1994 STOCK OPTION PLAN
(as amended effective October 16, 1996)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
A. This 1994 Stock Option 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, II.C. 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 subsidiary corporations as an independent contractor.
CORPORATE TRANSACTION: "Corporate Transaction" shall have the meaning set
forth in Article Two, II. 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.
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.
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 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. Stock option grants made to any individual under the Plan shall not 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 IV., 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 granted 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 an outstanding grant.
D. Determinations of the Committee on all matters relating to the Plan and
any discretionary option grants made hereunder shall be final, binding and
conclusive on all persons having any interest in the Plan or any options
granted issued under the Plan.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate components: the Option Grant
Program specified in Article Two and the Automatic Grant Program specified in
Article Three. Under the 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. The provisions of Articles One, Four and Five of the Plan shall apply
to the the Option Grant Program and the Automatic Option Grant Program and
shall accordingly govern the interests of all individuals in the Plan.
IV. ELIGILBILITY FOR OPTION GRANTS
The individuals eligible to receive option grants ("Optionees") 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 4,500,000 shares (subject to adjustment from time to time in
accordance with subparagraphs 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 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 repurchased by the Company pursuant to its repurchase rights under the
Plan shall not be available for subsequent issuance.
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 and 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, and (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. All adjustments made by
the Committee pursuant to this subparagraph C. shall be final, binding and
conclusive.
D. Subject to the special priority provisions of Article Five 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
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 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 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 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 III 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 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 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
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 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 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 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 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 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. 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 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 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 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
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 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 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.
III. INCENTIVE OPTIONS
A. The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Option Grant Program. Options which are
specifically designated as "non-statutory" options when issued under this
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 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.
Notwithstanding any term 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 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.
IV. 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 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.
V. 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 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, 1995, 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 Special Common Stock. Each non-
Employee who is first appointed or elected a member of the Board after April
30, 1995 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 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, 1995 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 15,000 shares of
Special Common Stock. This provision shall terminate on April 30, 1996.
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 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 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 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
A. In the event of a Corporate Transaction, options granted under the
Automatic Grant Program shall be treated as described in Section II of Article
Two, except the provisions of clause (iii) of the penultimate sentence of
Section II A(iii) of Article Two shall not apply.
IV. CHANGE IN CONTROL
A. In the event of a Change in Control, options granted under the Automatic
Grant Program shall be treated as described in Section II of Article Two,
except the last sentence of Section II C.(ii) of Article Two shall not apply.
ARTICLE FOUR
MISCELLANEOUS
I. TAX WITHHOLDING
A. The Company's obligation to deliver shares upon the exercise or surrender
of stock options granted under Article Two 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 then
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 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 previously granted under the Plan shall terminate and no further stock
options shall be granted. Subject to such limitation, the Committee may grant
stock options 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 22, 2004.
Upon such termination, any stock options 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.
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
hereunder, and the issuance of Special Common Stock under the Option Grant
Program or the Automatic Grant 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 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 FIVE
SPECIAL REDEMPTION PROVISIONS
I. PRIORITY
To the extent there is a conflict between any of the provisions of this
Article Five and any other provision of the Plan, the specific provisions of
this Article Five shall be controlling and shall govern the disposition of all
such options outstanding at the time the Redemption (as defined below) occurs
or no longer can occur.
II. EFFECT OF REDEMPTION ON VESTED OPTIONS
A. 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 (the "Redemption"), then holders of all outstanding options granted
hereunder, to the extent vested immediately prior to the date fixed for the
Redemption ("Vested Options"), shall promptly be paid for each such Vested
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 Vested Option or right.
III. EFFECT OF REDEMPTION ON UNVESTED OPTIONS
A. Upon the Redemption, each option granted under this Plan, to the extent
not vested immediately prior to the date fixed for the Redemption, shall be
replaced by a comparable incentive program. 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.
IV. EFFECT OF NO REDEMPTION
A. If the Redemption does not occur, upon conversion of the Special Common
Stock into 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, specified for that option at the time of grant.
V. OTHER
A. After the earlier of the Redemption or the Conversion Date (as defined in
Article Third of the Certificate of Incorporation of the Company), 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.