1996 STOCK OPTION/STOCK INCENTIVE PLAN
(as amended effective October 16, 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.
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.
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. 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.
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 Incentive Program specified in
Article Four. Under the Regular Option Grant Program, eligible Employees,
non-Employee Board members 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, non-Employee Board
members 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, non-Employee Board members 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 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 and Section 144 of the Delaware General Corporation
Law) to determine which Employees, non-Employee Board members 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 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 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. 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.
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 in accordance with subparagraph b.
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, non-
Employee Board members or Consultants eligible for option grants under this
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 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.
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 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.
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.
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.
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;
(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. 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.
E. 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.
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.
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. 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.
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).
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.
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 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.