1990 STOCK OPTION/STOCK INCENTIVE PLAN
(as amended effective October 16, 1996)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
A. This 1990 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 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 Common
Stock on any relevant date under the Plan shall be the closing selling price
per share of Common Stock, if such 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).
COMMON STOCK: The Common Stock issuable under the Plan shall be shares of
the Company's common stock, par value $0.02 per share. From and after October
25, 1995, all references to "shares", "stock", or "common stock" shall be
deemed to be references to shares of Callable Putable Common Stock, par value
$0.02 per share (the "Special Common Stock"), of the Company.
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 subsidiary corporations as an independent
contractor.
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 subsidiary corporations.
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 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 (i) renders service on a periodic basis
to the Company or one or more of its parent or subsidiary corporations as an
Employee or Consultant or (ii) is a member of the Company's Board of Directors
(the "Board").
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 nonstatutory option grants under Article Two
and stock incentive grants under Article Three 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
individuals 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 corporation.
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 three (3)
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. The Committee shall at all times have the authority to make
discretionary option grants under the Plan to eligible Employees who are not
members of the Board.
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 Common Stock at an exercise price equal to not less than 50% of the
Closing Selling Price per share on the grant date, and a special option grant
is to be made in accordance with Section VII of Article Two. Under the
Automatic Grant Program, non-Employee Board members shall automatically be
granted options to purchase shares of Common Stock at an exercise price of
100% of the Closing Selling Price per share of Common Stock on the date of
grant, provided, however, that options granted under the Automatic Grant
Program in 1990 shall have an exercise price per share equal to the Closing
Selling Price on the date thirty (30) days after (i) the effective date of the
Merger (defined in Article Six) or (ii) the termination date of the Merger
Agreement (defined in Article Six), as applicable.
B. Under the Stock Incentive Program, eligible Employees, non-Employee
Board members and Consultants may be awarded shares of 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
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 Common Stock issuable under the Plan shall be made available either
from authorized but unissued shares of Common Stock or from shares of Common
Stock reacquired by the Company on the open market. The aggregate number of
shares of Common Stock issuable over the term of this Plan, whether through
exercised options or direct stock issuances shall not exceed 11,500,000 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 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 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-director pursuant to the applicable limitation of
Section II.B of this Article One and the number and/or class of shares for
which the special option grant is to be made pursuant to the automatic grant
provisions of Section VII of Article Two and 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 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 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. Except for the special option grant to be made pursuant to Section VII
of this Article Two, 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 422A 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 twenty (20) 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 (other than the instrument evidencing the special grant to be
made under Section VII of this Article Two) 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 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 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 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 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. The shares of 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 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 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 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 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 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 Common Stock or in a combination of cash and Common
Stock. Any shares of Common Stock so distributed shall be valued at the
Closing Selling Price on the date the option is surrendered, and the shares of
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 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 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 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 Common Stock or in a combination of cash and Common
Stock. Any shares of 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 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 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 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 the effective
date of the Merger) 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 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 Securities Exchange Act of 1934, as amended) 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 "nonstatutory" 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 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 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 subsidiary corporations
(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 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
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 subsidiary
corporations) 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. An Incentive Option must be exercised within the three (3)-month period
commencing with the date of cessation of Employee status for any reason other
than death, 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.
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 (other
than the special grant to be made pursuant to Section VII of this Article Two)
and to grant in substitution therefor new options under this Plan covering the
same or different numbers of shares of 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
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
(other than the special grant to be made pursuant to Section VII of this
Article Two) 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 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.
VII. SPECIAL OPTION GRANT
[RESERVED]
ARTICLE THREE
AUTOMATIC GRANT PROGRAM
I. AUTOMATIC GRANTS
On July 18, 1990, each individual who is a non-Employee member of the Board
on such date shall automatically be granted a nonstatutory option under this
Article Three to purchase 15,000 shares of Common Stock. On April 30, 1992,
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 15,000 shares of Common Stock. Each non-Employee who is first elected
a member of the Board after such date 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 15,000 shares of Common Stock. Each Employee
director who is first elected a member of the Board and who subsequently
becomes a non-Employee director after January 1, 1992 shall automatically be
granted, on the date of such individual's change from Employee to non-
Employee, a non- statutory option under this Article Three to purchase 15,000
shares of Common Stock. This provision shall terminate on April 30, 1995.
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 Common Stock on the grant date; provided,
however, that options granted under this Article Three in 1990 shall have an
exercise price per share equal to the Closing Selling Price on the date thirty
(30) days after (i) the effective date of the Merger (defined in Article Six)
or (ii) the termination date of the Merger Agreement (defined in Article Six),
as applicable.
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 and third 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 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 one or more automatic
grants held by the optionee under this Article Three, then each such grant
shall remain exercisable, for any shares of 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 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
A. In the event of one or more 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 the effective
date of the Merger) 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 each option grant under
this Article Three outstanding at the time and not otherwise at the time fully
exercisable shall automatically accelerate and become exercisable for any or
all of the shares subject to the option immediately prior to the specified
effective date for the Corporate Transaction. Upon the consummation of such
Corporate Transaction, all outstanding options granted under this Article
Three shall, to the extent not previously exercised by the optionee or assumed
by the successor corporation or its parent company, terminate and cease to be
outstanding.
B. The Automatic Grant Program in effect under this Article Three 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. CHANGE IN CONTROL
A. In the event of one or more 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 Securities Exchange Act of 1934, as amended) 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 all outstanding options granted under this Article Three and
not otherwise at the time fully exercisable shall automatically accelerate
upon the Change in Control and thereby become exercisable for any or all
option shares. In addition, each option grant under this Article Three which
has been outstanding for at least six (6) months may be surrendered, on the
tenth (10th) business day following the Change in Control, in exchange for a
cash payment from the Company in an amount equal to the excess of (i) the Fair
Market Value (on the date of such surrender) of the shares of Common Stock
subject to the surrendered option over (ii) the aggregate option price payable
for such shares.
B. For purposes of subparagraph A above, the Fair Market Value per share of
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 such
surrender, as determined in accordance with the normal valuation provisions of
the Plan, or if applicable, (b) the highest reported price per share paid in
acquiring ownership of the fifty percent (50%) or greater interest in the
Company's outstanding voting securities.
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 subsidiary
corporations 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 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 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
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 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 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 shares of 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 Common Stock at the time outstanding
under the Plan. In addition, with a view to making available the benefits
provided by Section 422A 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 Article
Three 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. 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 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 Common Stock under the
Regular Option Grant, the Automatic Option Grant or Stock Incentive Programs
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 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
subsidiary corporations 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 MERGER PROVISIONS
I. PRIORITY
The provisions of this Article Six shall govern any and all options under
this Plan which have been granted prior to, or are granted following, the
effective date of the merger of the Company with and into HLR (U.S.) II, Inc.
(the "Merger") pursuant to that certain Agreement and Plan of Merger ("Merger
Agreement") dated May 23, 1995 among the Company, Roche Holdings, Inc., and
HLR (U.S.) II, Inc. 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 Merger.
II. OPTION ADJUSTMENTS
A. None of the options granted under this Plan prior to the effective date
of the Merger shall be accelerated in whole or in part in connection with the
Merger.
B. None of the options granted under this Plan prior to the effective date
of the Merger shall be cashed out, or otherwise entitle the option holders to
any cash payments, in connection with the consummation of the Merger.
C. Each option granted under this Plan prior to the effective date of the
Merger shall remain in effect after the Merger upon the same terms and
conditions (including, without limitation, the exercise price per share and
the number of shares) in effect for such option immediately prior to the
Merger, except that the shares purchasable under each such continuing option
shall be shares of Special Common Stock. Each such continuing option will
become exercisable, and the shares purchasable thereunder shall vest, in
accordance with the same installment dates such option would have become
exercisable, and such shares would have vested, under the vesting schedule
specified for that option at the time of grant.
III. PLAN ADJUSTMENTS
A. After the effective date of the Merger, all references in the Plan to
Common Stock shall automatically become references to Special Common Stock.
B. If the Special Common Stock shall be redeemed at any time as provided in
Section (c)(ii) of Article Third of the Certificate of Incorporation of the
Company, then all outstanding options and stock appreciation rights granted
hereunder shall automatically accelerate and become fully exercisable and
vested immediately prior to the date fixed for redemption, and upon such
redemption the holder of such option or stock appreciation right shall
promptly be paid for each such option or right an amount equal to the product
of (i) the excess of the redemption price per share fixed in Section (c)(ii)
of Article Third (without reduction for the payment of any cash dividends as
provided in the fourth sentence of Section (c)(ii)(C) of Article Third) over
the exercise price per share, times (ii) the number of shares covered by such
option or right. Upon such redemption, any of the redemption price to be paid
pursuant to Section (c)(ii) of Article Third of the Certificate of
Incorporation of the Company received by a holder of shares issued under the
Stock Incentive Program in respect of unvested shares shall be placed in
escrow and released to such holder in accordance with the vesting schedule
that would have applied to such shares had such redemption not taken place.
C. Neither the consummation of the Merger nor 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, nor any change in the composition of the Board of
Directors resulting therefrom, shall constitute a Change in Control.
D. Upon the conversion of the Special Common Stock into Common Stock, all
references in the Plan to Special Common Stock (as provided in Article Five,
III. A.) shall automatically become references to Common Stock. Each option
granted under this Plan prior to such conversion shall remain in effect after
such conversion upon the same terms and conditions (including, without
limitation, the exercise price per share and the number of shares) in effect
for such option immediately prior to such conversion, except that the shares
purchasable under each such continuing option shall be shares of Common Stock.
Each such continuing option will become exercisable, and the shares
purchasable thereunder shall vest, in accordance with the same installment
dates such option would have become exercisable, and such shares would have
vested, under the vesting schedule specified for that option at the time of
grant.