Facing a slumping stock price that has lost 67 percent of its value in the past five years, ZymoGenetics is considering a plan to allow the majority of its employees to trade in existing stock options for new options at lower strike prices.

The plan -- disclosed in a SEC filing today -- would allow employees to trade in options above the exercise price of $7.90. In return, they would get fewer options that would be priced based on a closing stock price at the time of the exchange. The stock of Seattle's largest biotech closed today at $5.96.

ZymoGenetics is seeking shareholder approval for the plan, writing in the filing that the exchange would help it retain employees. Ninety percent of the company's employees hold some stock options above $7.90.

"Our management and Board of Directors believe that these outstanding out-of-the-money stock options do not provide the incentive and retention benefits they were intended to provide because they are perceived by employees as having little or no potential value," the company writes in the filing. "As a result, we believe that our risk of losing key contributors is increased."

This is not an uncommon problem for big companies to face. As growth slows and the stock slumps, talented employees are more inclined to test the waters with other opportunities. Microsoft has also faced these issues over the years.

Of course, that's less of an issue in a tough economic climate where many employees are just happy to collect their salaries. But the ZymoGenetics' filing shows just how important retaining talent is, especially in the competitive biotech arena.

Zymo chopped its staff by a third earlier this year, which also could be causing some angst about future prospects at the company.

The stock option exchange program would be voluntary. But the company laid out examples of what it could look like for some key employees if they were to participate at a new exercise price of $5.88

For example, CEO Doug Williams -- who holds 593,674 shares at a weighted average price per share of $16.39 -- would end up with 280,070 after the exchange. Chief Medical Officer Eleanor Ramos -- who holds 57,500 shares at a weighted average price per share of $14.33 -- would have her options reset to 34,571.

[Via The Seattle Times]