GENENTECH INC, S-8, 1999-07-19

GENENTECH INC
S-8, 1999-07-19
PHARMACEUTICAL PREPARATIONS

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<PAGE> 1
As filed with the Securities and Exchange Commission on July 19, 1999
Registration No. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------

FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

----------

GENENTECH, INC.
(Exact name of registrant as specified in its charter)

Delaware 94-2345624
(State of Incorporation) (I.R.S. Employer Identification No.

1 DNA Way
South San Francisco, 94080-4990
California (Zip Code)
(Address of principal
executive offices)

----------

1990 Stock Option/Stock Incentive Plan
1994 Stock Option Plan
1996 Stock Option/Stock Incentive Plan
(Full title of the plans)

Stephen G. Juelsgaard, Esq.
Senior Vice President, General Counsel and Secretary
Genentech, Inc.
1 DNA Way
South San Francisco, California 94080-4990
(Name and address of agent for service)

(650) 225-1000
(Telephone number, including area code, of agent for service)

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=============================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Aggregate Amount of
to be Registered Registered Price per Share (1) Offering Price (1) Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value 3,991,263 shares $57.38 $229,018,671 $63,667.19
$.02 per share
=============================================================================================================
</TABLE>

(1) The Proposed Maximum Offering Price Per Share was estimated pursuant to
Rule 457(h) promulgated under the Securities Act of 1933, as amended.
Pursuant to Rule 457(h), the per share price of options to purchase
stock under an employee stock option plan may be estimated by reference
to the price to be paid upon exercise of such options. All options
covering the 3,991,263 shares of Genentech, Inc.'s common stock to be
registered hereunder are outstanding, and the weighted average exercise
price of such options is $57.38. The actual exercise price of each
option was determined with reference to the grant date of that option.
<PAGE> 2

PART II: INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3: INCORPORATION OF DOCUMENTS BY REFERENCE

In this Registration Statement, "Genentech," "we," "us" and "our" refer
to Genentech, Inc. The Securities and Exchange Commission, or SEC, allows us to
"incorporate by reference" the information we file with it, which means we can
disclose important information by referring to those documents. The information
included in the following documents is incorporated by reference and is
considered to be a part of this Registration Statement. The most recent
information that we file with the SEC automatically updates and supersedes more
dated information. We have previously filed the following documents with the SEC
and incorporate them by reference into this Registration Statement:

(a) Our annual report on Form 10-K for the year ended December 31, 1998;

(b) Our quarterly report on Form 10-Q for the quarter ended March 31,
1999;

(d) The description under the heading "Description of Capital Stock"
relating to our common stock in the prospectus included in our Amendment No. 3
to the Registration Statement on Form S-3 (Registration No. 333-80601) filed
with the SEC on July 16, 1999, and the description under the heading
"Description of Capital Stock" relating to the common stock in the our final
prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act
of 1933, as amended, which is commonly known as the Securities Act, including
any amendment or report filed for the purpose of updating that description.

We also incorporate by reference all documents subsequently filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, which is commonly known as the Exchange Act, until all of the
shares registered under this Registration Statement are sold.

We will provide without charge to each person to whom a prospectus is
delivered, including any beneficial owner, a copy of any or all of the
information that has been incorporated by reference in this Registration
Statement. If you would like to obtain this information from us, please direct
your request to the Investor Relations Department, either in writing or by
telephone, to Genentech, Inc., 1 DNA Way, South San Francisco, California 94080,
Attention Investor Relations (650) 225-1260.

ITEM 4: DESCRIPTION OF SECURITIES

We have incorporated by reference the description under the heading
"Description of Capital Stock" relating to our common stock in the prospectus
included in our Amendment No. 3 to the Registration Statement on Form S-3
(Registration No. 333-80601) filed with the SEC on July 16, 1999, and the
description under the heading "Description of Capital Stock" relating to the
common stock in the our final prospectus filed with the SEC pursuant to Rule
424(b) under the Securities Act, including any amendment or report filed for the
purpose of updating that description.

ITEM 5: INTERESTS OF NAMED EXPERTS AND COUNSEL

Stephen G. Juelsgaard, Senior Vice President, General Counsel and
Secretary of Genentech, is an officer of Genentech and has received options
under our 1994 Stock Option Plan and our 1996 Stock Option/Stock Incentive Plan.

ITEM 6: INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our certificate of incorporation limits, to the fullest extent permitted
by Delaware corporate law, the personal liability of directors for monetary
damages for breach of their fiduciary duties.

<PAGE> 3

Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides, in summary, that directors and officers of Delaware
corporations are entitled, under certain circumstances, to be indemnified
against all expenses and liabilities (including attorneys' fees) incurred by
them as a result of suits brought against them in their capacity as a director
or officer, if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, and with
respect to any criminal action or proceeding, if they had no reasonable cause to
believe their conduct was unlawful; provided, that no indemnification may be
made against expenses in respect of any claim, issue or matter as to which they
shall have been adjudged to be liable to the corporation, unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, they are fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Any such
indemnification may be made by the corporation only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct.

Our board of directors may provide similar indemnification to our
officers, employees and agents as it deems appropriate and as authorized by
Delaware law. We may purchase insurance on behalf of any director, officer,
employee or agent against any expense incurred by such person in his or her
capacity.

Our certificate of incorporation also provides that Roche Holdings,
Inc., or Roche, which is our majority stockholder, and the officers or directors
of Roche will not be presumed liable to us or our stockholders for breach of any
fiduciary duty or duty of loyalty, failure to act in the best interests of
Genentech, or receipt of any improper personal benefit, simply because Roche or
any director or officer of Roche, in good faith, takes any action, exercises any
right or gives or withholds any consent with respect to any agreement or
contract between Roche and Genentech.

In addition, Roche will not be liable to us or our stockholders for
breach of any fiduciary duty if Roche pursues or acquires a potential corporate
opportunity of ours or does not inform us of a potential corporate opportunity.
If a director, officer or employee of Genentech who is also a director, officer
or employee of Roche knows of a potential transaction or matter that may be a
corporate opportunity both for Genentech and Roche, the director, officer or
employee is entitled to offer the corporate opportunity to us or Roche as the
director, officer or employee deems appropriate under the circumstances in his
or her sole discretion, and no such director, officer or employee will be liable
to us or our stockholders for breach of any fiduciary duty or duty of loyalty or
failure to act in our best interests or the derivation of any improper personal
benefit by reason of the fact that such director, officer or employee offered
such corporate opportunity to Roche (rather than to us) or did not communicate
information regarding such corporate opportunity to us, or Roche pursues or
acquires such corporate opportunity for itself or directs such corporate
opportunity to another person or does not communicate the corporate opportunity
to us.

Neither Roche nor any officer or director thereof shall be liable to us
or our stockholders for breach of any fiduciary duty or duty of loyalty or
failure to act in (or not opposed to) our best interests or the derivation of
any improper personal benefit by reason of the fact that Roche or an officer of
director thereof in good faith takes any action or exercises any rights or gives
or withholds any consent in connection with any agreement or contract between
Roche and Genentech. No vote cast or other action taken by any person who is an
officer, director or other representative of Roche, which vote is cast or action
is taken by such person in his capacity as a director of Genentech, shall
constitute an action of or the exercise of a right by or a consent of Roche for
the purpose of any such agreement or contract.

ITEM 7: EXEMPTION FROM REGISTRATION CLAIMED

Not applicable.

<PAGE> 4

ITEM 8: EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C>
5 Opinion of Stephen G. Juelsgaard, Esq.

15.1 Letter re: Unaudited Interim Financial Information.

23.1 Consent of Ernst & Young LLP, independent auditors.

23.2 Consent of Stephen G. Juelsgaard, Esq. is contained in Exhibit 5 to
this Registration Statement.

24 Power of Attorney is contained on the signature pages.

99.1 1990 Stock Option/Stock Incentive Plan.

99.2 1994 Stock Option Plan.

99.3 1996 Stock Option/Stock Incentive Plan.

99.4 Resolutions of the Executive Committee of the Board of Directors of
Genentech, Inc. Relating to Employee Compensation, pursuant to an
Action by Unanimous Written Consent of the Executive Committee of
the Board of Directors of Genentech, Inc., to which such Resolutions
are attached as "Exhibit B."
</TABLE>

ITEM 9: UNDERTAKINGS

1. The undersigned registrant hereby undertakes:

(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933, as amended, which is commonly
known as the Securities Act;

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;

Provided, however, that paragraphs (a)(i) and (a)(ii) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed

<PAGE> 5

by the issuer pursuant to section 13 or section 15(d) of the
Exchange Act that are incorporated by reference herein.

(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.

(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.

2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.

<PAGE> 6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the undersigned registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of South San Francisco, State of
California, on July 19, 1999.

GENENTECH, INC.

By: /s/ Stephen G. Juelsgaard
---------------------------------
Name: Stephen G. Juelsgaard
Title: Senior Vice President, General
Counsel and Secretary

<PAGE> 7

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Arthur D. Levinson and Stephen G.
Juelsgaard, and each or any one of them, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>

/s/ ARTHUR D. LEVINSON Principal Executive Officer and July 19, 1999
- ------------------------------------ Director
Arthur D. Levinson

/s/ LOUIS J. LAVIGNE, JR. Principal Financial Officer July 19, 1999
- ------------------------------------
Louis J. Lavigne, Jr.

/s/ JOHN M. WHITING Principal Accounting Officer July 19, 1999
- ------------------------------------
John M. Whiting

/s/ FRANZ B. HUMER Director July 19, 1999
- ------------------------------------
Franz B. Humer

/s/ JONATHAN K.C. KNOWLES Director July 19, 1999
- ------------------------------------
Jonathan K.C. Knowles
</TABLE>

<PAGE> 8

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBERS
<S> <C> <C>

5 Opinion of Stephen G. Juelsgaard, Esq.

15.1 Letter re: Unaudited Interim Financial Information.

23.1 Consent of Ernst & Young LLP, independent auditors.

23.2 Consent of Stephen G. Juelsgaard, Esq. is contained in Exhibit 5 to
this Registration Statement.

24 Power of Attorney is contained on the signature pages.

99.1 1990 Stock Option/Stock Incentive Plan.

99.2 1994 Stock Option Plan.

99.3 1996 Stock Option/Stock Incentive Plan.

99.4 Resolutions of the Executive Committee of the Board of Directors of
Genentech, Inc. Relating to Employee Compensation, pursuant to an
Action by Unanimous Written Consent of the Executive Committee of the
Board of Directors of Genentech, Inc., to which such Resolutions are
attached as "Exhibit B."
</TABLE>

<PAGE> 1

EXHIBIT 5

Genentech, Inc.
1 DNA Way
South San Francisco, California 94080

July 19, 1999

Ladies and Gentlemen:

I am Senior Vice President, General Counsel and Secretary of Genentech, Inc.
(the "Company"). In connection with this opinion, I have examined the following
documents:

- the Company's Registration Statement on Form S-8 (the "Registration
Statement") to be filed with the Securities and Exchange Commission
covering the offering of 3,991,263 shares of the Company's Common Stock,
par value $.02 per share (the "Shares"), pursuant to the Company's 1990
Stock Option/Stock Incentive Plan, 1994 Stock Option Plan and 1996 Stock
Option/Stock Incentive Plan (collectively, the "Plans") and the related
Prospectuses;

- the Company's Certificate of Incorporation and Bylaws; and

- such other documents, records, certificates, memoranda and other
instruments as I deem necessary as a basis for this opinion.

I have assumed the genuineness and authenticity of all documents submitted to me
as originals, the conformity to originals of all documents submitted to me as
copies thereof, and the due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness thereof.

On the basis of the foregoing, and in reliance thereon, I am of the opinion that
the Shares, when sold and issued in accordance with the Plans, the Registration
Statement and the related Prospectuses, will be validly issued, fully paid, and
nonassessable (except as to shares issued pursuant to certain deferred payment
arrangements, which will be fully paid and nonassessable when such deferred
payments are made in full).

I am admitted to practice only in the State of California. The opinions set
forth herein are limited to matters of the General Corporation Law of the state
of Delaware and the federal securities laws of the United States.

I consent to the filing of this opinion as an exhibit to the Registration
Statement.

Very truly yours,

/s/ STEPHEN G. JUELSGAARD

Stephen G. Juelsgaard
Senior Vice President, General Counsel
and Secretary

<PAGE> 1

EXHIBIT 15.1

July 15, 1999

The Board of Directors and Stockholder
Genentech, Inc.

We are aware of the incorporation by reference in the Registration Statement
(Form S-8) of Genentech, Inc. pertaining to the 1990 Stock Option/Stock
Incentive Plan, the 1994 Stock Option Plan and the 1996 Stock Option/Stock
Incentive Plan of Genentech, Inc. of our report dated April 9, 1999 relating to
the unaudited condensed consolidated interim financial statements of Genentech,
Inc. that are included in its Form 10-Q for the quarter ended March 31, 1999.

Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.

Very truly yours,

/s/ ERNST & YOUNG LLP

<PAGE> 1
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the 1990 Stock Option/Stock Incentive Plan, the 1994 Stock
Option Plan and the 1996 Stock Option/Stock Incentive Plan of Genentech, Inc. of
our reports dated January 20, 1999, with respect to the consolidated financial
statements and schedule of Genentech, Inc. included and incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31,
1998, filed with the Securities and Exchange Commission.

San Jose, California
July 15, 1999 /s/ ERNST & YOUNG LLP

<PAGE> 1
EXHIBIT 99.1

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.

<PAGE> 2

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

<PAGE> 3

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.

<PAGE> 4

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

<PAGE> 5

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

<PAGE> 6

(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

<PAGE> 7

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.

<PAGE> 8

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.

<PAGE> 9

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.

<PAGE> 10

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,

<PAGE> 11

(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

<PAGE> 12

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.

<PAGE> 13

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.

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.

<PAGE> 14

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.

<PAGE> 15

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;

<PAGE> 16

(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

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"):

(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

<PAGE> 17

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

<PAGE> 18

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

<PAGE> 19

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.

<PAGE> 20

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.

<PAGE> 21

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.

<PAGE> 1
EXHIBIT 99.2

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).

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.

<PAGE> 2

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.

<PAGE> 3

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

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
Option Grant Program and the Automatic Option Grant Program and shall
accordingly govern the interests of all individuals in the Plan.

IV. ELIGIBILITY 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).

<PAGE> 4

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

<PAGE> 5

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) 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.

<PAGE> 6

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

<PAGE> 7

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.

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,

<PAGE> 8

(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

<PAGE> 9

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.

<PAGE> 10

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

<PAGE> 11

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

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.

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;

<PAGE> 12

(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.

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.

<PAGE> 13

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.

<PAGE> 14

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.

<PAGE> 15

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.

<PAGE> 16

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.

<PAGE> 1
EXHIBIT 99.3

1996 STOCK OPTION/STOCK INCENTIVE PLAN

(as amended effective October 16, 1996)

ARTICLE ONE

GENERAL PROVISIONS

I. PURPOSES OF THE PLAN

A. This 1996 Stock Option/Stock Incentive Plan (the "Plan") is intended to
promote the interests of Genentech, Inc., a Delaware corporation (the
"Company"), by providing a method whereby the Company may retain the services of
persons now employed by or serving as consultants or directors to it, secure and
retain the services of persons capable of filling such positions and provide
incentives for such persons to exert maximum efforts for the success of the
Company or its parent or subsidiary corporations.

B. For purposes of the Plan, the following definitions shall be in effect:

CHANGE IN CONTROL: "Change in Control" shall have the meaning set forth in
Article Two, III.C. hereof.

CHANGE IN CONTROL PRICE: "Change in Control Price" shall have the meaning set
forth in Article Two, II.C.4.b. hereof.

CONSULTANT: An individual shall be considered to be a Consultant for so long as
such individual continues to render personal services to the Company or one or
more of its Parent or Subsidiaries as an independent contractor or continues to
have an effective and unexpired consulting agreement with the Company.

CORPORATE TRANSACTION: "Corporate Transaction" shall have the meaning set forth
in Article Two, III.A. hereof.

EMPLOYEE: An individual shall be considered to be an Employee for so long as
such individual remains in the employ of the Company or one or more of its
Parent or Subsidiaries, irrespective of whether employment services are actually
provided by the individual.

<PAGE> 2

immediately preceding the date in question and made any purchase or sale of
Special Common Stock during such six-month period.

SPECIAL COMMON STOCK: The Special Common Stock issuable under the Plan shall be
shares of the Company's Callable Putable Common Stock, par value $0.02 per
share. All references to "shares" or "stock", shall be deemed to be references
to shares of the Special Common Stock.

SUBSIDIARY: A corporation shall be deemed to be a subsidiary of the Company if
it is one of the corporations (other than the Company) in an unbroken chain of
corporations beginning with the Company, provided each such corporation (other
than the last corporation in the unbroken chain) owns, at the time of
determination, stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
For purposes of non-statutory option grants under Article Two and stock
incentive grants under Article Four and all Corporate Transaction provisions of
the Plan, the term "subsidiary" shall also include any partnership, joint
venture or other business entity of which the Company owns, directly or
indirectly through another subsidiary corporation, more than a fifty percent
(50%) interest in voting power, capital or profits.

C. Neither stock option grants nor stock bonus issuances made to any individual
under the Plan shall in any way affect, limit or restrict such individual's
eligibility to participate in any other stock plan or other compensation or
benefit plan, arrangement or practice now or hereafter maintained by the Company
or any Parent or Subsidiary.

II. ADMINISTRATION OF THE PLAN

B. Subject to limitations contained elsewhere herein and to the provisions of
Section V., C. and D. of this Article I relating to adjustments upon changes in
stock, the aggregate number of shares of stock that may be subject to options
and stock appreciation rights granted hereunder to any Employee in a calendar
year shall not exceed two hundred fifty thousand (250,000) shares of the
Company's Special Common Stock.

C. Subject to the express provisions of the Plan, the Committee shall have
plenary authority:

(i) to interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, and to make all other determinations deemed necessary or
advisable in administering the Plan; and

III. STRUCTURE OF THE PLAN

<PAGE> 3

Board members and Consultants may be granted options to purchase shares of
Special Common Stock at an exercise price equal to not less than 50% of the
Closing Selling Price per share on the grant date. Under the Automatic Grant
Program, non-Employee Board members shall automatically be granted options to
purchase shares of Special Common Stock on the dates and in the amounts
specified in Article Three below at an exercise price of 100% of the Closing
Selling Price per share of Special Common Stock on the date of grant.

B. Under the Stock Incentive Program, eligible Employees, non-Employee Board
members and Consultants may be awarded shares of Special Common Stock as a
reward for past services or as an incentive to the performance of future
services. Such shares may be issued as fully-vested shares or as shares vesting
over time.

IV. ELIGIBILITY FOR OPTION GRANTS AND STOCK ISSUANCES

A. The individuals eligible to receive option grants ("Optionees") and/or stock
incentives ("Recipients") pursuant to the Plan shall be limited to (i) those
Employees, non-Employee Board members and Consultants selected by the Committee
and (ii) those non-Employee Board members who are entitled to option grants
pursuant to the Automatic Option Grant Program of Article Three.

V. STOCK SUBJECT TO THE PLAN

A. The Special Common Stock issuable under the Plan shall be made available
either from authorized but unissued shares of Special Common Stock or from
shares of Special Common Stock reacquired by the Company on the open market. The
aggregate number of shares of Special Common Stock issuable over the term of
this Plan, whether through exercised options or direct stock issuances shall not
exceed 9,000,000 shares (subject to adjustment from time to time in accordance
with paragraphs C. and D. below).

C. In the event any change is made to the Special Common Stock issuable under
the Plan by reason of any stock dividend, stock split, combination of shares,
exchange of shares or other change affecting the outstanding Special Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made by the Committee to (i) the aggregate number and/or class of
shares issuable under this Plan, the maximum number and/or class of shares
purchasable per Employee pursuant to the applicable limitation of Section II.B
of this Article One and the number and/or class of shares for which the
automatic option grants are to be made pursuant to the provisions of Article
Three, to reflect the effect of such change upon the Company's capital
structure, (ii) the number and/or class of shares and the exercise price per
share of the stock subject to each outstanding option in order to preclude the
dilution or enlargement of benefits thereunder and (iii) the number and/or class
of shares and the exercise price per share in effect under each outstanding
stock appreciation right in order to preclude the dilution or enlargement of
benefits thereunder. All adjustments made by the Committee pursuant to this
paragraph C. shall be final, binding and conclusive.

<PAGE> 4

options pursuant to the Corporate Transaction provisions of the Plan or (ii) the
outstanding options under the Plan are to be assumed in connection with such
Corporate Transaction, then each such continuing or assumed option shall,
immediately after such Corporate Transaction, be appropriately adjusted to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Special Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the exercise price payable per share subject to each option,
provided that the aggregate exercise price of such option shall remain the same.
In addition, the aggregate number and/or class of shares issuable under this
Plan shall be appropriately adjusted to reflect the effect of such Corporate
Transaction upon the Company's capital structure.

ARTICLE TWO

REGULAR OPTION GRANT PROGRAM

I. TERMS AND CONDITIONS OF OPTIONS

A. The Committee shall have plenary authority (subject to the express provisions
of the Plan and Section 144 of the Delaware General Corporation Law) to
determine which Employees, non-Employee Board members and Consultants are to be
granted options under this Regular Option Grant Program, the number of shares to
be covered by each such option, the status of the granted option as either an
incentive stock option ("Incentive Option") which meets the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code"), or a non-statutory option not intended to meet such requirements,
the time or times at which such option is to become exercisable, the time or
times at which such option (or the Shares subject to such option) becomes vested
(referred to herein as the "vesting schedule") and the term for which the option
is to remain outstanding, up to a maximum term of ten (10) years.

1. Exercise Price.

(A) full payment in cash or check made payable to the Company's order; or

<PAGE> 5

2. Term and Exercise of Options.

c. The Committee may, at its discretion, accelerate the vesting schedule of any
outstanding option at any time.

3. Termination of Service.

a. Should an Optionee cease to continue in Service for any reason (other than
termination due to death, permanent disability or retirement from employment by
the Company after reaching age sixty-five (65)) while the holder of one or more
outstanding options under this Regular Option Grant Program, then such options
shall not be exercisable at any time after the earlier of (i) the specified
expiration date of the option term or (ii) the expiration of three (3) months
after the Optionee's cessation of Service. Each such option shall, during the
applicable period following cessation of Service, be exercisable only to the
extent of the number of shares (if any) in which the Optionee is vested on the
date of such cessation of Service; provided, however, that the Committee shall
have the discretion to specify, either at the time the option is granted or at
the time that the Optionee ceases Service, that vesting of such option may be
extended for a period not to exceed three (3) years from the date of cessation
of Service and that the applicable expiration period set forth in clause (ii)
may be increased to a period of up to five (5) years.

b. Should an Optionee cease to continue in Service due to permanent disability
while the holder of one or more outstanding options under this Regular Option
Grant Program, then such options shall not be exercisable at any time after the
earlier of (i) the specified expiration date of the option term or (ii) the
expiration of three (3) months after the Optionee's cessation of Service. Each
such option shall, during the applicable period following cessation of Service,
be exercisable only to the extent of the number of shares (if any) in which the
Optionee is vested on the date of such cessation of Service; provided, however,
that the Committee shall have the discretion to specify, either at the time the
option is granted or at the time that the Optionee ceases Service, that the
vesting of such option may be accelerated or extended from the date of cessation
of Service and that the period of exercisability can be increased up to the
expiration date of the option term. Should an Optionee cease to continue in
Service due to death, or retirement from employment by the Company after
reaching age sixty-five (65), while the holder of one or more outstanding
options under this Regular Option Grant Program, then all unvested options on
such date shall automatically become vested and the expiration date of the
option shall automatically be extended to the expiration date of the option
term.

<PAGE> 6

4. Repurchase Rights.

a. Options may provide that notwithstanding any vesting schedule pursuant to
subparagraph 2. a. above, they may be exercised prior to such vesting schedule
so long as the Optionee enters into a repurchase agreement satisfactory to the
Company. The shares of Special Common Stock acquired upon the exercise of one or
more options granted under this Regular Option Grant Program may be subject to
repurchase by the Company, at the exercise price paid per share, upon the
Optionee's cessation of Service prior to vesting in such shares.

5. Stockholder Rights.

II. STOCK APPRECIATION RIGHTS

B. Three types of stock appreciation rights shall be authorized for issuance
under the Plan:

1. Tandem Stock Appreciation Rights. These rights require the holder to elect
between the exercise of the underlying option for shares of Special Common Stock
and the surrender of such option for an appreciation distribution equal to the
excess of (i) the Closing Selling Price (on the date of option surrender) of the
vested shares of Special Common Stock purchasable under the surrendered option
over (ii) the aggregate option price payable for such shares.

<PAGE> 7

2. Concurrent Stock Appreciation Rights. Concurrent rights may apply to all or
any portion of the shares of Special Common Stock subject to the underlying
option and will be exercised automatically at the same time the option is
exercised for those shares. The appreciation distribution to which the holder of
such concurrent right shall be entitled upon exercise of the underlying option
shall be in an amount equal to the excess of (i) the aggregate Closing Selling
Price (at date of exercise) of the vested shares purchased under the underlying
option with such concurrent rights over (ii) the aggregate option price paid for
those shares.

3. Limited Stock Appreciation Rights. These rights will entitle the holder to
surrender outstanding options in connection with certain Changes in Control (as
defined below) for an appreciation distribution equal in amount to the excess of
(i) the Change in Control Price (as defined below) of the number of shares in
which the Optionee is at the time vested under the surrendered option over (ii)
the aggregate option price payable for such vested shares.

1. Tandem Rights.

b. The Appreciation Distribution payable on the exercised Tandem Right shall be
in an amount equal to the excess of (i) the Closing Selling Price (on the date
of the option surrender) of the number of shares of Special Common Stock in
which the Optionee is vested under the surrendered option over (ii) the
aggregate option price payable for such vested shares.

c. The Appreciation Distribution may, in the Committee's discretion, be made in
cash, in shares of Special Common Stock or in a combination of cash and Special
Common Stock. Any shares of Special Common Stock so distributed shall be valued
at the Closing Selling Price on the date the option is surrendered, and the
shares of Special Common Stock subject to the surrendered option shall not be
available for subsequent issuance under this Plan.

2. Concurrent Rights.

a. Concurrent Rights may be tied to any or all of the shares of Special Common
Stock subject to any Incentive Option or non-statutory option grant made under
this Regular Option Grant Program. The Concurrent Right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular stock option grant to which it pertains.

b. The Concurrent Right shall be automatically exercised at the same time the
underlying option is exercised for the particular shares of Special Common Stock
to which the Concurrent Right pertains.

c. The Appreciation Distribution payable on the exercised Concurrent Right shall
be equal to the excess of (i) the aggregate Closing Selling Price (on the
Exercise Date) of the vested shares of Special Common Stock purchased under the
underlying option which have Concurrent Rights appurtenant to them over (ii) the
aggregate option price paid for such shares.

d. The Appreciation Distribution may, in the Committee's discretion, be paid in
cash, in shares of Special Common Stock or in a combination of cash and Special
Common Stock. Any shares of Special Common Stock so distributed shall be valued
at the Closing Selling Price on the date the Concurrent Right is exercised and
shall reduce on a one-for-one basis the number of shares of Special Common Stock
thereafter issuable under this Plan.

3. Terms Applicable to Both Tandem Rights and Concurrent Rights.

<PAGE> 8

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.

c. No limitation shall exist on the aggregate amount of cash payments the
Company may make under this Article Two Program in connection with the exercise
of Tandem or Concurrent Rights.

4. Limited Rights.

a. Each Section 16(b) Insider shall have the Limited Right, exercisable in the
event there should occur a Change in Control (as such term is defined below), to
surrender any or all of the options (whether incentive stock options or
non-statutory options) held by such individual under this Article Two Program,
to the extent such options (i) have been outstanding for at least six (6) months
and (ii) are at the time exercisable for vested shares.

b. In exchange for each option surrendered in accordance with subparagraph a.
above, the Section 16(b) Insider shall receive an Appreciation Distribution in
an amount equal to the excess of (i) the Change in Control Price (determined as
of the date of surrender) of the number of shares in which the Section 16(b)
Insider is at the time vested under the surrendered option over (ii) the
aggregate option price payable for such vested shares. For purposes of such
Appreciation Distribution, the Change in Control Price per share of the vested
Special Common Stock subject to the surrendered option shall be deemed to be
equal to the greater of (a) the Closing Selling Price per share on the date of
surrender or (b) the highest reported price per share paid in effecting the
Change in Control. However, if the option is an Incentive Option, then the
Change in Control Price of the vested shares subject to the surrendered option
shall not exceed the value per share determined under clause (a) above.

c. The Appreciation Distribution shall be made entirely in cash, and the shares
of Special Common Stock subject to each surrendered option shall not be
available for subsequent issuance under this Plan.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any of the following transactions (a "Corporate
Transaction"):

(i) a merger or acquisition in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the State
of the Company's incorporation,

(ii) the sale, transfer or other disposition of all or substantially all of the
assets of the Company to any entity other than a Subsidiary of the Company, or

(iii) any reverse merger in which the Company is the surviving entity but in
which fifty percent (50%) or more of the Company's outstanding voting stock held
by persons who are not "Subject Persons" as defined in Article Eleventh of the
Company's Certificate of Incorporation (as in effect on September 7, 1990)
including persons included in such definition by subparagraph (b) thereof is
transferred to holders different from those who held the stock immediately prior
to such merger, then the exercisability of each option outstanding under this
Regular Option Grant Program shall be automatically accelerated so that each
such option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable with respect to the total number
of shares of Special Common Stock purchasable under such option and may be
exercised for all or any portion of such shares. However, an outstanding option
under this Regular Option Grant Program shall not be so accelerated if and to
the extent: (i) such option is, in connection with the Corporate Transaction,
either to be assumed by the successor corporation or parent thereof or be
replaced with a comparable option to purchase shares of the capital stock of the
successor

<PAGE> 9

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.

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

IV. INCENTIVE OPTIONS

A. The terms and conditions specified below shall be applicable to all Incentive
Options granted under this Regular Option Grant Program. Options which are
specifically designated as "non-statutory" options when issued under this
Regular Option Grant Program shall not be subject to such terms and conditions.

1. Option Price.

2. 10% Stockholder.

<PAGE> 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.

4. Term and Exercise of Options.

a. No Incentive Option shall have a term in excess of ten (10) years from the
grant date.

b. An Incentive Option shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Optionee only by the Optionee.

5. Termination of Service.

A. Notwithstanding any terms in the Plan to the contrary, an Incentive Option
must be exercised within the three (3) month period commencing with the date of
cessation of Employee status for any reason, except that in the event the
Optionee's cessation of Employee status is due to permanent disability, such
period shall be one (1) year from the date of such cessation of Employee status.
Incentive Options not exercised within the applicable period shall be treated as
non-statutory options.

B. Except as modified by the preceding provisions of this Incentive Options
section, all the provisions of this Regular Option Grant Program shall be
applicable to the Incentive Options granted hereunder. If any option originally
granted as an Incentive Stock Option is modified so as not to qualify under the
Code as an Incentive Stock Option, such modified Incentive Stock Option shall be
a non-statutory option.

V. CANCELLATION AND RE-GRANT OF OPTIONS

The Committee shall have the authority to effect, at any time and from time to
time, with the consent of the affected option holders, the cancellation of any
or all outstanding options under this Regular Option Grant Program and to grant
in substitution therefor new options under this Plan covering the same or
different numbers of shares of Special Common Stock but having an option price
per share not less than fifty percent (50%) of the Closing Selling Price (one
hundred percent (100%) of the Closing Selling Price in the case of an Incentive
Option or, in the case of a 10% Stockholder, not less than one hundred and ten
percent (110%) of the Closing Selling Price) per share of Special Common Stock
on the new grant date.

VI. LOANS OR GUARANTEE OF LOANS

The Committee may assist any Employee (including any officer or director) in the
exercise of one or more options under this Regular Option Grant Program by (a)
authorizing the extension of a loan to such Employee from the Company, (b)
permitting the Employee to pay the option price for the purchased Special Common
Stock in installments over a period of years or (c) authorizing a guarantee by
the Company of a third-party loan to the Employee. The terms of any loan,
installment method of payment or guarantee (including the interest rate and
terms of repayment) shall be established by the Committee in its sole
discretion. Loans, installment payments and guarantees may be granted without
security or collateral,

<PAGE> 11

but the maximum credit available to the Optionee shall not exceed the sum of (i)
the aggregate exercise price (less the par value) of the purchased shares plus
(ii) any Federal and State income and employment tax liability incurred by the
Employee in connection with the exercise of the option.

ARTICLE THREE

AUTOMATIC GRANT PROGRAM

I. AUTOMATIC GRANTS

On April 30, 1996 each individual who is a non-Employee member of the Board on
such date shall automatically be granted a non-statutory option under this
Article Three to purchase 20,000 shares of Special Common Stock. Each
non-Employee who is first appointed or elected a member of the Board after April
30, 1996 shall automatically be granted, on the date of such individual's
election to the Board, a non-statutory option under this Article Three to
purchase 20,000 shares of Special Common Stock. Each Employee director who is
first elected a member of the Board and who subsequently becomes a non-Employee
director after April 30, 1996 shall automatically be granted, on the date of
such individual's change from Employee to non-Employee director, a non-statutory
option under this Article Three to purchase 20,000 shares of Special Common
Stock.

II. TERMS AND CONDITIONS OF GRANT

A. Exercise Price.

The exercise price per share shall be one hundred percent (100%) of the Closing
Selling Price per share of Special Common Stock on the grant date.

B. Term and Vesting of Options.

1. Except as otherwise specified below, each option shall vest in increments of
5,000 shares on the first, second, third and fourth anniversaries of the grant
date and shall thereafter remain exercisable until the expiration or earlier
termination of the option term.

2. Each granted option shall have a term of ten (10) years measured from the
grant date.

C. Exercise of Option.

Upon exercise of the option, the option exercise price for the purchased shares
shall become immediately due and payable in full in one of the alternative forms
specified below:

(i) cash or check payable to the Company's order;

(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.

<PAGE> 12

1. Should an optionee cease to be a member of the Board for any reason (other
than death) prior to the expiration date of the automatic grant held by the
optionee under this Article Three, then each such grant shall remain
exercisable, for any shares of Special Common Stock for which the option is
exercisable at the time of such cessation of Board membership, for a period not
to exceed the earlier of (i) the expiration of the three (3) month period
following the date of such cessation of Board membership or (ii) the specified
expiration date of the option term.

2. Should the optionee's membership on the Board cease by reason of death, then
each outstanding grant held by the optionee under this Article Three may be
subsequently exercised, for any shares of Special Common Stock for which the
option is exercisable at the time of the optionee's cessation of Board
membership, by the personal representative of the optionee's estate or by the
person or persons to whom the option is transferred pursuant to the optionee's
will or in accordance with the laws of descent and distribution. Any such
exercise must, however, occur prior to the earlier of (i) the expiration of the
twelve (12) month period following the date of the optionee's death or (ii) the
specified expiration date of the option term.

E. Stockholder Rights.

III. CORPORATE TRANSACTION

In the event of a Corporate Transaction, options granted under the Automatic
Grant Program shall be treated as described in Section III of Article Two,
except the provisions of clause (iii) of the penultimate sentence of Section III
A.(iii) of Article Two shall not apply.

IV. CHANGE IN CONTROL

In the event of a Change in Control, options granted under the Automatic Grant
Program shall be treated as described in Section III of Article Two, except the
last sentence of Section III C.(ii) of Article Two shall not apply.

ARTICLE FOUR

STOCK INCENTIVE PROGRAM

I. TERMS AND CONDITIONS OF STOCK ISSUANCES

A. Shares may be issued under this Stock Incentive Program as a reward for past
services rendered the Company or one or more of its Parent or Subsidiaries or as
an incentive for future service with such entities. Any unvested shares so
issued shall be evidenced by a Restricted Stock Issuance Agreement ("Issuance
Agreement") which complies with the terms and conditions of this Stock Incentive
Program and shall include appropriate terms with respect to legending of
certificates and escrow of unvested shares.

1. Vesting Schedule.

a. The Recipient's interest in the issued shares of Special Common Stock may, in
the absolute discretion of the Committee, be fully and immediately vested upon
issuance or may vest in one or more installments.

<PAGE> 13

which are to lapse between installments and the effect which death, disability
or other event designated by the Committee is to have upon the vesting schedule,
shall be determined by the Committee and set forth in the Issuance Agreement
executed by the Company and the Recipient at the time of the incentive grant.

c. Except as may otherwise be provided in the Issuance Agreement, the Recipient
may not transfer unvested shares of Special Common Stock. The Recipient,
however, shall have all the rights of a stockholder with respect to such
unvested shares, including without limitation the right to vote such shares and
to receive all dividends paid on such shares.

2. Cancellation of Shares.

a. In the event the Recipient should, while his/her interest in the issued
Special Common Stock remains unvested, cease to continue in Service for any
reason whatsoever, then the Company shall have the right to cancel all such
unvested shares, and the Recipient shall thereafter have no further stockholder
rights with respect to such shares.

b. The Committee may in its discretion waive such cancellation of unvested
shares in whole or in part and thereby effect the immediate vesting of the
Recipient's interest in the shares of Special Common Stock (or other assets) as
to which the waiver applies.

3. Corporate Transaction/Change in Control.

All unvested shares under the Stock Incentive Program shall immediately vest in
full immediately prior to the occurrence of any Corporate Transaction or Change
in Control, except to the extent:

(i) the Company's outstanding cancellation rights are to be assigned to the
successor corporation (or parent thereof) in connection with the Corporate
Transaction, or

(ii) one or more limitations imposed by the Committee at the time of stock
issuance preclude such accelerated vesting.

ARTICLE FIVE

MISCELLANEOUS

I. TAX WITHHOLDING

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

<PAGE> 14

A. The Board shall have the complete and exclusive authority to amend or modify
the Plan in any or all respects whatsoever; provided, however, that no such
amendment or modification shall, without the consent of the holders, adversely
affect rights and obligations with respect to any stock options, stock
appreciation rights or unvested Special Common Stock at the time outstanding
under the Plan. In addition, with a view to making available the benefits
provided by Section 422 of the Code and/or SEC Rule 16b-3 as in effect from time
to time under the 1934 Act, the Board shall, at the time of each such amendment,
determine whether or not to submit such amendment of the Plan to the Company's
stockholders for approval.

B. No material amendments shall be made to the provisions of the Automatic Grant
Program without the approval of the Company's stockholders.

III. EFFECTIVE DATE AND TERM OF PLAN

B. The Plan shall in all events terminate on the date determined by the Board
but in no event shall the Plan terminate later than February 6, 2006. Upon such
termination, any stock options, stock appreciation rights and unvested shares at
the time outstanding under the Plan shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants or
issuances.

IV. MISCELLANEOUS PROVISIONS

A. Any cash proceeds received by the Company from the issuance of shares
hereunder shall be used for general corporate purposes.

B. The implementation of the Plan, the granting of any stock option or stock
appreciation right hereunder, and the issuance of Special Common Stock under the
Regular Option Grant, the Automatic Grant Program or Stock Incentive Program
shall be subject to the Company's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options and stock appreciation rights granted under it and the Special Common
Stock issued pursuant to it.

C. Neither the action of the Company in establishing the Plan, nor any action
taken by the Board or the Committee hereunder, nor any provision of the Plan
itself shall be construed so as to grant any individual the right to remain in
the employ or service of the Company or any of its Parent or Subsidiaries for
any period of specific duration, and the Company (or any parent or subsidiary
retaining the services of such

<PAGE> 15

individual) may terminate such individual's employment or service at any time
and for any reason, with or without cause.

ARTICLE SIX

SPECIAL REDEMPTION AND PUT PROVISIONS

I. PRIORITY

To the extent there is a conflict between any of the provisions of this Article
Six and any other provision of the Plan, the specific provisions of this Article
Six shall be controlling and shall govern the disposition of all such options
outstanding at the time of the Redemption (as defined below), upon the exercise
of the Put Rights (as defined below), or when both events may no longer occur.
Any rights under Section 1.04 of the Governance Agreement dated as of September
7, 1990 between the Company and Roche Holdings, Inc., ("Roche") and Section 1.04
of the Amended Governance Agreement which a holder of an option, stock
appreciation right, or stock issued under the Stock Incentive Program may have
are superseded in their entirety by this Article Six.

II. EFFECT OF REDEMPTION ON VESTED OPTIONS AND VESTED STOCK APPRECIATION RIGHTS
AND VESTED SHARES ISSUED UNDER THE STOCK INCENTIVE PROGRAM

A. If the Special Common Stock shall be redeemed by the Company (the
"Redemption") at any time as provided in Section (c)(ii) of Article Third of the
Certificate of Incorporation of the Company as in effect on October 25, 1995
(the "Certificate") or the put rights are exercisable by the stockholders of the
Company (the "Put Rights") at any time as provided in Section (c)(iii) of
Article Third of the Certificate, then holders of all outstanding options and
stock appreciation rights granted hereunder, to the extent vested immediately
prior to the date fixed for the Redemption or to the extent to which the Put
Rights were properly exercised by such holder for their outstanding vested
options and stock appreciation rights granted hereunder ("Vested Securities"),
shall promptly be paid for such Vested Securities an amount equal to the product
of (i) the excess of the redemption price or put price per share fixed in
Section (c)(ii) or (iii) of Article Third of the Certificate, as applicable
(without reduction for the payment of any cash dividends as provided in the
fourth sentence of Section (c)(ii)(C) of Article Third of the Certificate), over
the exercise price per share, times (ii) the number of shares covered by such
Vested Security. If either the Redemption or exercise of the Put Rights occurs
as described in the preceding sentence, then holders of all outstanding shares
issued under the Stock Incentive Program, to the extent vested immediately prior
to the date fixed for the Redemption or to the extent to which the Put Rights
were properly exercised by such holder for their outstanding vested shares
issued under the Stock Incentive Program ("Vested Shares"), shall promptly be
paid for such Vested Shares an amount equal to the product of (i) the redemption
price or put price per share fixed in Section (c)(ii) or (iii) of Article Third
of the Certificate, as applicable (without reduction for the payment of any cash
dividends as provided in the fourth sentence of Section (c)(ii)(C) of Article
Third of the Certificate), times (ii) the number of Vested Shares. All payments
hereunder shall be reduced by any appropriate tax withholding.

III. EFFECT OF REDEMPTION ON UNVESTED OPTIONS AND STOCK APPRECIATION RIGHTS, AND
UNVESTED SHARES ISSUED UNDER THE STOCK INCENTIVE PROGRAM

A. Upon the Redemption each option and stock appreciation right granted under
this Plan, to the extent not vested immediately prior to the date fixed for the
Redemption shall be canceled. Upon the Redemption, all unvested shares issued
under the Stock Incentive Program shall be canceled.

<PAGE> 16

IV. EFFECT OF NO REDEMPTION

A. If the Redemption does not occur, each option and stock appreciation right
granted and each share awarded under the Stock Incentive Program under this Plan
which is outstanding on July 1, 1999 shall remain outstanding on the same terms
and conditions (including, without limitation, the exercise price per share (in
the case of options and stock appreciation rights), and the number of shares for
options, stock appreciation rights and shares issued under the Stock Incentive
Program) in effect for such option, stock appreciation right or share issued
under the Stock Incentive Program immediately prior to July 1, 1999, except that
the shares purchasable under each such option, stock appreciation right or
shares issued under the Stock Incentive Program shall continue to be shares of
Special Common Stock prior to the Conversion Date (as defined in Section (c)(vi)
of Article Third of the Certificate) and shares of Common Stock on and after the
Conversion Date. Each such continuing option, stock appreciation right and share
issued under the Stock Incentive Program will become exercisable, and shall vest
in accordance with the same installment dates such option, stock appreciation
right or share issued under the Stock Incentive Program would have become
exercisable at the time of grant. Notwithstanding any provision in this Article
Six, Section IV, to the contrary, if at any time following July 1, 1999 the
shares of Genentech's capital stock are no longer listed for trading on the New
York Stock Exchange, the Nasdaq National Market, or any other national exchange
for any reason, any unvested options, stock appreciation rights and shares
issued under the Stock Incentive Program shall automatically be cancelled as of
such date.

V. EXAMPLE

A. For purposes of this example assume that it is July 1, 1999, the Redemption
has not occurred, the Put Rights are exercisable, an individual holds an option
for 100 shares of Special Common Stock with an exercise price of $50 per share,
75 of such shares are vested and 25 shares are unvested, the Special Common
Stock is trading on the New York Stock Exchange at $62 per share, and the Put
Price (as defined in the Certificate) is $60 per share. During the Put Period
(as defined in the Certificate) the holder may properly exercise the holder's
Put Rights with respect to none, some or all of the 75 vested shares. If, for
example, the holder exercised Put Rights for 40 of the 75 shares, that holder
would receive (40 shares) x (60 - 50 dollars per share) = $400, reduced by
appropriate tax withholding. So long as the Special Common Stock (during the Put
Period) or the Common Stock (following the Put Period) are listed for trading on
the New York Stock Exchange, the Nasdaq National Market, or any other national
exchange, (i) the 35 remaining vested shares for which Put Rights were not
exercised shall remain exercisable to acquire shares of Special Common Stock or
Common Stock, as appropriate, and (ii) the 25 unvested shares would continue to
vest and, to the extent vested, be exercisable to acquire shares of Special
Common Stock or Common Stock, as appropriate. If the Special Common Stock or the
Common Stock is no longer listed for trading on the New York Stock Exchange, the
Nasdaq National Market, or any other national exchange for any reason, any of
the 25 shares that are unvested on such date shall automatically be cancelled.

VI. OTHER

A. On the Conversion Date, all references in the Plan to Special Common Stock
shall automatically become references to Common Stock.

<PAGE> 1

EXHIBIT 99.4

ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE EXECUTIVE COMMITTEE OF THE
BOARD OF DIRECTORS OF
GENENTECH, INC.

We, the undersigned, representing all of the members of the Executive
Committee of the Board of Directors of Genentech, Inc. (the "Company"), do
hereby consent to, approve and adopt by unanimous written consent the actions
and resolutions set forth on Exhibit A and Exhibit B to this Action, in lieu of
a meeting pursuant to Section 141(f) of the Delaware General Corporation Law.
This Action may be signed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument.

Date: June 9, 1999

/s/ HERBERT W. BOYER
- -------------------------------------
Herbert W. Boyer

/s/ FRANZ B. HUMER
- -------------------------------------
Franz B. Humer

/s/ ARTHUR D. LEVINSON
- -------------------------------------
Arthur D. Levinson

/s/ J. RICHARD MONROE
- -------------------------------------
J. Richard Monroe

<PAGE> 2

EXHIBIT B

GENENTECH, INC.
RESOLUTIONS OF THE
EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS
RELATING TO EMPLOYEE COMPENSATION

WHEREAS, Roche Holdings, Inc. ("ROCHE") has the right to require the
redemption (the "REDEMPTION") by the Company of its callable putable common
stock, par value $0.02 per share (the "SPECIAL COMMON STOCK"), pursuant to the
certificate of incorporation of the Company (the "CERTIFICATE OF
INCORPORATION"), and

WHEREAS, this Committee is authorized to exercise all the powers and
authority of the Board to the fullest extent permitted by Section 141(c)(2) of
the General Corporation Law of the State of Delaware, including without
limitation the powers to administer and interpret the terms of the Company's
1984 Non-Qualified Stock Option Plan, as amended and restated (the "1984 NON-ISO
PLAN"), the 1984 Incentive Stock Option Plan, as amended and restated (the "1984
ISO PLAN" and together with the 1984 Non-ISO Plan, the "1984 PLANS"), the 1990
Stock Option/Stock Incentive Plan, as amended (the "1990 PLAN"), the 1994 Stock
Option Plan, as amended (the "1994 PLAN"), the 1996 Stock Option/Stock Incentive
Plan (the "1996 PLAN" and together with the 1984 Plans, the 1990 Plan and the
1994 Plan, the "STOCK OPTION PLANS") and the Deferred Compensation Plan (the "DC
PLAN");

NOW THEREFORE, this Committee adopts the following resolutions, each
conditioned upon the delivery by Roche to the Company of notice of its exercise
of its right to require the Redemption:

RESOLVED, that (i) all options granted under the 1984 Plans and 1990
Plan outstanding on the date of redemption (the "REDEMPTION DATE"), whether or
not vested and (ii) all options granted under the 1994 Plan outstanding on the
Redemption Date that are not vested on the Redemption Date will be canceled on
the Redemption Date and, within three business days thereof, the Company will
pay to the holder of each such option in cash an amount equal to the product of
(A) $82.50 minus the exercise price per share under such option and (B) the
number of shares of Special Common Stock subject to such option. Notwithstanding
the foregoing, in the discretion of the Board of Directors or the Compensation
Committee or this Committee, certain options granted under the 1990 Plan and
1994 Plan to employees of the Company hired during the period between January 1,
1997 and the date hereof that are outstanding but are not vested on the
Redemption Date may be converted into options to purchase shares of common
stock, par value $0.02 per share, of the Company ("COMMON STOCK"), exercisable
for the same number of shares and at the same exercise price as the options
prior to such conversion.

RESOLVED, that all options granted under the 1994 Plan and the 1996 Plan
to employees as of the Redemption Date and that are vested and outstanding as of
the Redemption Date ("CONVERTING OPTIONS") will be converted, as of such date,
into options ("CONVERTED OPTIONS") to purchase shares of Common Stock, provided
that the holder of such option has not

<PAGE> 3

elected prior to the Redemption Date to receive cash in exchange for the
cancellation of such option pursuant to a "cashless" exercise or otherwise. Each
Converted Option will entitle the holder to purchase a number of shares of
Common Stock equal to the number of shares of Special Common Stock that the
holder was entitled to purchase under the applicable Converting Option, at the
same exercise price per share as applied under such applicable Converting Option
(subject, in each case, to adjustment as appropriate to reflect any changes in
the capitalization of the Company in connection with or following the
Redemption). Each Converted Option will otherwise be subject to the same terms
and conditions as applied to the applicable Converting Option.

RESOLVED, that all options granted under the 1996 Plan that are not
vested as of the Redemption Date ("CANCELED OPTIONS") will be canceled as of
such date. Upon a subsequent public offering by the Company or its shareholder
of Common Stock, the former holder of each Canceled Option who remains an
employee of the Company will receive a new option (a "REPLACEMENT OPTION") which
will vest over a three-year period and shall entitle the holder to purchase
shares of Common Stock at a per share exercise price equal to the offering price
per share of Common Stock under the initial public offering. The number of
shares of Common Stock for which each Replacement Option may be exercised shall
be 1.33 times the number of shares covered by the applicable Canceled Option,
subject to any adjustments necessary to reflect any capital contributions by
Roche. Notwithstanding the foregoing, the Board or the Executive Committee or
the Compensation Committee may, in its discretion, provide for alternative
treatment of certain of the unvested options under the 1996 Plan.

RESOLVED, that the Authorized Officers are hereby authorized and
directed to restrict the exercisability of any outstanding option under the
Stock Option Plans prior to and including the Redemption Date, to the extent
requested by Roche as necessary to facilitate the orderly consummation of the
Redemption. Such restrictions will not apply to "cashless" exercises not
involving the issuance by the Company of additional shares of Special Common
Stock.

RESOLVED, that the DC Plan is hereby canceled and terminated and shall
be considered to be of no force or effect.

RESOLVED, that in lieu of issuing Special Common Stock to an
optionholder upon the exercise of an option prior to the Redemption Date, the
Company may permit a "cashless" exercise by paying an optionholder, in
consideration for the relinquishment of his or her vested option, an amount
equal to the product of (A) $82.50 minus the exercise price per share under such
option and (B) the number of shares of Special Common Stock subject to such
option.

RESOLVED, that the AUTHORIZED OFFICERS of the Company, for purposes of
the foregoing resolutions, shall be the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer, any Senior Vice President, and
any Vice President. The Authorized Officers are, and each of them is, authorized
to make such amendments and modifications to the forms of plans, contracts and
other arrangements adopted or authorized herein as in his, her or their sole
discretion are deemed necessary or desirable, appropriate and consistent with
the intent of the foregoing resolutions.