee.
(c) Upon grant of the Option, the employee's rights to purchase stock under
all employee stock purchase plans (as defined in Section 423(b) of the Code) of
the Company and its Related Corporations will not accrue at a rate which exceeds
$25,000 of fair market value of the stock (determined as of the grant date) for
each calendar year in which such option is outstanding at any time. The accrual
of rights to purchase stock shall be determined in accordance with Section
423(b)(8) of the Code.
8. Offering Commencement Dates. Options shall be granted on the first
---------------------------
business day of any calendar month which is designated by the Committee as the
beginning of an Offering Period.
B-4
<PAGE>
9. Terms and Conditions of Options.
-------------------------------
9.1 General. All Options granted on a particular Offering Commencement
-------
Date shall comply with the terms and conditions set forth in Sections 9.2
through 9.10.
9.2 Purchase Price. The purchase price of Option Shares shall be 85% of
--------------
the lower of (a) the Fair Market Value of the shares as of the Offering
Commencement Date and (b) the Fair Market Value of the shares as of the Offering
Termination Date.
9.3 Restrictions on Transfer. Options may not be assigned, transferred,
------------------------
pledged or otherwise disposed of. An Option may not be exercised by anyone
other than the Optionee during the lifetime of the Optionee. Option Shares may
not be assigned, transferred, pledged or otherwise disposed of, except by will
or under the laws of descent and distribution, until after the first anniversary
of the Offering Termination Date on which acquired (or the death of the
Optionee, if earlier) without the of consent the Committee, but thereafter may
be sold or otherwise transferred without restriction. The Optionee shall agree
in the Enrollment Agreement to notify the Company of any transfer of the shares
within two years of the Offering Commencement Date of those shares. The Company
shall have the right to place a legend on all stock certificates instructing the
transfer agent to notify the Company of any transfer of the shares. The Company
shall also have the right to place a legend on certificates setting forth the
restriction on transferability of such shares.
9.4 Expiration. Each Option shall expire at the close of business on the
----------
Offering Termination Date or on such earlier date as may result from the
operation of Section 9.5 or by action of the Committee taken pursuant to Section
9.6.
9.5 Termination of Employment of Optionees. If an Optionee ceases for any
--------------------------------------
reason to be continuously employed by a Participating Employer, whether due to
death, retirement, voluntary severance, involuntary severance, transfer, or
disaffirmation of a Related Corporation with the Company, his or her Option
shall immediately expire, and the Optionee's accumulated payroll deductions
shall be returned to the Optionee or his or her Beneficiary, as the case may be,
by the Company. For purposes of this Section 9.5, an Optionee shall be deemed
to be employed throughout any leave of absence for military service, illness or
other bona fide purpose which does not exceed the longer of ninety days or the
period during which the Optionee's reemployment rights are guaranteed by statute
or by contract. If the Optionee does not return to active employment prior to
the termination of such period, his or her employment shall be deemed to have
ended on the ninety-first day of such leave of absence.
9.6 Capital Changes Affecting the Stock. In the event that, between the
-----------------------------------
Offering Commencement Date and the Offering Termination Date of an Option, a
stock dividend is paid or becomes payable in respect of the Stock or there
occurs a split-up or contraction in the number of shares of Stock, the number of
shares for which the Option may
B-5
<PAGE>
thereafter be exercised and the price to be paid for each such share shall be
proportionately adjusted. [-- AND THE MAXIMUM NUMBER OF SHARES ISSUABLE UNDER
THE PLAN?] In the event of a Change in Control, the Committee, in its sole
discretion, shall either (a) provide that Options granted under the Plan shall
be fully exercisable to the extent of each Participant's accumulated
withholdings for the Offering Period as of a date prior to the Change in Control
or (b) arrange with the surviving, continuing, successor or purchasing
corporation, as the case may be, that such corporation assume the Company's
rights and obligations under the Plan. In the event that there is to occur a
recapitalization involving an increase in the par value of the Stock which would
result in a par value exceeding the exercise price under an outstanding Option,
the Company shall notify the Optionee of such proposed recapitalization
immediately upon its being recommended by the Board to the Company's
shareholders, after which the Optionee shall have the right to exercise his or
her Option prior to such recapitalization; if the Optionee fails to exercise the
Option prior to recapitalization, the exercise price under the Option shall be
appropriately adjusted. In the event that, after the Offering Commencement Date,
there occurs a dissolution or liquidation of the Company, except pursuant to a
transaction to which Section 424(a) of the Code applies, each Option shall
terminate, but the Optionee shall have the right to exercise his or her Option
prior to such dissolution or liquidation.
9.7 Payroll Deductions. An Optionee may purchase shares under his or her
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Option during any particular Offering Period by completing and returning to the
Human Resources department of the Company at least ten days prior to the
beginning of such Offering Period an Enrollment Agreement indicating a
percentage (which shall be a full integer between two and ten) of his or her
Base Salary which is to be withheld each payroll period. The Optionee shall not
be permitted to change the percentage of Base Salary withheld during an Offering
Period. However, the Optionee may withdraw any or all of his or her accumulated
payroll deductions by submitting a written request therefor to the Human
Resources department of the Company no later than two weeks prior to the
Offering Termination Date whereupon his or her payroll deduction for the
remainder of the Offering Period shall cease and he or she shall not be
permitted to re-enroll in such Offering Period. Any Enrollment Agreement in
effect for an Offering Period shall remain in effect as to any subsequent
Offering Period unless revoked by a withdrawal of the Optionee's accumulated
payroll deduction amounts (in which case submission of a new Enrollment
Agreement will be required for participation in a future Offering Period) or
modified by submission of a new Enrollment Agreement, or until the Optionee's
termination of employment for any reason.
9.8 Exercise of Options. On the Offering Termination Date, the Optionee
-------------------
may purchase the number of shares purchasable by his or her accumulated payroll
deductions (subject to any maximum limit established by the Committee, in its
sole discretion, on the number of shares available under every Option in a
particular Offering Period), provided that:
(a) If the total number of shares which all Optionees elect to
purchase, together with any shares already purchased under the Plan, exceeds the
total number of shares which may be purchased under the Plan pursuant to Section
6, the number of shares which
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each Optionee is permitted to purchase shall be decreased pro rata based
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on the Optionee's accumulated payroll deductions in relation to all accumulated
payroll deductions currently being withheld under the Plan.
(b) If the number of shares purchasable includes a fraction, such
number shall be adjusted to the next smaller whole number and the purchase price
shall be adjusted accordingly.
Accumulated payroll deductions not withdrawn prior to the Offering
Termination Date shall be automatically applied by the Company toward the
purchase of Option Shares. Accumulated payroll deductions, to the extent in
excess of the aggregate purchase price of the shares purchased by the Optionee
on an Offering Termination Date, shall be refunded to the Optionee.
9.9 Delivery of Stock. Except as provided below, within a reasonable time
-----------------
after the Offering Termination Date, the Company shall deliver or cause to be
delivered to the Optionee a certificate or certificates for the number of shares
purchased by the Optionee. A stock certificate representing the number of
shares purchased will be issued in the Participant's name only, or if his or her
Enrollment Agreement so specifies, in the name of the employee and another
person of legal age as joint tenants with rights of survivorship. If any law or
applicable regulation of the Securities and Exchange Commission or other body
having jurisdiction in the premises shall require that the Company or the
Optionee take any action in connection with the shares being purchased under the
Option, delivery of the certificate or certificates for such shares shall be
postponed until the necessary action shall have been completed, which action
shall be taken by the Company at its own expense, without unreasonable delay.
The Optionee shall have no rights as a shareholder in respect of shares for
which he or she has not received a certificate.
Notwithstanding the foregoing, the Company may elect to hold for the
benefit of the Optionee any shares otherwise to be delivered to the Optionee
pursuant to this Section 9.9, or to deliver the same to such agent or agents of
the Company for the benefit of the Optionee as the Company may select, for the
period during which the transfer of such shares is limited by this Plan and by
Section 423 of the Code (and thereafter, until the Optionee requests delivery of
such shares of Stock in writing). In that event, the Optionee shall have all of
the rights of a shareholder in the shares so held by the Company or its agent,
except as limited by the restriction on transferability, from and after the
issuance of the same and the Company or its agent shall adopt reasonable
procedures to enable the Optionee to exercise such rights. In the event of the
Optionee's death while any shares are so held, such shares shall be delivered to
the Optionee's Beneficiary promptly following the Committee's receipt of
evidence satisfactory to the Committee of the Optionee's death.
9.10 Return of Accumulated Payroll Deductions. In the event that the
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Optionee or his or her Beneficiary is entitled to the return of accumulated
payroll deductions, whether by reason of voluntary withdrawal, termination of
employment, retirement, death, or in the event that accumulated payroll
deductions exceed the price of shares purchased, such amount
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shall be returned by the Company to the Optionee or the Beneficiary, as the case
may be, as soon as practicable following the Offering Termination Date of the
Offering Period in which the same were deducted. Accumulated payroll deductions
held by the Company shall not bear interest nor shall the Company be obligated
to segregate the same from any of its other assets.
10. No Enlargement of Employment Rights. Neither the establishment or
-----------------------------------
continuation of the Plan nor the grant of any Option hereunder shall be deemed
to give any employee the right to be retained in the employ of the Company or a
Related Corporation, or any successor to either, or to interfere with the right
of the Company or such Corporation or successor to discharge the employee at any
time.
11. Tax Withholding. If, at any time, the Company or any Related Corporation
---------------
is required, under applicable laws and regulations, to withhold, or to make any
deduction of any taxes or take any other action in connection with any exercise
of an Option or transfer of shares of Stock, the Company or such Related
Corporation shall have the right to deduct from all amounts paid in cash any
taxes required by law to be withheld therefrom, and in the case of shares of
Stock, the Optionee or his or her estate or Beneficiary shall be required to pay
the Company or such Related Corporation the amount of taxes required to be
withheld, or, in lieu thereof, the Company or such Related Corporation shall
have the right to retain, or sell without notice, a sufficient number of shares
of Stock to cover the amount required to be withheld, or to make other
arrangements with respect to withholding as it shall deem appropriate.
12. Governing Law. The Plan and all Options and actions taken thereunder
-------------
shall be governed by and construed in accordance with the laws of the State of
Washington, without regard to the conflict of laws principles thereof.
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