<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
TARGETED GENETICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WASHINGTON 91-1549568
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
1100 OLIVE WAY, SUITE 100
SEATTLE, WASHINGTON 98101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
TARGETED GENETICS CORPORATION
1992 RESTATED STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
H. STEWART PARKER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1100 OLIVE WAY, SUITE 100
SEATTLE, WASHINGTON 98101
(206) 623-7612
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
______________________
COPY TO:
STEPHEN M. GRAHAM
PERKINS COIE LLP
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
______________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
PROPOSED MAXIMUM
TITLE OF SECURITIES NUMBER TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) OFFERING PRICE PER SHARE(2) PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share 500,000 $1.52 $760,000 $225
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Together with an indeterminate number of additional shares that may be
necessary to adjust the number of shares reserved for issuance pursuant to
such employee benefit plan as the result of any future stock split, stock
dividend or similar adjustment of the Registrant's outstanding Common
Stock.
(2) Estimated solely for the purpose of calculating the registration fee. The
price per share is estimated to be $1.52, based on the average of the high
($1.56) and low ($1.47) prices for the Common Stock on July 8, 1998, as
reported on the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") are hereby incorporated by reference in this Registration
Statement:
(a) The Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, filed on March 31 1998, which contains audited financial
statements for the most recent fiscal year for which such statements have been
filed;
(b) All other reports filed by the Registrant pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since the end of the fiscal year covered by the Annual Report on Form 10-
K referred to in (a) above; and
(c) The description of the Registrant's Common Stock contained in the
Registration Statement on Form 8-A filed with the Commission on April 26, 1994
under Section 12(g) of the Exchange Act, including any amendments or reports
filed for the purpose of updating such description.
All documents filed by the Registrant pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date hereof and prior to the filing of a
post-effective amendment, which indicate that the securities offered hereby have
been sold or which deregister the securities covered hereby then remaining
unsold, shall also be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof commencing on the respective
dates on which such documents are filed.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act 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"). Section 10 of the Registrant's Restated Bylaws provides for
indemnification of the Registrant's directors, officers, employees and agents to
the maximum extent permitted by Washington law.
Section 23B.08.320 of the Washington Business Corporation Act 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, self-dealing or illegal
corporate loans or distributions, or any transactions from which the director
personally receives a benefit in money, property or services to which the
director is not entitled. Article 11 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. Under these Indemnification Agreements, the officer or
director is not indemnified for any action, suit, claim or proceeding instituted
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
or unless the action is to enforce the provisions of the Indemnification
Agreement.
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 an executive officer or director for an accounting of
profits made from the purchase or sale by the executive officer or director of
securities of the Registrant in violation of the provisions of Section 16(b) of
the Exchange Act, and amendments thereto, or for damages that have been paid
directly to the executive officer or director by an insurance carrier under a
policy of directors' and officers' liability insurance maintained by the
Registrant.
II-1
<PAGE>
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------- ------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Perkins Coie LLP regarding legality of the Common Stock being
registered
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Perkins Coie LLP (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Targeted Genetics Corporation 1992 Restated Stock Option Plan
</TABLE>
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;
(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 paragraphs (1)(i) and (1)(ii) above do not apply if the
- -------- -------
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefits plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in 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.
II-2
<PAGE>
C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities 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 Securities 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, the Registrant
certifies that it has reasonable grounds to believe that it meets all 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 the 10th day of
July, 1998.
TARGETED GENETICS CORPORATION
/s/ H. STEWART PARKER
-------------------------------------
By: H. Stewart Parker
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints H.
Stewart Parker and James A. Johnson, or either of them, as attorneys-in-fact
with full power of substitution, to execute in the name and on the behalf of
each person, individually and in each capacity stated below, and to file, any
and all amendments to this Registration Statement, including any and all post-
effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 10th day of July, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ H. STEWART PARKER President, Chief Executive Officer (Principal Executive
- ------------------------------------------------ Officer) and Director
H. Stewart Parker
/s/ JAMES A. JOHNSON Vice President, Finance, Chief Financial Officer, Treasurer
- ------------------------------------------------ and Secretary (Principal Financial Officer)
James A. Johnson
/s/ JEREMY CURNOCK COOK Chairman of the Board
- ------------------------------------------------
Jeremy Curnock Cook
Director
- ------------------------------------------------
Jack L. Bowman
Director
- ------------------------------------------------
James D. Grant
/s/ LOUIS P. LACASSE Director
- ------------------------------------------------
Louis P. Lacasse
Director
- ------------------------------------------------
Mark P. Richmond
/s/ MARTIN P. SUTTER Director
- ------------------------------------------------
Martin P. Sutter
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------- --------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Perkins Coie LLP regarding legality of the Common Stock being
registered
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Perkins Coie LLP (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Targeted Genetics Corporation 1992 Restated Stock Option Plan
</TABLE>
<PAGE>
EXHIBIT 5.1
PERKINS COIE LLP
A LAW PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
1201 THIRD AVENUE, 40TH FLOOR, SEATTLE, WASHINGTON 98101-3099
TELEPHONE: 206 583-8888 FACSIMILE: 206 583-8500
July 10, 1998
Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, WA 98101
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Targeted Genetics Corporation (the "Company")
in connection with the preparation of a Registration Statement on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), which the Company is filing with the Securities and Exchange Commission
with respect to 500,000 shares of Common Stock, $.01 par value per share (the
"Shares"), pursuant to the Targeted Genetics Corporation 1992 Restated Stock
Option Plan (the "Plan"). We have examined the Registration Statement and such
documents and records of the Company and other documents as we have deemed
necessary for the purpose of this opinion.
Based upon and subject to the foregoing, we are of the opinion that any
original issuance of Shares that may be issued pursuant to the Plan has been
duly authorized and that, upon the due execution by the Company and the
registration by its registrar of such Shares and the sale thereof by the Company
in accordance with the terms of the Plan, and the receipt of consideration
therefor in accordance with the terms of the Plan, such Shares will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Perkins Coie LLP
PERKINS COIE 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 Targeted Genetics Corporation Restated 1992 Stock Option
Plan of our report dated February 3, 1998 with respect to the financial
statements of Targeted Genetics Corporation included in its Annual Report (Form
10-K) for the year ended December 31, 1997 filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Seattle, Washington
July 9, 1998
<PAGE>
EXHIBIT 99.1
TARGETED GENETICS CORPORATION
1992 RESTATED STOCK OPTION PLAN
SECTION 1 PURPOSE
The purpose of the Targeted Genetics Corporation 1992 Restated Stock Option
Plan (this "Plan") is to provide a means whereby selected employees, directors
(subject to the restrictions contained in Sections 2 and 4), officers, agents,
consultants and independent contractors of Targeted Genetics Corporation (the
"Company") or of any parent or subsidiary (as defined in subsection 5.8 and
referred to hereinafter as "related corporations") thereof, may be granted
incentive stock options and nonqualified stock options to purchase the Common
Stock (as defined in Section 3) of the Company, in order to attract and retain
the services or advice of such employees, directors, officers, agents,
consultants and independent contractors and to provide added incentive to them
by providing an opportunity for stock ownership in the Company.
SECTION 2 ADMINISTRATION
2.1 PLAN ADMINISTRATOR
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or, in the event the Board shall appoint or authorize a committee
to administer this Plan, by such committee. The administrator of this Plan
shall hereinafter be referred to as the "Plan Administrator."
In the event a member of the Plan Administrator may be eligible, subject to
the restrictions set forth in Section 4, to participate in this Plan, no member
of the Plan Administrator shall vote with respect to the granting of an option
hereunder to himself or herself and, if state corporate law does not permit a
committee to grant options to directors, then any option granted under this Plan
to a director for his or her services as such shall be approved by the full
Board.
The members of any committee serving as Plan Administrator shall be
appointed by the Board for such term as the Board may determine. The Board may
from time to time remove members from, or add members to, the committee.
Vacancies on the committee, however caused, shall be filled by the Board.
With respect to grants made under this Plan to officers and directors of
the Company who are subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Plan Administrator shall be
constituted at all times so as to meet the requirements of Rule 16b-3
promulgated under Section 16(b) of the Exchange Act if any of the Company's
equity securities are registered pursuant to Section 12(b) or 12(g) of the
Exchange Act.
2.2 PROCEDURES
The Board shall designate one of the members of the Plan Administrator as
chairman. The Plan Administrator may hold meetings at such times and places as
it shall determine. The acts of a majority of the members of the Plan
Administrator present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Plan Administrator members, shall be valid acts of
the Plan Administrator.
2.3 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan, the
Plan Administrator shall have the authority, in its discretion, to determine all
matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise
<PAGE>
price, and all other terms and conditions of the options. Grants under this Plan
need not be identical in any respect, even when made simultaneously. The
interpretation and construction by the Plan Administrator of any terms or
provisions of this Plan or any option issued hereunder, or of any rule or
regulation promulgated in connection herewith, shall be conclusive and binding
on all interested parties, so long as such interpretation and construction with
respect to incentive stock options correspond to the requirements of Internal
Revenue Code of 1986, as amended (the "Code"), Section 422, the regulations
thereunder, and any amendments thereto.
2.4 RULE 16b-3 COMPLIANCE AND BIFURCATION OF PLAN
It is the intention of the Company that, if any of the Company's equity
securities are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, this Plan comply in all respects with Rule 16b-3 under the Exchange Act.
If any Plan provision is later found not to be in compliance with Rule 16b-3,
such provision shall be deemed null and void and in all events this Plan shall
be construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the application of any provision of this Plan to participants who are
officers and directors subject to Section 16(b) of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other
participants.
SECTION 3 SHARES SUBJECT TO THIS PLAN
The shares subject to this Plan shall be the Company's Common Stock, par
value $0.01 (the "Common Stock"), currently authorized but unissued or now held
or subsequently acquired by the Company. Subject to adjustment as provided in
Section 7 hereof, the aggregate amount of Common Stock to be delivered upon the
exercise of all options granted under this Plan shall not exceed 2,500,000
shares./1/
SECTION 4 ELIGIBILITY
An incentive stock option may be granted only to an individual who, at the
time the option is granted, is an employee of the Company or a related
corporation (as defined in subsection 5.8). A nonqualified stock option may be
granted to any employee, director, officer, agent, consultant or independent
contractor of the Company or of any related corporation, whether an individual
or an entity. Any party to whom an option is granted under this Plan shall be
referred to hereinafter as an "Optionee."
SECTION 5 TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with this
Plan. Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the exercise
of each option and the price per share at which such option is exercisable (the
"exercise price") shall be as established by the Plan Administrator; provided,
--------
however, that the maximum number of shares with respect to which an option or
- -------
options may be granted to any Optionee in any one fiscal year of the Company
shall not exceed 200,000 shares (the "Maximum Annual Optionee Grant"); provided
--------
further that the Plan Administrator shall act in good faith to establish an
- -------
exercise price which shall be not less than the fair market value per share of
the Common Stock at the
- -------------------
/1/ The number of shares subject to this Plan and all other share numbers
referred to in this Plan have been adjusted to reflect the 1:2.5 reverse stock
split, which was effective on March 23, 1994.
2
<PAGE>
time the option is granted and, with respect to incentive stock options granted
to greater than 10% shareholders (as described in Section 6), the exercise price
shall be as required by subsection 6.1.
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to granting
incentive stock options to greater than 10% shareholders, the term of each
incentive stock option shall be as established by the Plan Administrator and, if
not so established, shall be ten years from the date it is granted but in no
event shall the term of any incentive stock option exceed ten years. The term
of each nonqualified stock option shall be as established by the Plan
Administrator, and if not so established, shall be ten years. To ensure that
the Company or related corporation will achieve the purpose and receive the
benefits contemplated by this Plan, any option granted to any Optionee shall,
unless the condition of this sentence is waived or modified in the agreement
evidencing the option or by resolution adopted by the Plan Administrator, be
exercisable according to the following schedule:
<TABLE>
<CAPTION>
Period of Optionee's Continuous Relationship
With the Company or Related Corporation From
the Date the Option Is Granted Portion of Total Option Which is Exercisable
- ----------------------------------------------- --------------------------------------------
<S> <C>
Less than twelve months 0%
Twelve months 20%
Twenty-four months 40%
Thirty-six months 60%
Forty-eight months 80%
Sixty months or greater 100%
</TABLE>
5.3 EXERCISE
Subject to the vesting schedule described in subsection 5.2 and to any
additional holding period required by applicable law, each option may be
exercised in whole or in part; provided, however, that no fewer than 20% of the
-------- -------
shares purchasable under the option (or the remaining shares then purchasable
under the option, if less than 20%) may be purchased upon any exercise of any
option and that only whole shares will be issued pursuant to the exercise of any
option. An option shall be exercised by delivery to the Company of notice of
the number of shares with respect to which the option is exercised, together
with payment of the exercise price.
5.4 PAYMENT OF EXERCISE PRICE
Payment of the option exercise price shall be made in full at the time the
notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check, or personal check (unless at the time
of exercise the Plan Administrator in a particular case determines not to accept
a personal check) for the shares being purchased.
The Plan Administrator may determine at any time before exercise that
additional forms of payment will be permitted. To the extent permitted by the
Plan Administrator, and applicable laws and regulations (including, without
limitation, federal tax and securities laws and state corporate law), an option
may be exercised by:
(a) delivery of shares of Common Stock of the Company held by an
Optionee having a fair market value equal to the exercise price, such fair
market value to be determined in good faith by the Plan
3
<PAGE>
Administrator; provided, however, that payment in shares of Common Stock shall
-------- -------
not be made unless the shares of Common Stock shall have been owned by the
Optionee for a period of at least six months;
(b) delivery of a full-recourse promissory note executed by the
Optionee; provided, however, that (i) such note delivered in connection with an
-------- -------
incentive stock option shall, and such note delivered in connection with a
nonqualified stock option may, in the sole discretion of the Plan Administrator,
bear interest at a rate specified by the Plan Administrator but in no case less
than the rate required to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income tax purposes, (ii)
the Plan Administrator in its sole discretion shall specify the term and other
provisions of such note at the time an incentive stock option is granted or at
any time prior to exercise of a nonqualified stock option, (iii) the Plan
Administrator may require that the Optionee pledge to the Company for the
purpose of securing the payment of such note the shares of Common Stock to be
issued to the Optionee upon exercise of the option and may require that the
certificate representing such shares be held in escrow in order to perfect the
Company's security interest, and (iv) the Plan Administrator in its sole
discretion may at any time restrict or rescind this right upon notification to
the Optionee; or
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with the exercise.
5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation shall have the right to retain and
withhold from any payment of cash or shares of Common Stock under the Plan the
amount of taxes required by any government to be withheld or otherwise deducted
and paid with respect to such payment. At its discretion, the Company may
require an Optionee receiving shares of Common Stock to reimburse the Company
for any such taxes required to be withheld by the Company and withhold any
distribution in whole or in part until the Company is so reimbursed. In lieu
thereof, the Company shall have the right to withhold from any other cash
amounts due or to become due from the Company to the Optionee an amount equal to
such taxes. The Company may also retain and withhold or the Optionee may elect,
subject to approval by the Company in its sole discretion, to have the Company
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld by the Company to reimburse the
Company for any such taxes and cancel (in whole or in part) any such shares so
withheld. In order to qualify such election for exemption under Rule 16b-3
under Section 16(b) of the Exchange Act, any election made by an officer or
director who is subject to Section 16 of the Exchange Act must be made six
months prior to the date the option exercise becomes taxable or the option must
be exercised during the quarterly 10-day window period required under Section
16(b) of the Exchange Act for exercises of stock appreciation rights.
5.6 HOLDING PERIODS
5.6.1 SECURITIES EXCHANGE ACT SECTION 16
Shares of Common Stock obtained upon the exercise of a stock option may not
be sold by a person subject to Section 16 of the Exchange Act until six months
after the date the option was granted.
5.6.2 TAXATION OF STOCK OPTIONS
In order to obtain certain tax benefits accorded to incentive stock options
under Section 422 of the Code, an Optionee must hold the shares issued upon the
exercise of an incentive stock option for two years after the date of grant of
the option and one year from the date of exercise. An Optionee may be subject
to the alternative minimum tax at the time of exercise.
4
<PAGE>
The Plan Administrator may require an Optionee to give the Company prompt
notice of any disposition of shares acquired by the exercise of an incentive
stock option prior to the expiration of such holding periods.
Tax advice should be obtained by an Optionee when exercising any option and
prior to the disposition of the shares issued upon the exercise of any option.
5.7 TRANSFERABILITY OF OPTION
During an Optionee's lifetime, an option may be exercisable only by the
Optionee. Options granted under this Plan and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than by will or by
the applicable laws of descent and distribution or, with respect to nonqualified
stock options, pursuant to the terms of a qualified domestic relations order as
defined in the Code, and shall not be subject to execution, attachment or
similar process. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under this Plan or of any right or privilege
conferred hereby, contrary to the Code or to the provisions of this Plan, or the
sale or levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void. Notwithstanding the foregoing, to the
extent permitted by Rule 16b-3 under the Exchange Act and other applicable laws
and regulations, the Plan Administrator may permit an Optionee to (a) during the
Optionee's lifetime, designate a person who may exercise the option after the
Optionee's death by giving written notice of such designation to the Plan
Administrator (provided that such designation may be changed from time to time
by the Optionee by giving written notice to the Plan Administrator revoking any
earlier designation and making a new designation) or (b) transfer the option and
the rights and privileges conferred hereby.
5.8 TERMINATION OF RELATIONSHIP
If the Optionee's relationship with the Company or any related corporation
ceases for any reason other than termination for cause, death or total
disability, and unless by its terms the option sooner terminates or expires,
then the Optionee may exercise, for a three-month period, that portion of the
Optionee's option which is exercisable at the time of such cessation, but the
Optionee's option shall terminate at the end of such period following such
cessation as to all shares for which it has not theretofore been exercised,
unless such provision is waived in the agreement evidencing the option or by
resolution adopted by the Plan Administrator. If, in the case of an incentive
stock option, an Optionee's relationship with the Company or related corporation
changes (i.e., from employee to nonemployee, such as a consultant), such change
shall constitute a termination of an Optionee's employment with the Company or
related corporation and the Optionee's incentive stock option shall terminate in
accordance with this subsection. Upon the expiration of the three-month period
following cessation of employment in the case of an incentive stock option, or
at any time prior to the expiration of the option in the case of a nonqualified
stock option, the Plan Administrator shall have sole discretion in a particular
circumstance to extend the exercise period following such cessation beyond that
specified above. If, however, in the case of an incentive stock option, the
Optionee does not exercise the Optionee's option within three months after
cessation of employment, the option will no longer qualify as an incentive stock
option under the Code.
If an Optionee is terminated for cause, each option shall automatically
terminate as of the first discovery by the Company of any reason for termination
for cause, and such Optionee shall thereupon have no right to purchase any
shares pursuant to such option. "Termination for cause" shall mean dismissal
for dishonesty, conviction or confession of a crime (except minor violations),
fraud, misconduct or disclosure of confidential information. If an Optionee's
relationship with the Company or any related corporation is suspended pending an
investigation of whether or not the Optionee shall be terminated for cause, the
Optionee's rights under each option likewise shall be suspended during the
period of investigation.
If an Optionee's relationship with the Company or any related corporation
ceases because of a total disability, the Optionee's option shall not terminate
or, in the case of an incentive stock option, cease to be treated as an
incentive stock option until the end of the twelve month period following such
cessation (unless by its terms it sooner terminates or expires). As used in
this Plan, the term "total disability" refers to a mental or physical impairment
of the Optionee which is expected to result in death or which has lasted or is
expected to last for a
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continuous period of twelve months or more and which causes the Optionee to be
unable, in the opinion of the Company and two independent physicians, to perform
his or her duties for the Company. Total disability shall be deemed to have
occurred on the first day after the Company and the two independent physicians
have furnished their opinion of total disability to the Plan Administrator.
For purposes of this subsection 5.8, a transfer between or among the
Company and any related corporation shall not be deemed to constitute a
cessation of the Optionee's relationship with the Company or any related
corporation. For purposes of this subsection 5.8, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the option, stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When referring
to a parent corporation, the term "related corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the option, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
5.9 DEATH OF OPTIONEE
If an Optionee dies while he or she has a relationship with the Company or
any related corporation or within the three-month period (or twelve month period
in the case of totally disabled Optionees) following cessation of such
relationship, any option held by such Optionee to the extent that the Optionee
would have been entitled to exercise such option, may be exercised within one
year after his or her death by the person, if any, designated by the Optionee
pursuant to subsection 5.7 to exercise the option after the Optionee's death, by
the personal representative of his or her estate or by the person or persons to
whom the Optionee's rights under the option shall pass (a) by will or by the
applicable laws of descent and distribution or (b) by a designation or transfer
pursuant to Section 5.7.
5.10 NO STATUS OF SHAREHOLDERS
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a shareholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.11 CONTINUATION OF EMPLOYMENT
Nothing in this Plan or in any option shall confer upon any Optionee any
right to continue in the employ of the Company or of a related corporation, or
to interfere in any way with the right of the Company or of any such related
corporation to terminate his or her employment or other relationship with the
Company at any time.
5.12 MODIFICATION AND AMENDMENT OF OPTION
Subject to the requirements of Code Section 422 with respect to incentive
stock options and to the terms and conditions of this Plan, the Plan
Administrator may modify or amend any outstanding options. The modification or
amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her rights or any of the obligations
of the Company under such option. Except as otherwise provided in this Plan, no
outstanding option shall be terminated without the consent of the Optionee.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding incentive stock options
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shall be made in such a manner so as not to constitute a "modification" as
defined in Code Section 424(h) and so as not to cause any incentive stock option
to fail to continue to qualify as an incentive stock option as defined in Code
Section 422(b).
5.13 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan, to
the extent that the aggregate fair market value of the shares (determined at the
time the incentive stock option is granted) with respect to which incentive
stock options are exercisable for the first time by the Optionee during any
calendar year (under this Plan and all other incentive stock option plans of the
Company, a related corporation or a predecessor corporation) exceeds $100,000,
such options shall be treated as nonqualified stock options. The previous
sentence shall not apply if the Internal Revenue Service issues a public rule,
issues a private ruling to the Company, any Optionee, or any personal
representative or distributee of an Optionee or issues regulations changing or
eliminating such annual limit.
SECTION 6 GREATER THAN 10% SHAREHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If an incentive stock option is granted under this Plan to any employee who
owns more than 10% of the total combined voting power of all classes of stock of
the Company or any related corporation, the term of such incentive stock options
shall not exceed five years and the exercise price shall be not less than 110%
of the fair market value of the shares at the time the incentive stock option is
granted. This provision shall control notwithstanding any contrary terms
contained in an option agreement or any other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an employee
shall be deemed to own the shares owned, directly or indirectly, by or for his
or her brothers, sisters, spouse, ancestors and lineal descendants. Shares
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust shall be deemed to be owned proportionately by or for its shareholders,
partners or beneficiaries. If an employee or a person related to the employee
owns an unexercised option or warrant to purchase shares of the Company, the
shares subject to that portion of the option or warrant which is unexercised
shall not be counted in determining stock ownership. For purposes of this
Section 6, shares owned by an employee shall include all shares actually issued
and outstanding immediately before the grant of the incentive stock option to
the employee.
SECTION 7 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be granted
under this Plan, the Maximum Annual Optionee Grant set forth in Section 5.1, the
number and class of shares covered by each outstanding option and the exercise
price per share thereof (but not the total price), and each such option, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from a split or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
7.1 EFFECT OF LIQUIDATION, REORGANIZATION OR CHANGE IN CONTROL
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, upon a merger (other than a merger
of the Company in which the holders of shares of Common Stock immediately prior
to the merger have the same proportionate ownership of shares of Common Stock in
the surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the shareholders of the Company receive cash,
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stock or other property in exchange for or in connection with their shares of
Common Stock, each option shall terminate, but the Optionee shall have the right
immediately prior to any such merger, consolidation, acquisition of property or
stock, reorganization or liquidation to exercise such option in whole or in part
whether or not the vesting requirements set forth in the option agreement have
been satisfied.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger, consolidation, acquisition of property or
stock, or reorganization, all options shall be converted into options to
purchase shares of Exchange Stock unless the Company and the corporation issuing
the Exchange Stock, in their sole discretion, determine that any or all such
options shall not be converted into options to purchase shares of Exchange Stock
but instead shall terminate in accordance with the provisions of subsection
7.1.1. The amount and price of converted options shall be determined by
adjusting the amount and price of the options granted hereunder in the same
proportion as used for determining the number of shares of Exchange Stock the
holders of shares of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, or reorganization. Unless accelerated by the
Plan Administrator, the vesting schedule set forth in the option agreement shall
continue to apply to the options granted for the Exchange Stock.
7.1.3 CHANGE IN CONTROL
In the event of a "Change in Control," as defined below, of the Company,
unless otherwise determined by the Board prior to the occurrence of such Change
in Control, the following acceleration and cash-out provisions shall apply:
(a) Any option outstanding as of the date such Change in Control is
determined to have occurred that is not yet fully vested on such date shall
become immediately exercisable in full and
(b) Optionees shall have, as an alternative to the right to exercise
any option, the right to elect within 90 days following a Change in Control, or,
if during the six months prior to the date of such Change in Control such
Optionee is subject to Section 16 of the Exchange Act, then with respect to
options held by the Optionee, the period following the Change in Control during
which an election may be made shall be extended for one month after the end of
the six-month period required to avoid any liability under Section 16(b) of the
Exchange Act, to receive in cash an amount equal to the difference between the
option exercise price and the fair market value of the shares on the date of
exercising this election, times the number of shares subject to the option or
portion thereof for which this election is made. The election shall be made by
delivering written notice of making such election to the Company within the 90
day period. The notice shall specify the options or portions thereof to which
the election relates. The cash-out proceeds shall be paid to the Optionee or,
in the event of death of an Optionee prior to full payment, to the estate of the
Optionee or to a person who acquired the right to exercise the option by
designation, bequest or inheritance.
7.1.4 DEFINITION OF "CHANGE IN CONTROL"
For purposes of this Plan, a "Change in Control" shall mean:
(a) A "Board Change" (for purposes of this Plan, a Board Change shall
have occurred if individuals who, as of the date of the adoption of this Plan,
constitute the Company's Board of Directors (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board; provided, however,
-------- -------
that for all purposes of this Plan any individual becoming a director subsequent
to such date whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at
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least a majority of the directors then comprising the Incumbent Board shall 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 a 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 (as defined below) other than the Board); or
(b) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of (i) 20% 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"), in the
case of either (A) or (B) of this clause (i), which acquisition is not approved
in advance by a majority of the Incumbent Board, or (ii) 33% or more of either
(A) the Outstanding Company Common Stock or (B) the Outstanding Company Voting
Securities, in the case of either (A) or (B) of this clause (ii), which
acquisition is approved in advance by a majority of the Incumbent Board;
provided, however, that the following acquisitions shall not constitute a Change
- -------- -------
in Control: (x) any acquisition by the Company, (y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any company controlled by the Company, or (z) any acquisition by any company
pursuant to a reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in clauses
(i), (ii) and (iii) of the following subsection (c) are satisfied; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the company resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such company 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, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such company resulting from such
reorganization, merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 33% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 33% or more of, respectively, the then outstanding shares of common
stock of the company resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting securities of such
company entitled to vote generally in the election of directors, and (iii) at
least a majority of the members of the board of directors of the company
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
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
company, with respect to which following such sale or other disposition, (A)
more than 60% of, respectively, the then outstanding shares of common stock of
such company and the combined voting power of the then
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outstanding voting securities of such company 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 disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such company and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 33% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities, as
the case may be) beneficially owns, directly or indirectly, 33% or more of,
respectively, the then outstanding shares of common stock of such company and
the combined voting power of the then outstanding voting securities of such
company entitled to vote generally in the election of directors, and (C) at
least a majority of the members of the board of directors of such company were
approved by a majority 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.
7.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments, other than those made after a Change in Control
pursuant to Section 7.1.3, shall be made by the Board, and its determination as
to what adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive. Unless an Optionee agrees otherwise, any change or
adjustment to an incentive stock option shall be made in such a manner so as not
to constitute a "modification" as defined in Code Section 424(h) and so as not
to cause his or her incentive stock option issued hereunder to fail to continue
to qualify as an incentive stock option as defined in Code Section 422(b).
SECTION 8 SECURITIES REGULATION
Shares of Common Stock shall not be issued with respect to any option
unless the exercise of such option and the issuance and delivery of such shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, any applicable state securities laws, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance, including the availability, if
applicable, of an exemption from registration for the issuance and sale of any
shares hereunder.
SECTION 9 AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may at any time suspend, amend or terminate this Plan, provided
that to the extent required for compliance with Rule 16b-3 under the Exchange
Act, Section 422 of the Code or any applicable law or regulation, the
shareholders must approve any amendment that will:
(a) increase the number of shares which are to be reserved for
issuance in connection with options under this Plan;
(b) with respect to nonqualified stock options, materially modify the
requirements as to eligibility for participation in this Plan or, with respect
to incentive stock options, change the designation of the participants or class
of participants eligible for participation in this Plan; or
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(c) otherwise materially increase the benefits accruing to the
participants under this Plan.
Such shareholder approval must be obtained (a) within twelve months after
the adoption by the Board of such amendment or (b) if earlier, and to the extent
required for compliance with Rule 16b-3 under the Exchange Act, at the next
annual meeting of shareholders after such adoption by the Board.
Any amendment made to this Plan which would constitute a "modification" to
incentive stock options outstanding on the date of such amendment, shall not be
applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
9.2 AUTOMATIC TERMINATION
Unless sooner terminated by the Board, this Plan shall terminate ten years
from the earlier of (a) the date on which this Plan is adopted by the Board or
(b) the date on which this Plan is approved by the shareholders of the Company.
No option may be granted after such termination or during any suspension of this
Plan. The amendment or termination of this Plan shall not, without the consent
of the Optionee, alter or impair any rights or obligations under any option
theretofore granted under this Plan.
SECTION 10 EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board so long as it
is approved by the Company's shareholders any time within twelve months after
the adoption of this Plan or, if earlier, and to the extent required for
compliance with Rule 16b-3 under the Exchange Act, at the next annual meeting of
shareholders after adoption by the Board.
Adopted by the Board of Directors on January 21, 1992 and approved by the
shareholders on January 21, 1992. Restated Plan adopted by the Board of
Directors on March 2, 1994, and approved by the Company's shareholders on March
23, 1994. Restated Plan adopted by the Board of Directors on January 30, 1998
and approved by the Company's shareholders on May 5, 1998.
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