1996 STOCK OPTION/STOCK INCENTIVE PLAN
(as approved by the Board of Directors on February 8, 1996)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
A. This 1996 Stock Option/Stock Incentive Plan (the "Plan") is intended to
promote the interests of Genentech, Inc., a Delaware corporation (the
"Company"), by providing a method whereby the Company may retain the services
of persons now employed by or serving as consultants or directors to it, secure
and retain the services of persons capable of filling such positions and
provide incentives for such persons to exert maximum efforts for the success of
the Company or its parent or subsidiary corporations.
B. For purposes of the Plan, the following definitions shall be in effect:
CHANGE IN CONTROL: "Change in Control" shall have the meaning set
forth in Article Two, III.C. hereof.
CHANGE IN CONTROL PRICE: "Change in Control Price" shall have the
meaning set forth in Article Two, II.C.4.b. hereof.
CLOSING SELLING PRICE: The Closing Selling Price per share of Special
Common Stock on any relevant date under the Plan shall be the closing selling
price per share of Special Common Stock, if such Special Common Stock is
reported on a national securities exchange or reported on the NASDAQ National
Market System (or any successor system), for the trading day immediately
preceding the date in question, as such price is published in the Wall Street
Journal (or if such publication is not available, a comparable publication
selected by the Committee).
CONSULTANT: An individual shall be considered to be a Consultant for
so long as such individual continues to render personal services to the Company
or one or more of its Parent or Subsidiaries as an independent contractor or
continues to have an effective and unexpired consulting agreement with the
Company.
CORPORATE TRANSACTION: "Corporate Transaction" shall have the meaning
set forth in Article Two, III.A. hereof.
EMPLOYEE: An individual shall be considered to be an Employee for so
long as such individual remains in the employ of the Company or one or more of
its Parent or Subsidiaries, irrespective of whether employment services are
actually provided by the individual.
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PARENT: A corporation shall be deemed to be a parent of the Company
if it is a corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each such corporation in the
unbroken chain (other than the Company) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
SECTION 16(b) INSIDER: An individual shall be considered to be a
Section 16(b) Insider on any relevant date under the Plan if such individual
(A) is at the time an officer or director of the Company subject to the short-
swing profit restrictions of the regulations promulgated under Section 16 of
the Securities Exchange Act of 1934, as amended (the "1934 Act") or (B) unless
Section 16 or regulations promulgated thereunder, are amended to provide
otherwise, was such an officer or director at any time during the six month
period immediately preceding the date in question and made any purchase or sale
of Special Common Stock during such six-month period.
SERVICE: An individual shall be deemed to be in the Service of the
Company for so long as such individual renders service on a periodic basis to
the Company or one or more of its Parent or Subsidiaries as an Employee or
Consultant.
SPECIAL COMMON STOCK: The Special Common Stock issuable under the
Plan shall be shares of the Company's Callable Putable Common Stock, par value
$0.02 per share. All references to "shares" or "stock", shall be deemed to be
references to shares of the Special Common Stock.
SUBSIDIARY: A corporation shall be deemed to be a subsidiary of the
Company if it is one of the corporations (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided each such
corporation (other than the last corporation in the unbroken chain) owns, at
the time of determination, stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain. For purposes of non-statutory option grants under Article Two
and stock incentive grants under Article Four and all Corporate Transaction
provisions of the Plan, the term "subsidiary" shall also include any
partnership, joint venture or other business entity of which the Company owns,
directly or indirectly through another subsidiary corporation, more than a
fifty percent (50%) interest in voting power, capital or profits.
C. Neither stock option grants nor stock bonus issuances made to any individual
under the Plan shall in any way affect, limit or restrict such individual's
eligibility to participate in any other stock plan or other compensation or
benefit plan, arrangement or practice now or hereafter maintained by the
Company or any Parent or Subsidiary.
Except for the grant of options to be made pursuant to the Automatic
Grant Program set forth in Article Three below and Section I of Article Three
of the Company's 1994 Stock Option Plan, as amended (the "1994 Plan"), non-
Employee Board members shall not be eligible to receive any option grants or
stock issuances under this Plan or any other stock plan of the Company or any
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Parent or Subsidiary. The terms of Section I of Article Three of the 1994 Plan
providing for automatic option grants to non-employee members of the Board
shall terminate on April 30, 1996.
II. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Compensation Committee (the
"Committee"). The Committee shall be comprised of not less than two (2) Board
members ("Disinterested Directors") who: (i) were not during the one year prior
to serving on the Committee granted or awarded equity securities under this
Plan or any other stock option, stock appreciation, stock bonus or other stock
plan of the Company or its Parent or Subsidiaries, except as permitted by Rule
16b-3(c)(2)(i) promulgated under the 1934 Act ("Rule 16b-3(c)(2)(i)") or (ii)
are otherwise considered to be "disinterested directors" within Rule
16b-3(c)(2)(i), or any other applicable rules, regulations or interpretations
of the Securities and Exchange Commission (the "SEC"). The Board may from time
to time appoint members to the Committee in substitution for (or in addition
to) members previously appointed, and the Board shall have the authority to
fill any and all vacancies on the Committee, however caused. The requirement
that the Committee be composed of Disinterested Directors shall not apply
during any period in which the Company does not have an equity security
registered under Section 12 of the 1934 Act.
B. Subject to limitations contained elsewhere herein and to the provisions of
Section V., C. and D. of this Article I relating to adjustments upon changes in
stock, the aggregate number of shares of stock that may be subject to options
and stock appreciation rights granted hereunder to any Employee in a calendar
year shall not exceed two hundred fifty thousand (250,000) shares of the
Company's Special Common Stock.
C. Subject to the express provisions of the Plan, the Committee shall have
plenary authority:
(i) to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations deemed
necessary or advisable in administering the Plan; and
(ii) to change the terms and conditions of any outstanding
discretionary option grant or unvested stock issuance, provided such action
does not, without the consent of the holder, adversely affect the rights and
obligations such individual may have under the Plan or the outstanding grant or
stock issuance.
D. Determinations of the Committee on all matters relating to the Plan and any
discretionary option grants or stock issuances made hereunder shall be final,
binding and conclusive on all persons having any interest in the Plan or any
options granted or shares issued under the Plan.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate components: the Regular Option
Grant Program specified in Article Two, the Automatic Grant Program specified
in Article Three and the Stock
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Incentive Program specified in Article Four. Under the Regular Option Grant
Program, eligible Employees and Consultants may be granted options to purchase
shares of Special Common Stock at an exercise price equal to not less than 50%
of the Closing Selling Price per share on the grant date. Under the Automatic
Grant Program, non-Employee Board members shall automatically be granted
options to purchase shares of Special Common Stock on the dates and in the
amounts specified in Article Three below at an exercise price of 100% of the
Closing Selling Price per share of Special Common Stock on the date of grant.
B. Under the Stock Incentive Program, eligible Employees and Consultants may be
awarded shares of Special Common Stock as a reward for past services or as an
incentive to the performance of future services. Such shares may be issued as
fully-vested shares or as shares vesting over time.
C. The provisions of Articles One, Five and Six of the Plan shall apply to the
Regular Option Grant Program, the Automatic Option Grant Program and the Stock
Incentive Program and shall accordingly govern the interests of all individuals
in the Plan.
IV. ELIGIBILITY FOR OPTION GRANTS AND STOCK ISSUANCES
A. The individuals eligible to receive option grants ("Optionees") and/or stock
incentives ("Recipients") pursuant to the Plan shall be limited to (i) those
Employees and Consultants selected by the Committee and (ii) those non-Employee
Board members who are entitled to option grants pursuant to the Automatic
Option Grant Program of Article Three.
V. STOCK SUBJECT TO THE PLAN
A. The Special Common Stock issuable under the Plan shall be made available
either from authorized but unissued shares of Special Common Stock or from
shares of Special Common Stock reacquired by the Company on the open market.
The aggregate number of shares of Special Common Stock issuable over the term
of this Plan, whether through exercised options or direct stock issuances shall
not exceed 9,000,000 shares (subject to adjustment from time to time in
accordance with paragraphs C. and D. below).
B. Should an option granted under this Plan expire or terminate for any reason
prior to exercise or surrender in full (including options canceled in
accordance with the cancellation-regrant provisions of the Regular Option Grant
Program), the shares subject to the portion of the option not so exercised or
surrendered shall be available for subsequent option grants under this Plan.
Shares subject to stock appreciation rights exercised in accordance with the
Stock Appreciation Right provisions of Article Two and shares repurchased by
the Company pursuant to its repurchase rights under the Plan shall not be
available for subsequent issuance, whether through option grants, stock
appreciation rights or direct issuances, under this Plan.
C. In the event any change is made to the Special Common Stock issuable under
the Plan by reason of any stock dividend, stock split, combination of shares,
exchange of shares or other change
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affecting the outstanding Special Common Stock as a class without receipt of
consideration, then appropriate adjustments shall be made by the Committee to
(i) the aggregate number and/or class of shares issuable under this Plan, the
maximum number and/or class of shares purchasable per Employee pursuant to the
applicable limitation of Section II.B of this Article One and the number and/or
class of shares for which the automatic option grants are to be made pursuant
to the provisions of Article Three, to reflect the effect of such change upon
the Company's capital structure, (ii) the number and/or class of shares and the
exercise price per share of the stock subject to each outstanding option in
order to preclude the dilution or enlargement of benefits thereunder and (iii)
the number and/or class of shares and the exercise price per share in effect
under each outstanding stock appreciation right in order to preclude the
dilution or enlargement of benefits thereunder. All adjustments made by the
Committee pursuant to this paragraph C. shall be final, binding and conclusive.
D. Subject to the special priority provisions of Article Six of the Plan, in
the event that (i) the Company is the surviving entity in any Corporate
Transaction that does not result in the termination of outstanding options
pursuant to the Corporate Transaction provisions of the Plan or (ii) the
outstanding options under the Plan are to be assumed in connection with such
Corporate Transaction, then each such continuing or assumed option shall,
immediately after such Corporate Transaction, be appropriately adjusted to
apply and pertain to the number and class of securities which would be
issuable, in consummation of such Corporate Transaction, to an actual holder of
the same number of shares of Special Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the exercise price payable per share subject to each option,
provided that the aggregate exercise price of such option shall remain the
same. In addition, the aggregate number and/or class of shares issuable under
this Plan shall be appropriately adjusted to reflect the effect of such
Corporate Transaction upon the Company's capital structure.
ARTICLE TWO
REGULAR OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
A. The Committee shall have plenary authority (subject to the express
provisions of the Plan) to determine which Employees and Consultants are to be
granted options under this Regular Option Grant Program, the number of shares
to be covered by each such option, the status of the granted option as either
an incentive stock option ("Incentive Option") which meets the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code"), or a non-statutory option not intended to meet such requirements,
the time or times at which such option is to become exercisable, the time or
times at which such option (or the Shares subject to such option) becomes
vested (referred to herein as the "vesting schedule") and the term for which
the option is to remain outstanding, up to a maximum term of ten (10) years.
B. The granted options shall be evidenced by instruments in such form as the
Committee shall from time to time approve; provided, however, that each such
instrument shall comply with and
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incorporate the terms and conditions specified below, except as such terms and
conditions must be modified for Incentive Options as set forth below in Section
IV of this Article Two.
1. Exercise Price.
a. The exercise price per share shall be fixed by the Committee, but
in no event shall the exercise price per share be less than fifty percent (50%)
of the Closing Selling Price per share of Special Common Stock on the date of
the option grant.
b. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the loan provisions of this Article Two, be
payable in one of the alternative forms specified below:
(A) full payment in cash or check made payable to the ]
Company's order; or
(B) full payment in shares of Special Common Stock held by
the Optionee for the requisite period necessary to avoid a charge to the
Company's reported earnings and valued at the Closing Selling Price on the
Exercise Date (as such term is defined below); or
(C) full payment in a combination of shares of Special
Common Stock held by the Optionee for the requisite period necessary to avoid a
charge to the Company's reported earnings and valued at the Closing Selling
Price on the Exercise Date and cash or check.
c. For purposes of subparagraph b. above, the Exercise Date shall be
the first date on which there is delivered to the Company both (i) written
notice of the exercise of the option and (ii) payment of the exercise price for
the purchased shares.
2. Term and Exercise of Options.
a. Each option granted under this Regular Option Grant Program shall
be exercisable in one or more installments over the Optionee's period of
Service as shall be determined by the Committee and set forth in the instrument
evidencing such option; provided, however, that unless no longer required by
SEC Rule 16b-3 issued under Section 16b-3 of the 1934 Act, no such option
granted to a Section 16(b) Insider shall become exercisable in whole or in part
within the first six (6) months after the grant date, except in the event of
the Optionee's death or disability.
b. Except for options granted to Section 16(b) Insiders, an option
may be exercisable by the Optionee or, in the event the Optionee is permanently
disabled (as such term is defined in Section 22(e) of the Code), by his or her
spouse, and such option may be transferred by the Optionee to a trust for such
Optionee's benefit or the benefit of an immediate family member or by will or
the laws of descent or distribution. An option granted to a Section 16(b)
Insider shall, during the lifetime of such Optionee, be exercisable only by
that Optionee and shall not be assignable or transferable by the Optionee
otherwise than by will or by the laws of descent and distribution.
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c. The Committee may, at its discretion, accelerate the vesting
schedule of any outstanding option at any time.
3. Termination of Service.
a. Should an Optionee cease to continue in Service for any reason
(other than termination due to death, permanent disability or retirement from
employment by the Company after reaching age sixty-five (65)) while the holder
of one or more outstanding options under this Regular Option Grant Program,
then such options shall not be exercisable at any time after the earlier of (i)
the specified expiration date of the option term or (ii) the expiration of
three (3) months after the Optionee's cessation of Service. Each such option
shall, during the applicable period following cessation of Service, be
exercisable only to the extent of the number of shares (if any) in which the
Optionee is vested on the date of such cessation of Service; provided, however,
that the Committee shall have the discretion to specify, either at the time the
option is granted or at the time that the Optionee ceases Service, that vesting
of such option may be extended for a period not to exceed three (3) years from
the date of cessation of Service and that the applicable expiration period set
forth in clause (ii) may be increased to a period of up to five (5) years.
b. Should an Optionee cease to continue in Service due to permanent
disability while the holder of one or more outstanding options under this
Regular Option Grant Program, then such options shall not be exercisable at any
time after the earlier of (i) the specified expiration date of the option term
or (ii) the expiration of three (3) months after the Optionee's cessation of
Service. Each such option shall, during the applicable period following
cessation of Service, be exercisable only to the extent of the number of shares
(if any) in which the Optionee is vested on the date of such cessation of
Service; provided, however, that the Committee shall have the discretion to
specify, either at the time the option is granted or at the time that the
Optionee ceases Service, that the vesting of such option may be accelerated or
extended from the date of cessation of Service and that the period of
exercisability can be increased up to the expiration date of the option term.
Should an Optionee cease to continue in Service due to death, or retirement
from employment by the Company after reaching age sixty-five (65), while the
holder of one or more outstanding options under this Regular Option Grant
Program, then all unvested options on such date shall automatically become
vested and the expiration date of the option shall automatically be extended to
the expiration date of the option term.
c. Any option granted to an Optionee under this Regular Option Grant
Program and outstanding in whole or in part on the date of the Optionee's death
may be subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution in the case of the Optionee's death, and any option granted to an
Optionee under this Regular Option Grant Program which is outstanding in whole
or in part on the date of the Optionee's cessation of Service due to permanent
disability may be exercised by the Optionee's spouse or designee. Any such
exercise must be inaccordance with subparagraph b.
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d. The Committee shall have complete discretion, exercisable either
at the time the option is granted or at the time the Optionee ceases Service,
to establish as a provision applicable to the exercise of one or more options
granted under this Regular Option Grant Program that during the limited period
of exercisability following cessation of Service due to retirement, "plant
closing" or "mass layoff" (as such terms are defined at 29 U.S.C. Section 2101)
that is subject to the notice requirements of 29 U.S.C. Section 2102, the
option will continue to vest according to the vesting schedule that would have
applied had the optionee continued in Service.
4. Repurchase Rights.
a. Options may provide that notwithstanding any vesting schedule
pursuant to subparagraph 2. a. above, they may be exercised prior to such
vesting schedule so long as the Optionee enters into a repurchase agreement
satisfactory to the Company. The shares of Special Common Stock acquired upon
the exercise of one or more options granted under this Regular Option Grant
Program may be subject to repurchase by the Company, at the exercise price paid
per share, upon the Optionee's cessation of Service prior to vesting in such
shares.
b. Any such repurchase right shall be exercisable by the Company
upon such terms and conditions (including the establishment of the appropriate
vesting schedule and other provision for the expiration of such right in one or
more installments over the optionee's period of Service) as the Committee may
specify in the instrument evidencing such right, which instrument shall include
appropriate terms with respect to the legending of stock certificates and the
placing of unvested shares into escrow.
c. All of the Company's outstanding repurchase rights shall
automatically terminate, and all shares purchased under this Regular Option
Grant Program shall immediately vest in full, upon the occurrence of any
Corporate Transaction or Change in Control; provided, however, that no such
termination of repurchase rights or immediate vesting of the purchased shares
shall occur if (and to the extent that): (i) the Company's outstanding
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction or (ii) such termination
of repurchase rights and acceleration of vesting are precluded by other
limitations imposed by the Committee either at the time the option is granted
or at the time the option shares are purchased.
5. Stockholder Rights.
An option holder shall have none of the rights of a stockholder with respect to
any shares covered by the option until such individual shall have exercised the
option, paid the option price and satisfied all other conditions precedent to
the issuance of certificates for the purchased shares.
II. STOCK APPRECIATION RIGHTS
A. The Committee shall have full power and authority, exercisable in its sole
discretion, to grant stock appreciation rights to one or more Employees or
Consultants eligible for option grants under this
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Regular Option Grant Program. Each such right shall entitle the holder to a
distribution based on the appreciation in the value per share of a designated
amount of Special Common Stock.
B. Three types of stock appreciation rights shall be authorized for issuance
under the Plan:
1. Tandem Stock Appreciation Rights. These rights require the holder
to elect between the exercise of the underlying option for shares of Special
Common Stock and the surrender of such option for an appreciation distribution
equal to the excess of (i) the Closing Selling Price (on the date of option
surrender) of the vested shares of Special Common Stock purchasable under the
surrendered option over (ii) the aggregate option price payable for such
shares.
2. Concurrent Stock Appreciation Rights. Concurrent rights may apply
to all or any portion of the shares of Special Common Stock subject to the
underlying option and will be exercised automatically at the same time the
option is exercised for those shares. The appreciation distribution to which
the holder of such concurrent right shall be entitled upon exercise of the
underlying option shall be in an amount equal to the excess of (i) the
aggregate Closing Selling Price (at date of exercise) of the vested shares
purchased under the underlying option with such concurrent rights over (ii) the
aggregate option price paid for those shares.
3. Limited Stock Appreciation Rights. These rights will entitle the
holder to surrender outstanding options in connection with certain Changes in
Control (as defined below) for an appreciation distribution equal in amount to
the excess of (i) the Change in Control Price (as defined below) of the number
of shares in which the Optionee is at the time vested under the surrendered
option over (ii) the aggregate option price payable for such vested shares.
C. The terms and conditions applicable to each Tandem Stock Appreciation Right
("Tandem Right"), Concurrent Stock Appreciation Right ("Concurrent Right") and
Limited Stock Appreciation Right ("Limited Right") shall be as follows:
1. Tandem Rights.
a. Tandem Rights may be tied to either Incentive Options or
non-statutory options. Each such right shall, except as specifically set forth
below, be subject to the same terms and conditions applicable to the particular
stock option grant to which it pertains.
b. The Appreciation Distribution payable on the exercised Tandem
Right shall be in an amount equal to the excess of (i) the Closing Selling
Price (on the date of the option surrender) of the number of shares of Special
Common Stock in which the Optionee is vested under the surrendered option over
(ii) the aggregate option price payable for such vested shares.
c. The Appreciation Distribution may, in the Committee's discretion,
be made in cash, in shares of Special Common Stock or in a combination of cash
and Special Common Stock. Any shares of Special Common Stock so distributed
shall be valued at the Closing Selling Price on the date the
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option is surrendered, and the shares of Special Common Stock subject to the
surrendered option shall not be available for subsequent issuance under this
Plan.
2. Concurrent Rights.
a. Concurrent Rights may be tied to any or all of the shares of
Special Common Stock subject to any Incentive Option or non-statutory option
grant made under this Regular Option Grant Program. The Concurrent Right shall,
except as specifically set forth below, be subject to the same terms and
conditions applicable to the particular stock option grant to which it
pertains.
b. The Concurrent Right shall be automatically exercised at the same
time the underlying option is exercised for the particular shares of Special
Common Stock to which the Concurrent Right pertains.
c. The Appreciation Distribution payable on the exercised Concurrent
Right shall be equal to the excess of (i) the aggregate Closing Selling Price
(on the Exercise Date) of the vested shares of Special Common Stock purchased
under the underlying option which have Concurrent Rights appurtenant to them
over (ii) the aggregate option price paid for such shares.
d. The Appreciation Distribution may, in the Committee's discretion,
be paid in cash, in shares of Special Common Stock or in a combination of cash
and Special Common Stock. Any shares of Special Common Stock so distributed
shall be valued at the Closing Selling Price on the date the Concurrent Right
is exercised and shall reduce on a one-for-one basis the number of shares of
Special Common Stock thereafter issuable under this Plan.
3. Terms Applicable to Both Tandem Rights and Concurrent Rights.
a. To exercise any outstanding Tandem or Concurrent Right, the
holder must provide written notice of exercise to the Company in compliance
with the provisions of the instrument evidencing such right.
b. If a Tandem or Concurrent Right is granted to an individual who
is at the time a Section 16(b) Insider, then the instrument of grant shall
incorporate all the terms and conditions at the time necessary to assure that
the subsequent exercise of such right shall qualify for the safe-harbor
exemption from short-swing profit liability provided by SEC Rule 16b-3 (or any
successor rule or regulation).
c. No limitation shall exist on the aggregate amount of cash
payments the Company may make under this Article Two Program in connection with
the exercise of Tandem or Concurrent Rights.
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4. Limited Rights.
a. Each Section 16(b) Insider shall have the Limited Right,
exercisable in the event there should occur a Change in Control (as such term
is defined below), to surrender any or all of the options (whether incentive
stock options or non-statutory options) held by such individual under this
Article Two Program, to the extent such options (i) have been outstanding for
at least six (6) months and (ii) are at the time exercisable for vested shares.
b. In exchange for each option surrendered in accordance with
subparagraph a. above, the Section 16(b) Insider shall receive an Appreciation
Distribution in an amount equal to the excess of (i) the Change in Control
Price (determined as of the date of surrender) of the number of shares in which
the Section 16(b) Insider is at the time vested under the surrendered option
over (ii) the aggregate option price payable for such vested shares. For
purposes of such Appreciation Distribution, the Change in Control Price per
share of the vested Special Common Stock subject to the surrendered option
shall be deemed to be equal to the greater of (a) the Closing Selling Price per
share on the date of surrender or (b) the highest reported price per share paid
in effecting the Change in Control. However, if the option is an Incentive
Option, then the Change in Control Price of the vested shares subject to the
surrendered option shall not exceed the value per share determined under clause
(a) above.
c. The Appreciation Distribution shall be made entirely in cash, and
the shares of Special Common Stock subject to each surrendered option shall not
be available for subsequent issuance under this Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any of the following transactions (a "Corporate
Transaction"):
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company to any entity other than a Subsidiary of the
Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's outstanding
voting stock held by persons who are not "Subject Persons" as defined in
Article Eleventh of the Company's Certificate of Incorporation (as in effect on
September 7, 1990) including persons included in such definition by
subparagraph (b) thereof is transferred to holders different from those who
held the stock immediately prior to such merger, then the exercisability of
each option outstanding under this Regular Option Grant Program shall be
automatically accelerated so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Special Common Stock
purchasable under such option and may be exercised for all or any portion
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of such shares. However, an outstanding option under this Regular Option Grant
Program shall not be so accelerated if and to the extent: (i) such option is,
in connection with the Corporate Transaction, either to be assumed by the
successor corporation or parent thereof or be replaced with a comparable option
to purchase shares of the capital stock of the successor corporation or parent
thereof, or (ii) such option is to be replaced by a comparable cash incentive
program of the successor corporation based on the value of the option at the
time of the Corporate Transaction, or (iii) the acceleration of such option is
subject to other applicable limitations imposed by the Committee at the time of
grant. The determination of comparability under clause (i) or (ii) above shall
be made by the Committee, and its determination shall be final, binding and
conclusive.
B. Upon the consummation of the Corporate Transaction, all outstanding options
under this Regular Option Grant Program shall, to the extent not previously
exercised or assumed by the successor corporation or its parent company,
terminate and cease to be outstanding.
C. In the event of any of the following transactions (a "Change in Control"):
(i) the acquisition by a person or group of related persons, other
than the Company or any person controlling, controlled by or under common
control with the Company, of beneficial ownership (as determined pursuant to
the provisions of Rule 13d-3 under the 1934 Act) of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities pursuant to a transaction or series of
related transactions which the Board does not approve; or
(ii) the first date within any period of thirty-six (36) consecutive
months or less on which there is effected any change in the composition of the
Board such that the majority of the Board (determined by rounding up to the
next whole number) ceases to be comprised of individuals who either (I) have
been members of the Board continuously since the beginning of such period or
(II) have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause (I) who
were still in office at the time such election or nomination was approved by
the Board; then the exercisability of each option outstanding under this
Regular Option Grant Program shall be automatically accelerated so that each
such option shall become exercisable, immediately prior to such Change in
Control, for the full number of shares purchasable under such option and may be
exercised for all or any portion of such shares. However, an outstanding option
under this Regular Option Grant Program shall not be so accelerated if and to
the extent one or more limitations imposed by the Committee at the time of
grant preclude such acceleration upon a Change in Control.
D. The grant of options under this Regular Option Grant Program shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
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IV. INCENTIVE OPTIONS
A. The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Regular Option Grant Program. Options
which are specifically designated as "non-statutory" options when issued under
this Regular Option Grant Program shall not be subject to such terms and
conditions.
1. Option Price.
The option price per share of the Special Common Stock subject to an
Incentive Option shall in no event be less than one hundred percent (100%) of
the Closing Selling Price per share of Special Common Stock on the grant date.
2. 10% Stockholder.
If any individual to whom an Incentive Option is to be granted
pursuant to the provisions of this Regular Option Grant Program is on the grant
date the owner of stock (as determined under Section 424(d) of the Internal
Revenue Code) possessing 10% or more of the total combined voting power of all
classes of stock of the Company or any one of its Parent or Subsidiaries (such
person to be herein referred to as a 10% Stockholder), then (i) the option
price per share shall not be less than one hundred and ten percent (110%) of
the Closing Selling Price per share of Special Common Stock on the grant date
and (ii) the maximum term of the option shall not exceed five (5) years from
the grant date.
3. Dollar Limitation.
The aggregate fair market value (determined on the basis of the
Closing Selling Price in effect on the respective date or dates of grant) of
the Special Common Stock for which one or more options granted to any Employee
under this Plan (or any other option plan of the Company or its Parent or
Subsidiaries) may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two or more such options which become exercisable for the first
time in the same calendar year, the foregoing limitation on the exercisability
thereof as incentive stock options under the Federal tax laws shall be applied
on the basis of the order in which such options are granted.
4. Term and Exercise of Options.
a. No Incentive Option shall have a term in excess of ten (10) years
from the grant date.
b. An Incentive Option shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable during the
lifetime of the Optionee only by the Optionee.
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5. Termination of Service.
A. Notwithstanding any terms in the Plan to the contrary, an
Incentive Option must be exercised within the three (3) month period commencing
with the date of cessation of Employee status for any reason, except that in
the event the Optionee's cessation of Employee status is due to permanent
disability, such period shall be one (1) year from the date of such cessation
of Employee status. Incentive Options not exercised within the applicable
period shall be treated as non-statutory options.
B. Except as modified by the preceding provisions of this Incentive
Options section, all the provisions of this Regular Option Grant Program shall
be applicable to the Incentive Options granted hereunder. If any option
originally granted as an Incentive Stock Option is modified so as not to
qualify under the Code as an Incentive Stock Option, such modified Incentive
Stock Option shall be a non-statutory option.
V. CANCELLATION AND RE-GRANT OF OPTIONS
The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under this Regular Option Grant
Program and to grant in substitution therefor new options under this Plan
covering the same or different numbers of shares of Special Common Stock but
having an option price per share not less than fifty percent (50%) of the
Closing Selling Price (one hundred percent (100%) of the Closing Selling Price
in the case of an Incentive Option or, in the case of a 10% Stockholder, not
less than one hundred and ten percent (110%) of the Closing Selling Price) per
share of Special Common Stock on the new grant date.
VI. LOANS OR GUARANTEE OF LOANS
The Committee may assist any Employee (including any officer or
director) in the exercise of one or more options under this Regular Option
Grant Program by (a) authorizing the extension of a loan to such Employee from
the Company, (b) permitting the Employee to pay the option price for the
purchased Special Common Stock in installments over a period of years or (c)
authorizing a guarantee by the Company of a third-party loan to the Employee.
The terms of any loan, installment method of payment or guarantee (including
the interest rate and terms of repayment) shall be established by the Committee
in its sole discretion. Loans, installment payments and guarantees may be
granted without security or collateral, but the maximum credit available to the
Optionee shall not exceed the sum of (i) the aggregate exercise price (less the
par value) of the purchased shares plus (ii) any Federal and State income and
employment tax liability incurred by the Employee in connection with the
exercise of the option.
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ARTICLE THREE
AUTOMATIC GRANT PROGRAM
I. AUTOMATIC GRANTS
On April 30, 1996 each individual who is a non-Employee member of
the Board on such date shall automatically be granted a non-statutory option
under this Article Three to purchase 20,000 shares of Special Common Stock.
Each non-Employee who is first appointed or elected a member of the Board after
April 30, 1996 shall automatically be granted, on the date of such individual's
election to the Board, a non-statutory option under this Article Three to
purchase 20,000 shares of Special Common Stock. Each Employee director who is
first elected a member of the Board and who subsequently becomes a non-Employee
director after April 30, 1996 shall automatically be granted, on the date of
such individual's change from Employee to non-Employee director, a non-
statutory option under this Article Three to purchase 20,000 shares of Special
Common Stock.
II. TERMS AND CONDITIONS OF GRANT
Each option granted in accordance with the provisions of this
Article Three shall be evidenced by an instrument in such form as the Committee
approves from time to time for grants made under Article Two; provided,
however, that each such automatic grant shall be subject to the following terms
and conditions:
A. Exercise Price.
The exercise price per share shall be one hundred percent (100%) of
the Closing Selling Price per share of Special Common Stock on the grant date.
B. Term and Vesting of Options.
1. Except as otherwise specified below, each option shall vest in
increments of 5,000 shares on the first, second, third and fourth anniversaries
of the grant date and shall thereafter remain exercisable until the expiration
or earlier termination of the option term.
2. Each granted option shall have a term of ten (10) years measured
from the grant date.
C. Exercise of Option.
Upon exercise of the option, the option exercise price for the
purchased shares shall become immediately due and payable in full in one of the
alternative forms specified below:
(i) cash or check payable to the Company's order;
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(ii) shares of Special Common Stock held by the optionee
for the requisite period necessary to avoid a charge to the Company's reported
earnings and valued at the Closing Selling Price on the date of exercise; or
(iii) any combination of the foregoing so long as the total
payment equals the aggregate exercise price for the purchased shares.
D. Non-Transferability.
During the lifetime of the optionee, the option shall be exercisable
only by the optionee and shall not be assignable or transferable by the
optionee otherwise than by will or by the laws of descent and distribution.
E. Effect of Termination of Board Membership.
1. Should an optionee cease to be a member of the Board for any
reason (other than death) prior to the expiration date of the automatic grant
held by the optionee under this Article Three, then each such grant shall
remain exercisable, for any shares of Special Common Stock for which the option
is exercisable at the time of such cessation of Board membership, for a period
not to exceed the earlier of (i) the expiration of the three (3) month period
following the date of such cessation of Board membership or (ii) the specified
expiration date of the option term.
2. Should the optionee's membership on the Board cease by reason of
death, then each outstanding grant held by the optionee under this Article
Three may be subsequently exercised, for any shares of Special Common Stock for
which the option is exercisable at the time of the optionee's cessation of
Board membership, by the personal representative of the optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and distribution. Any
such exercise must, however, occur prior to the earlier of (i) the expiration
of the twelve (12) month period following the date of the optionee's death or
(ii) the specified expiration date of the option term.
F. Stockholder Rights.
An option holder shall have none of the rights of a stockholder with
respect to any shares covered by an option granted under this Article Three
until such individual shall have exercised the option, paid the option exercise
price in full and satisfied all other conditions precedent to the issuance of
certificates for the purchased shares.
III. CORPORATE TRANSACTION
In the event of a Corporate Transaction, options granted under the
Automatic Grant Program shall be treated as described in Section III of Article
Two, except the provisions of clause (iii) of the penultimate sentence of
Section III A.(iii) of Article Two shall not apply.
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IV. CHANGE IN CONTROL
In the event of a Change in Control, options granted under the
Automatic Grant Program shall be treated as described in Section III of Article
Two, except the last sentence of Section III C.(ii) of Article Two shall not
apply.
ARTICLE FOUR
STOCK INCENTIVE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
A. Shares may be issued under this Stock Incentive Program as a
reward for past services rendered the Company or one or more of its Parent or
Subsidiaries or as an incentive for future service with such entities. Any
unvested shares so issued shall be evidenced by a Restricted Stock Issuance
Agreement ("Issuance Agreement") which complies with the terms and conditions
of this Stock Incentive Program and shall include appropriate terms with
respect to legending of certificates and escrow of unvested shares.
1. Vesting Schedule.
a. The Recipient's interest in the issued shares of Special Common
Stock may, in the absolute discretion of the Committee, be fully and
immediately vested upon issuance or may vest in one or more installments.
b. The elements of the vesting schedule applicable to any unvested
shares issued under this Stock Incentive Program, namely the number of
installments in which the shares are to vest, the interval or intervals (if
any) which are to lapse between installments and the effect which death,
disability or other event designated by the Committee is to have upon the
vesting schedule, shall be determined by the Committee and set forth in the
Issuance Agreement executed by the Company and the Recipient at the time of the
incentive grant.
c. Except as may otherwise be provided in the Issuance Agreement,
the Recipient may not transfer unvested shares of Special Common Stock. The
Recipient, however, shall have all the rights of a stockholder with respect to
such unvested shares, including without limitation the right to vote such
shares and to receive all dividends paid on such shares.
2. Cancellation of Shares.
a. In the event the Recipient should, while his/her interest in the
issued Special Common Stock remains unvested, cease to continue in Service for
any reason whatsoever, then the Company shall have the right to cancel all such
unvested shares, and the Recipient shall thereafter have no further stockholder
rights with respect to such shares.
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b. The Committee may in its discretion waive such cancellation of
unvested shares in whole or in part and thereby effect the immediate vesting of
the Recipient's interest in the shares of Special Common Stock (or other
assets) as to which the waiver applies.
3. Corporate Transaction/Change in Control.
All unvested shares under the Stock Incentive Program shall immediately vest in
full immediately prior to the occurrence of any Corporate Transaction or Change
in Control, except to the extent:
(i) the Company's outstanding cancellation rights are to be assigned
to the successor corporation (or parent thereof) in connection with the
Corporate Transaction, or
(ii) one or more limitations imposed by the Committee at the time of
stock issuance preclude such accelerated vesting.
ARTICLE FIVE
MISCELLANEOUS
I. TAX WITHHOLDING
A. The Company's obligation to deliver shares upon the exercise or surrender of
stock options or stock appreciation rights granted under Article Two or Article
Three or upon the issuance or vesting of shares under Article Four shall be
subject to the satisfaction of all applicable Federal, State and local income
and employment tax withholding requirements.
B. The Committee may, in its discretion and upon such terms and conditions as
it may deem appropriate (including the applicable safe-harbor provisions of SEC
Rule 16b-3 or any successor rule or regulation) provide any or all Optionees or
Recipients with the election to have the Company withhold, from the shares of
Special Common Stock purchased or issued under the Plan, one or more of such
shares with an aggregate Closing Selling Price equal to the designated
percentage (up to 100% specified by the Optionee or Recipient) of the Federal
and State income taxes ("Taxes") incurred in connection with the acquisition of
such shares. In lieu of such direct withholding, one or more Optionees or
Recipients may also be granted the right to deliver unrestricted shares of
Special Common Stock to the Company in satisfaction of such Taxes. The withheld
or delivered shares shall be valued at the Closing Selling Price on the
applicable determination date for such Taxes.
II. AMENDMENT OF THE PLAN
A. The Board shall have the complete and exclusive authority to amend or modify
the Plan in any or all respects whatsoever; provided, however, that no such
amendment or modification shall, without the consent of the holders, adversely
affect rights and obligations with respect to any stock options, stock
appreciation rights or unvested Special Common Stock at the time outstanding
under the Plan.
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In addition, with a view to making available the benefits provided by Section
422 of the Code and/or SEC Rule 16b-3 as in effect from time to time under the
1934 Act, the Board shall, at the time of each such amendment, determine
whether or not to submit such amendment of the Plan to the Company's
stockholders for approval.
B. No material amendments shall be made to the provisions of the Automatic
Grant Program without the approval of the Company's stockholders.
C. The provisions of the Automatic Grant Program shall not be amended more than
once every six months, as required by SEC Rule 16b-3.
III. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board, but no stock
option or stock appreciation right granted under the Plan shall become
exercisable, and no shares shall be issued, unless and until the Plan shall
have been approved by the Company's stockholders. If such stockholder approval
is not obtained within twelve (12) months after the date of the Board's
adoption of the Plan, then all stock options and stock appreciation rights
previously granted under the Plan shall terminate and no further stock options
or stock appreciation rights shall be granted. Subject to such limitation, the
Committee may grant stock options and stock appreciation rights under the Plan
at any time after the effective date and before the date fixed herein for
termination of the Plan.
B. The Plan shall in all events terminate on the date determined by the Board
but in no event shall the Plan terminate later than February 6, 2006. Upon such
termination, any stock options, stock appreciation rights and unvested shares
at the time outstanding under the Plan shall continue to have force and effect
in accordance with the provisions of the instruments evidencing such grants or
issuances.
C. Options may be granted under this Plan to purchase shares of Special Common
Stock in excess of the number of shares then available for issuance under the
Plan, provided (i) an amendment to increase the maximum number of shares
issuable under the Plan is adopted by the Board prior to the initial grant of
any such option and within one year thereafter such amendment is approved by
the Company's stockholders, if such stockholder approval is deemed necessary by
the Board, and (ii) each option granted is not to become exercisable, in whole
or in part, at any time prior to the obtaining of such stockholder approval,
and provided further that at any time that the Amended and Restated Governance
Agreement dated as of October 25, 1995 between the Company and Roche Holdings,
Inc. (the "Amended Governance Agreement") remains in effect, any action by the
Board pursuant to the foregoing shall require the approval of a majority of the
Independent Directors (as such term is defined in Article Eleventh of the
Certificate of Incorporation of the Company).
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IV. MISCELLANEOUS PROVISIONS
A. Any cash proceeds received by the Company from the issuance of shares
hereunder shall be used for general corporate purposes.
B. The implementation of the Plan, the granting of any stock option or stock
appreciation right hereunder, and the issuance of Special Common Stock under
the Regular Option Grant, the Automatic Grant Program or Stock Incentive
Program shall be subject to the Company's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the stock options and stock appreciation rights granted under it and the
Special Common Stock issued pursuant to it.
C. Neither the action of the Company in establishing the Plan, nor any action
taken by the Board or the Committee hereunder, nor any provision of the Plan
itself shall be construed so as to grant any individual the right to remain in
the employ or service of the Company or any of its Parent or Subsidiaries for
any period of specific duration, and the Company (or any parent or subsidiary
retaining the services of such individual) may terminate such individual's
employment or service at any time and for any reason, with or without cause.
D. Nothing contained in the Plan shall be construed to limit the authority of
the Company to exercise its corporate rights and powers, including (without
limitation) the right of the Company (a) to grant options for proper corporate
purposes otherwise than under this Plan to any Employee or other person, firm
or company or association or (b) to grant options to, or assume the option of,
any person in connection with the acquisition (by purchase, lease, merger,
consolidation or otherwise) of the business and assets (in whole or in part) of
any person, firm, company or association.
ARTICLE SIX
SPECIAL REDEMPTION AND PUT PROVISIONS
I. PRIORITY
To the extent there is a conflict between any of the provisions of
this Article Six and any other provision of the Plan, the specific provisions
of this Article Six shall be controlling and shall govern the disposition of
all such options outstanding at the time of the Redemption (as defined below),
upon the exercise of the Put Rights (as defined below), or when both events may
no longer occur. Any rights under Section 1.04 of the Governance Agreement
dated as of September 7, 1990 between the Company and Roche Holdings, Inc.,
("Roche") and Section 1.04 of the Amended Governance Agreement which a holder
of an option, stock appreciation right, or stock issued under the Stock
Incentive Program may have are superseded in their entirety by this Article
Six.
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II. EFFECT OF REDEMPTION ON VESTED OPTIONS AND VESTED STOCK APPRECIATION RIGHTS
AND VESTED SHARES ISSUED UNDER THE STOCK INCENTIVE PROGRAM
A. If the Special Common Stock shall be redeemed by the Company (the
"Redemption") at any time as provided in Section (c)(ii) of Article Third of
the Certificate of Incorporation of the Company as in effect on October 25,
1995 (the "Certificate") or the put rights are exercisable by the stockholders
of the Company (the "Put Rights") at any time as provided in Section (c)(iii)
of Article Third of the Certificate, then holders of all outstanding options
and stock appreciation rights granted hereunder, to the extent vested
immediately prior to the date fixed for the Redemption or to the extent to
which the Put Rights were properly exercised by such holder for their
outstanding vested options and stock appreciation rights granted hereunder
("Vested Securities"), shall promptly be paid for such Vested Securities an
amount equal to the product of (i) the excess of the redemption price or put
price per share fixed in Section (c)(ii) or (iii) of Article Third of the
Certificate, as applicable (without reduction for the payment of any cash
dividends as provided in the fourth sentence of Section (c)(ii)(C) of Article
Third of the Certificate), over the exercise price per share, times (ii) the
number of shares covered by such Vested Security. If either the Redemption or
exercise of the Put Rights occurs as described in the preceding sentence, then
holders of all outstanding shares issued under the Stock Incentive Program, to
the extent vested immediately prior to the date fixed for the Redemption or to
the extent to which the Put Rights were properly exercised by such holder for
their outstanding vested shares issued under the Stock Incentive Program
("Vested Shares"), shall promptly be paid for such Vested Shares an amount
equal to the product of (i) the redemption price or put price per share fixed
in Section (c)(ii) or (iii) of Article Third of the Certificate, as applicable
(without reduction for the payment of any cash dividends as provided in the
fourth sentence of Section (c)(ii)(C) of Article Third of the Certificate),
times (ii) the number of Vested Shares. All payments hereunder shall be reduced
by any appropriate tax withholding.
III. EFFECT OF REDEMPTION ON UNVESTED OPTIONS AND STOCK APPRECIATION RIGHTS,
AND UNVESTED SHARES ISSUED UNDER THE STOCK INCENTIVE PROGRAM
A. Upon the Redemption each option and stock appreciation right granted under
this Plan, to the extent not vested immediately prior to the date fixed for the
Redemption shall be canceled. Upon the Redemption, all unvested shares issued
under the Stock Incentive Program shall be canceled.
IV. EFFECT OF NO REDEMPTION
A. If the Redemption does not occur, each option and stock appreciation right
granted and each share awarded under the Stock Incentive Program under this
Plan which is outstanding on July 1, 1999 shall remain outstanding on the same
terms and conditions (including, without limitation, the exercise price per
share (in the case of options and stock appreciation rights), and the number of
shares for options, stock appreciation rights and shares issued under the Stock
Incentive Program) in effect for such option, stock appreciation right or share
issued under the Stock Incentive Program immediately
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prior to July 1, 1999, except that the shares purchasable under each such
option, stock appreciation right or shares issued under the Stock Incentive
Program shall continue to be shares of Special Common Stock prior to the
Conversion Date (as defined in Section (c)(vi) of Article Third of the
Certificate) and shares of Common Stock on and after the Conversion Date. Each
such continuing option, stock appreciation right and share issued under the
Stock Incentive Program will become exercisable, and shall vest in accordance
with the same installment dates such option, stock appreciation right or share
issued under the Stock Incentive Program would have become exercisable at the
time of grant. Notwithstanding any provision in this Article Six, Section IV,
to the contrary, if at any time following July 1, 1999 the shares of
Genentech's capital stock are no longer listed for trading on the New York
Stock Exchange, the Nasdaq National Market, or any other national exchange for
any reason, any unvested options, stock appreciation rights and shares issued
under the Stock Incentive Program shall automatically be cancelled as of such
date.
V. EXAMPLE
A. For purposes of this example assume that it is July 1, 1999, the Redemption
has not occurred, the Put Rights are exercisable, an individual holds an option
for 100 shares of Special Common Stock with an exercise price of $50 per share,
75 of such shares are vested and 25 shares are unvested, the Special Common
Stock is trading on the New York Stock Exchange at $62 per share, and the Put
Price (as defined in the Certificate) is $60 per share. During the Put Period
(as defined in the Certificate) the holder may properly exercise the holder's
Put Rights with respect to none, some or all of the 75 vested shares. If, for
example, the holder exercised Put Rights for 40 of the 75 shares, that holder
would receive (40 shares) x (60 - 50 dollars per share) = $400, reduced by
appropriate tax withholding. So long as the Special Common Stock (during the
Put Period) or the Common Stock (following the Put Period) are listed for
trading on the New York Stock Exchange, the Nasdaq National Market, or any
other national exchange, (i) the 35 remaining vested shares for which Put
Rights were not exercised shall remain exercisable to acquire shares of Special
Common Stock or Common Stock, as appropriate, and (ii) the 25 unvested shares
would continue to vest and, to the extent vested, be exercisable to acquire
shares of Special Common Stock or Common Stock, as appropriate. If the Special
Common Stock or the Common Stock is no longer listed for trading on the New
York Stock Exchange, the Nasdaq National Market, or any other national exchange
for any reason, any of the 25 shares that are unvested on such date shall
automatically be cancelled.
VI. OTHER
A. On the Conversion Date, all references in the Plan to Special Common Stock
shall automatically become references to Common Stock.
B. The exercise by Roche Holdings, Inc. or its affiliates of its right to
designate nominees to the Board of Directors pursuant to Sections 3.01 and 3.02
of the Amended Governance Agreement shall not constitute a Change in Control.
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