Document:

Form of Voting Agreement between Genentech, Inc. and Certain Stockholders of
      Tanox, Inc.

    
      
        

      

    

    EXHIBIT
      10.39

     

    EXECUTION
      COPY

    FORM
      OF VOTING AGREEMENT

    THIS
      VOTING AGREEMENT (this
“Agreement”) is made and entered into as of November 9,
      2006, by and between Genentech, Inc., a Delaware corporation
      (“Parent”) and the undersigned stockholder
      (“Stockholder”) of Tanox, Inc. (the
“Company”). 

    RECITALS
      

    A.
      Concurrently with the execution
      of this Agreement, Parent and the Company have entered into an Agreement and
      Plan of Merger (the “Merger Agreement”), which provides for the
      merger (the “Merger”) of a wholly-owned subsidiary of Parent
      with and into the Company. 

    B.
      Pursuant to the Merger, all of
      the issued and outstanding shares of capital stock and options of the Company
      will be canceled and converted into the right to receive the consideration
      set
      forth in the Merger Agreement, all upon the terms and subject to the conditions
      set forth in the Merger Agreement. 

    C.
      As of the date hereof,
      Stockholder is the beneficial owner (as defined in Rule 13d-3 under the
      Securities Exchange Act of 1934, as amended (the “Exchange
      Act”)) of the number of shares of outstanding capital stock of the
      Company (the “Shares”) and other securities convertible into,
      or exercisable or exchangeable for, shares of capital stock of the Company
      (the
“Options”), all as set forth on the signature page of this
      Agreement; provided that for purposes of determining beneficial ownership
      pursuant to this Agreement, Stockholder shall in all cases be deemed to be
      the
      beneficial owner of any securities which may be acquired by such Stockholder
      pursuant to any agreement, arrangement or understanding or upon the exercise
      of
      conversion rights, exchange rights, warrants or options, or otherwise
      (irrespective of whether the right to acquire such securities is exercisable
      immediately or only after the passage of time, including the passage of time
      in
      excess of 60 days, the satisfaction of any conditions, the occurrence of any
      event or any combination of the foregoing). 

    D.
      As a material inducement to
      Parent to enter into and to consummate the transactions contemplated by the
      Merger Agreement, Parent has required that Stockholder agree, and Stockholder
      is
      willing to agree, to restrict the transfer or disposition of any Shares, Options
      and any New Shares (as defined in Section 1(b) hereof), and to vote
      the Shares and any New Shares as set forth in this Agreement. 

    NOW,
      THEREFORE, the parties hereto
      hereby agree as follows: 

    1.
Agreement
      to Retain Shares and
      Options. 

    (a)
Transfer.
      Stockholder
      agrees that, at all times during the period beginning on the date hereof and
      ending at the Expiration Time, Stockholder shall not Transfer (as defined below)
      any of the Shares, Options and any New Shares, or make any agreement or
      understanding regarding
      any Transfer, in each case without the prior written consent of Parent.
      Stockholder agrees that any Transfer in violation of this Agreement shall be
      void and of no force or effect. 

    As
      used herein, the term
“Expiration Time” shall mean the earlier to occur of
      (i) such date and time as the Merger shall become effective in accordance
      with the terms and provisions of the Merger Agreement, or (ii) the
      termination of the Merger Agreement in accordance with the terms thereof. As
      used herein, the term “Transfer” shall mean, with respect to
      any security, the direct or indirect assignment, sale, transfer, tender, pledge,
      hypothecation, or the gift, placement in trust, or the Constructive Sale (as
      defined below) or other disposition of such security (excluding
[exercises of Options and]1
      transfers by testamentary or intestate succession or
      otherwise by operation of law) or any right, title or interest therein
      (including, but not limited to, any right or power to vote to which the holder
      thereof may be entitled, whether such right or power is granted by proxy or
      otherwise), or the record or beneficial ownership thereof, the offer to make
      such a sale, transfer, tender, pledge, hypothecation or Constructive Sale or
      other disposition, and each agreement, arrangement or understanding, whether
      or
      not in writing, to effect any of the foregoing, excluding any Transfer
      (A) pursuant to a court order, (B) pursuant to the Merger, (C) to
      any affiliate or family member of Stockholder if such transferee, prior to
      the
      Transfer, executes a binding agreement with Parent and the Company substantially
      in the form of this Agreement [or (D) that is a sale (other than a
      Constructive Sale) in the open market through a brokers’ transaction (as defined
      in Rule 144(g) under the Securities Act of 1933, as
      amended)]2.
      As used herein, the
      term “Constructive Sale” shall mean, with respect to any
      security, a short sale with respect to such security, entering into or acquiring
      an offsetting derivative contract with respect to such security, entering into
      or acquiring a futures or forward contract to deliver such security or entering
      into any other hedging or other derivative transaction that has the effect
      of
      materially changing the economic benefits and risks of ownership. 

    (b)
New
      Shares. Stockholder
      agrees that any shares of capital stock of the Company that Stockholder
      purchases or with respect to which Stockholder otherwise acquires beneficial
      ownership after the date of this Agreement and prior to the Expiration Time,
      including, without limitation, shares issued or issuable upon the conversion,
      exercise or exchange, as the case may be, of any Options held by Stockholder
      (“New Shares”), shall be subject to the terms and conditions of
      this Agreement to the same extent as if they constituted Shares as of the date
      hereof. 

    2.
Agreement
      to Vote Shares.
      Until the Expiration Time, at every meeting of stockholders of the Company
      called with respect to any of the following, and at every adjournment or
      postponement thereof, and on every action or approval by written consent of
      stockholders of the Company with respect to any of the following, Stockholder
      shall vote, to the extent not voted by the person(s) appointed under the Proxy
      (as defined in Section 3), the outstanding Shares and any
      outstanding New Shares (to the extent any such New Shares may be voted):

     

    1This
      language was included in voting agreements executed by
      Julia Brown, Heinz Bull, Danong Chen, Gary Frashier, Osama Mikhail and Peter
      Traber, but was excluded from the voting agreements executed by Nancy Chang
      and
      Tse-Wen Chang. 

    2This
      language was included in voting agreements executed by
      Julia Brown, Heinz Bull, Danong Chen, Gary Frashier, Osama Mikhail and Peter
      Traber, but was excluded from the voting agreements executed by Nancy Chang
      and
      Tse-Wen Chang. 

              (i) in
      favor of adoption of the
      Merger Agreement and in favor of any other action contemplated by the Merger
      Agreement or required in furtherance of the Merger and the transactions
      contemplated by the Merger Agreement (including one or more adjournments
      necessary to solicit additional proxies if there are insufficient votes to
      adopt
      the Merger Agreement and any such related proposals at the time of any meeting
      held for such purposes); 

    (ii) against
      approval of any
      proposal made in opposition to, or in competition with, consummation of the
      Merger and the transactions contemplated by the Merger Agreement; 

    (iii)
      against any of the following
      actions (other than those actions contemplated by the Merger Agreement):
      (A) any merger, consolidation, business combination, sale of assets,
      reorganization or recapitalization of the Company or any subsidiary of the
      Company with any party, (B) any sale, lease, license or transfer of any
      significant part of the assets of the Company or any subsidiary of the Company,
      (C) any reorganization, recapitalization, dissolution, liquidation or
      winding up of the Company or any subsidiary of the Company, (D) any
      amendment to the certificate of incorporation or bylaws of the Company or any
      subsidiary of the Company or any material change in the capitalization of the
      Company or any subsidiary of the Company, or the corporate structure of the
      Company or any subsidiary of the Company, or (E) any other action that is
      intended, or could reasonably be expected to, impede, frustrate, prevent,
      interfere with, delay, postpone, discourage, nullify or adversely affect the
      Merger, the Merger Agreement or any of the other transactions contemplated
      by
      the Merger Agreement; and 

    (iv)
      in favor of waiving any notice
      that may have been or may be required relating to any such meeting of
      stockholders or written consent, the Merger, the Merger Agreement or the
      transactions contemplated thereby. 

    Prior
      to the Expiration Time,
      Stockholder shall not enter into any agreement or understanding with any person
      to vote or give instructions in any manner inconsistent with this
Section 2. Prior to the Expiration Time, to the extent not
      represented thereat by the person(s) appointed under the Proxy, Stockholder
      shall [cause the Shares and any New Shares to be counted as present
      thereat for purposes of establishing quorum.]3

    3.
Irrevocable
      Proxy.
      Concurrently with the execution of this Agreement, Stockholder agrees to deliver
      to Parent an irrevocable proxy in the form attached hereto as
Appendix A (the “Proxy”), which shall be
      irrevocable to the fullest extent permitted by applicable law, covering the
      total number of Shares and New Shares. 

    4.
Representations,
      Warranties
      and Covenants of Stockholder. Stockholder represents, warrants and covenants
      to Parent as follows: 

    (i)
      Stockholder is the beneficial
      owner of the Shares, with full power to vote or direct the voting of the Shares
      and to dispose of the Shares for and on behalf of any and all beneficial owners
      of the Shares, with no limitations, qualifications or restrictions on such
      rights. 

     

    3This
      language was included in voting agreements executed by
      Julia Brown, Heinz Bull, Danong Chen, Gary Frashier, Osama Mikhail and Peter
      Traber. In the voting agreements executed by Nancy Chang and Tse-Wen Chang,
      the
      following language was substituted for the highlighted language: “appear at any
      meeting of stockholders of the Company and cause the Shares and any New Shares
      to be counted as present thereat for purposes of establishing quorum.”

     

    (ii)
      As of the date hereof, the
      Shares are, and at all times up until the Expiration Time the Shares will be,
      free and clear of any rights of first refusal, co-sale rights, security
      interests, liens, pledges, claims, options, charges or other encumbrances of
      any
      kind or nature, in each case that could impair Stockholder’s ability to fulfill
      its obligations under Section 2. The execution and delivery of this
      Agreement by Stockholder do not, and Stockholder’s performance of its
      obligations under this Agreement will not, conflict with or violate any order,
      decree, judgment or Contract applicable to Stockholder or by which Stockholder
      or any of Stockholder’s properties or Shares is bound. 

    (iii)
      Stockholder does not
      beneficially own any shares of capital stock of the Company, or any securities
      convertible into, or exchangeable or exercisable for, shares of capital stock
      of
      the Company, other than as set forth on the signature page hereto. 

    (iv)
      Stockholder has full power and
      authority to make, enter into and carry out the terms of this Agreement, the
      Proxy and any other related agreements to which Stockholder is a party.

    (v)
      Stockholder shall not take any
      action that the Company is prohibited from authorizing or permitting any
      Representative (as defined in the Merger Agreement) from taking under
      Section 5.4(a) of the Merger Agreement, whether or not Stockholder is or
      remains a Representative. 

    (vi)
      Stockholder agrees that it will
      not bring, commence, institute, maintain, prosecute, participate in or
      voluntarily aid any Action before any Governmental Entity, which alleges that
      the execution and delivery of this Agreement by Stockholder, either alone or
      together with the other Company voting agreements and proxies to be delivered
      in
      connection with the execution of the Merger Agreement, or the approval of the
      Merger Agreement by the board of directors of the Company, breaches any
      fiduciary duty of the board of directors of the Company or any member thereof;
      provided, that Stockholder may defend against, contest or settle any such
      action, claim, suit or cause of action brought against Stockholder that relates
      solely to Stockholder’s capacity as a director or officer of the Company.

    (vii)
      Stockholder shall not exercise
      any rights (including under Section 262 of the Delaware Law) to demand
      appraisal or dissenters’ rights with respect to any Shares or New Shares that
      may be available with respect to the Merger. 

    5.
Further
      Assurances.
      Stockholder hereby covenants and agrees to take, or cause to be taken, all
      actions, and to do, or cause to be done, all things reasonably necessary to
      fulfill such Stockholder’s obligations under this Agreement, and to execute and
      deliver any additional documents reasonably necessary or desirable to carry
      out
      the purpose and intent of this Agreement. 

     

    6.
Consents
      and Waivers.
      Stockholder hereby gives any consents or waivers that are reasonably required
      for the consummation of the Merger under the terms of any Contract or other
      instrument to which Stockholder is a party or subject or in respect of any
      rights Stockholder may have. Stockholder further consents to the Company placing
      a stop transfer order on the Shares and any New Shares with its transfer
      agent(s) in accordance with Section 8. 

    7.
Termination.
      This
      Agreement and the Proxy delivered in connection herewith shall terminate
      automatically and shall have no further force or effect as of the Expiration
      Time. 

    8.
Company
      Covenants. The
      Company agrees to make a notation on its records and give instructions to its
      transfer agent(s) to not permit, prior to the Expiration Time, the transfer
      of
      any Shares or New Shares, except as permitted pursuant to
Section 1(a). 

    9.
Miscellaneous.
      

    (a)
Directors
      and Officers.
      Notwithstanding any provision of this Agreement to the contrary, Stockholder
      has
      entered into this Agreement in his or her capacity as a Stockholder of the
      Company, and nothing in this Agreement shall limit or restrict Stockholder
      from
      acting in the Stockholder’s capacity as a director or officer of the Company, as
      applicable (it being understood that this Agreement shall apply to Stockholder
      solely in Stockholder’s capacity as a stockholder of the Company). 

    (b)
Waiver.
      No waiver by any
      party hereto of any condition or any breach of any term or provision set forth
      in this Agreement shall be effective unless in writing and signed by the other
      party hereto. The waiver of any breach of any term or provision of this
      Agreement shall not operate as or be construed to be a waiver of any other
      previous or subsequent breach of any term or provision of this Agreement. No
      delay or omission by Parent in exercising any right under this Agreement shall
      operate as a waiver of that right or any other right under this Agreement.
      

    (c)
Notices.
      All notices and
      other communications hereunder shall be in writing and shall be deemed given
      if
      delivered personally or by commercial delivery service, or sent via telecopy
      (receipt confirmed) to the parties at the following addresses or telecopy
      numbers (or at such other address or telecopy numbers for a party as shall
      be
      specified by like notice): 

    (i)if
      to Parent, to: 

    Genentech,
      Inc. 

    1
      DNA Way 

    South
      San Francisco, California
      94080 

    Attention:
      Corporate Secretary

    Telephone
      No.: (650) 225-1000

    Telecopy
      No.: (650) 467-9146

     

    with
      a copy to: 

    Wilson
      Sonsini Goodrich &
Rosati 

    Professional
      Corporation

    650
      Page Mill Road 

    Palo
      Alto, California 94304

    Attention:  Martin
      W.
      Korman, Esq. 

                                  Bradley
      L Finkelstein, Esq.

    Telephone
      No.: (650) 493-9300

    Telecopy
      No.: (650) 493-6811

    (ii)if
      to Stockholder: To the
      address for notice set forth on the signature page hereof. 

    (d)
Headings.
      All captions
      and section headings used in this Agreement are for are for reference purposes
      only and shall not affect in any way the meaning or interpretation of this
      Agreement. 

    (e)
Counterparts.
      This
      Agreement may be executed in one or more counterparts, all of which shall be
      considered the same agreement and shall become effective when one or more
      counterparts have been signed by each of the parties and delivered to the other
      party, it being understood that all parties need not sign the same counterpart.
      

    (f)
Entire
      Agreement;
      Amendment. This Agreement constitutes the entire agreement among the parties
      with respect to the subject matter hereof and supersedes all prior agreements
      and understandings, both written and oral, among the parties with respect to
      the
      subject matter hereof. This Agreement may not be changed or modified, except
      by
      an agreement in writing specifically referencing this Agreement and executed
      by
      each of the parties hereto. 

    (g)
Severability.
      In the
      event that any provision of this Agreement, or the application thereof, becomes
      or is declared by a court of competent jurisdiction to be illegal, void or
      unenforceable, the remainder of this Agreement will continue in full force
      and
      effect and the application of such provision to other persons or circumstances
      will be interpreted so as reasonably to effect the intent of the parties hereto.
      The parties further agree to replace such void or unenforceable provision of
      this Agreement with a valid and enforceable provision that will achieve, to
      the
      extent possible, the economic, business and other purposes of such void or
      unenforceable provision. 

    (h)
Governing
      Law. This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Delaware, regardless of the laws that might otherwise govern under
      applicable principles of conflicts of law thereof. The parties hereto hereby
      irrevocably submit to the exclusive jurisdiction of the Court of Chancery in
      Newcastle County in the state of Delaware (and any appellate courts therefrom),
      or if such jurisdiction shall be unavailable, any court in the State of Delaware
      and the Federal courts of the United States of America, each located
      within
      Newcastle County in the State of Delaware., solely in respect of the
      interpretation and enforcement of the provisions of this Agreement, and in
      respect of the transactions contemplated hereby and thereby, and hereby waive,
      and agree not to assert, as a defense in any action, suit or proceeding for
      the
      interpretation or enforcement hereof or thereof, that it is not subject thereto
      or that such action, suit or proceeding may not be brought or is not
      maintainable in said courts or that the venue thereof may not be appropriate
      or
      that this Agreement may not be enforced in or by such courts, and the parties
      hereto irrevocably agree that all claims with respect to such action or
      proceeding shall be heard and determined in the Court of Chancery in the State
      of Delaware or, if jurisdiction is not available in the Court of Chancery,
      any
      other Delaware state court or Federal court, each located in Newcastle, County
      Delaware. The parties hereby consent to and grant any such court jurisdiction
      over the person of such parties and over the subject matter of such dispute
      and
      agree that mailing of process or other papers in connection with any such action
      or proceeding in the manner provided in Section 9(c) or in such
      other manner as may be permitted by applicable law, shall be valid and
      sufficient service thereof. With respect to any particular action, suit or
      proceeding, venue shall lie solely in Newcastle County, Delaware. 

    (i)
Rules
      of
      Construction. The parties hereto agree that they have been represented
      by counsel during the negotiation and execution of this Agreement and,
      therefore, waive the application of any law, regulation, holding or rule of
      construction providing that ambiguities in this Agreement will be construed
      against the party drafting such agreement or document. The words “include,”
“includes” and “including” when used herein shall be deemed in each case to be
      followed by the words “without limitation.” All capitalized terms that are used
      but not defined herein shall have the meanings ascribed to them in the Merger
      Agreement. 

    (j)
Remedies.
      The parties
      acknowledge that Parent will be irreparably harmed and that there will be no
      adequate remedy at law for a violation of any of the covenants or agreements
      of
      Stockholder set forth herein. Therefore, it is agreed that, in addition to
      any
      other remedies that may be available to Parent upon any such violation, Parent
      shall have the right to enforce such covenants and agreements by specific
      performance, injunctive relief or by any other means available to Parent at
      law
      or in equity. 

    (k)
No
      Assignment. Unless
      otherwise provided for herein, Stockholder may not assign this Agreement. This
      Agreement shall inure to the benefit of Parent, Company and their respective
      successors and assigns. 

    (l)
Waiver
      of Jury Trial.
      EACH OF PARENT AND STOCKHOLDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
      BY
      JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
      TORT
      OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
      PARENT OR STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
      ENFORCEMENT HEREOF. 

     

    [Remainder
      of Page Intentionally
      Left Blank] 

     

    IN
      WITNESS WHEREOF, the undersigned
      have executed this Agreement on the date first above written. 

     

    
      	
            	
            
	GENENTECH,
              INC.
	
            	
            
	By:	
               

               

            
	Name:	
               

               

            
	Title:	
               

               

            
	
            
	STOCKHOLDER:
	
            
	
               

               

            
	Signature
	
               

               

            
	Print
              Name
	
            
	Shares:
	Company
              Common
              Stock: ___________________________________
	Company
              Options: _________________________________________
	
            
	Stockholder’s
              address for notice:
	
            
	
               

               

            
	
               

               

            
	
               

               

            

    

    ****
      Signature Page to Company Voting
      Agreement***  

    APPENDIX
      A

    IRREVOCABLE
      PROXY

    The
      undersigned stockholder
      (“Stockholder”) of Tanox, Inc., a Delaware corporation (the
“Company”), hereby irrevocably (to the fullest extent
      permitted
      by law) appoints Stephen Julesgaard and David Ebersman of Genentech, Inc.,
      a
      Delaware corporation (“Parent”), and each of them, as the sole
      and exclusive attorneys-in-fact and proxies of the undersigned, with full power
      of substitution and resubstitution, to vote and exercise all voting and related
      rights (to the full extent that the undersigned is entitled to do so) with
      respect to all Shares and New Shares (each as defined in the that certain Voting
      Agreement, dated of even date herewith, by and among Parent, the Company and
      Stockholder (the “Voting Agreement”)), in accordance with the
      terms of this Proxy until the Expiration Time (as defined in the Voting
      Agreement). The Shares beneficially owned by the undersigned stockholder of
      the
      Company as of the date of this Proxy are listed on the final page of this Proxy.
      Upon the undersigned’s execution of this Proxy, any and all prior proxies given
      by the undersigned with respect to any Shares are hereby revoked and the
      undersigned hereby agrees not to grant any subsequent proxies with respect
      to
      the Shares or any New Shares until after the Expiration Time (as defined in
      the
      Voting Agreement). 

    This
      Proxy is irrevocable (to the
      fullest extent permitted by law), is coupled with an interest, is granted
      pursuant to the Voting Agreement, and is granted in consideration of Parent
      entering into that certain Agreement and Plan of Merger, dated as of
      November 9, 2006, by and among Parent, the Company and certain other
      parties (the “Merger Agreement”). The Merger Agreement provides
      for the merger of a wholly-owned subsidiary of Parent with and into the Company
      in accordance with its terms (the “Merger”), and Stockholder is
      receiving a portion of the proceeds of the Merger. 

    The
      attorneys-in-fact and proxies
      named above are hereby authorized and empowered by the undersigned, at any
      time
      prior to the Expiration Time, to act as the undersigned’s attorney-in-fact and
      proxy to vote the Shares and any New Shares, and to exercise all voting, consent
      and similar rights of the undersigned with respect to the Shares and new Shares
      (including, without limitation, the power to execute and deliver written
      consents), at every annual, special, adjourned or postponed meeting of
      stockholders of the Company and in every written consent in lieu of such
      meeting: 

    (i) in
      favor of adoption of the
      Merger Agreement and in favor of any other action contemplated by the Merger
      Agreement or required in furtherance of the Merger and the transactions
      contemplated by the Merger Agreement (including one or more adjournments
      necessary to solicit additional proxies if there are insufficient votes to
      adopt
      the Merger Agreement and any such related proposals at the time of any meeting
      held for such purposes); 

     

              
(ii) against
      approval of
      any proposal made in opposition to, or in competition with, consummation of
      the
      Merger and the transactions contemplated by the Merger Agreement; 

    (iii)
      against any of the following
      actions (other than those actions contemplated by the Merger Agreement):
      (A) any merger, consolidation, business combination, sale of assets,
      reorganization or recapitalization of the Company or any subsidiary of the
      Company with any party, (B) any sale, lease, license or transfer of any
      significant part of the assets of the Company or any subsidiary of the Company,
      (C) any reorganization, recapitalization, dissolution, liquidation or
      winding up of the Company or any subsidiary of the Company, (D) any
      amendment to the certificate of incorporation or bylaws of the Company or any
      subsidiary of the Company or any material change in the capitalization of the
      Company or any subsidiary of the Company, or the corporate structure of the
      Company or any subsidiary of the Company, or (E) any other action that is
      intended, or could reasonably be expected to, impede, frustrate, prevent,
      interfere with, delay, postpone, discourage, nullify or adversely affect the
      Merger, the Merger Agreement or any of the other transactions contemplated
      by
      the Merger Agreement; and 

    (iv)
      in favor of waiving any notice
      that may have been or may be required relating to any such meeting of
      stockholders or written consent, the Merger, the Merger Agreement or the
      transactions contemplated thereby. 

    Any
      obligation of the undersigned
      hereunder shall be binding upon the successors and assigns of the undersigned.
      

    This
      Proxy shall terminate, and be
      of no further force and effect, automatically as of the Expiration Time.

    [Remainder
      of Page Intentionally
      Left Blank] 

    *****

     

    This
      Proxy shall terminate, and be
      of no further force and effect, automatically upon the Expiration Time (as
      defined in the Voting Agreement). 

    Dated:
      November 9, 2006

     

    
      	
            
	
               

               

            
	Signature
	
               

               

            
	Print
              Name
	
               

               

            
	
               

               

            
	Address
	
            
	Shares:
	
            
	Company
              Common
              Stock: ___________________________________
	
            
	Company
              Options: _________________________________________

    

    ****Signature
      Page to
      Proxy****OUTSIDE DIRECTOR STOCK OPTION AGREEMENT

EXHIBIT 10.12(c)

OUTSIDE DIRECTOR STOCK OPTION AGREEMENT

(PURSUANT TO THE TERMS OF THE

CONTINENTAL AIRLINES, INC.

1998 STOCK INCENTIVE PLAN)

If the Optionee accepts this Option, the Optionee agrees to be bound by all of the terms, provisions, conditions and limitations

of the Plan and this Outside Director Stock Option Agreement.

The Plan is hereby incorporated

by reference as a part of this Outside Director Stock Option Agreement.

Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Plan.

 

This STOCK OPTION AGREEMENT (this "Option Agreement") is between Continental Airlines, Inc., a Delaware corporation ("Company"), and Optionee and is dated as of _______________.

1.Grant of Option.  The Company hereby grants to Optionee the right, privilege and option as herein set forth (the "Option") to purchase up to ____________ (_________) shares (the "Shares") of Common Stock, in accordance with the terms of this Option Agreement.  The Shares, when issued to Optionee upon the exercise of the Option, shall be fully paid and nonassessable.  The Option is granted pursuant to and to implement in part the Continental Airlines, Inc. 1998 Stock Incentive Plan (as amended and in effect from time to time, the "Plan").  The Option is not intended to qualify as an Incentive Stock Option.

2.Option Term.  Subject to earlier termination as provided herein, the Option shall terminate on _________________.  The period during which the Option is in effect is referred to as the "Option Period".

3.Option Exercise Price.  The exercise price (the "Option Price") of the Shares subject to the Option shall be equal to the Market Value per Share on the date hereof.

4.Vesting.  The total number of Shares subject to this Option shall vest immediately upon the grant hereof.

5.Method of Exercise.  To exercise the Option, Optionee shall deliver an irrevocable written notice to Company (to the attention of the Secretary of the Company) stating the number of Shares with respect to which the Option is being exercised together with payment for such Shares.  Payment shall be made (i) in cash or by check acceptable to Company, (ii) in nonforfeitable, unrestricted shares of Company's Common Stock owned by Optionee at the time of exercise of the Option having an aggregate market value (measured by the Market Value per Share) at the date of exercise equal to the aggregate exercise price of the Option being exercised or (iii) by a combination of (i) and (ii).  In addition, at the request of Optionee, and to the extent permitted by applicable law and subject to Paragraph 15, the Option may be exercised pursuant to a "cashless exercise" arrangement with any brokerage firm approved by the Administrator or its delegate under which arrangement such brokerage firm, on behalf of Optionee, shall pay to Company the exercise price of the Options being exercised, and Company, pursuant to an irrevocable notice from Optionee, shall promptly after receipt of the exercise price deliver the shares being purchased to such firm.  

6.Termination of Board Service.  The Option shall terminate on, and may not be exercised after the earlier of (i) the date that is one year after termination of Optionee's service on the Board for any reason and (ii) the expiration of the Option Period.

7.Reorganization of Company and Subsidiaries.  The existence of the Option shall not affect in any way the right or power of Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in Company's capital structure or its business, or any merger or consolidation of Company or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Shares or the rights thereof, or the dissolution or liquidation of Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

8.Adjustment of Shares.  In the event of stock dividends, spin-offs of assets or other extraordinary dividends, stock splits, combinations of shares, recapitalizations, mergers, consolidations, reorganizations, liquidations, issuances of rights or warrants and similar transactions or events involving Company, appropriate adjustments shall be made to the terms and provisions of this Option, in the same manner as is provided for adjustments to the terms and provisions of the warrants issued by Company to Air Canada and to Air Partners, L.P. under the Warrant Agreement dated as of April 27, 1993.

9.No Rights in Shares.  Optionee shall have no rights as a stockholder in respect of Shares until such Optionee becomes the holder of record of such Shares.

10.Certain Restrictions.  By exercising the Option, Optionee agrees that if at the time of such exercise the sale of Shares issued hereunder is not covered by an effective registration statement filed under the Securities Act of 1933 ("Act"), Optionee will acquire the Shares for Optionee's own account and without a view to resale or distribution in violation of the Act or any other securities law, and upon any such acquisition Optionee will enter into such written representations, warranties and agreements as Company may reasonably request in order to comply with the Act or any other securities law or with this Option Agreement.  Optionee agrees that Company shall not be obligated to take any affirmative action in order to cause the issuance or transfer of Shares hereunder to comply with any law, rule or regulation that applies to the Shares subject to the Option.

11.Shares Reserved.  Company shall at all times during the Option Period reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of this Option.

12.Nontransferability of Option.  The Option granted pursuant to this Option Agreement is not transferable other than by will, the laws of descent and distribution or by qualified domestic relations order.  The Option will be exercisable during Optionee's lifetime only by Optionee or by Optionee's guardian or legal representative.  No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities, or torts of Optionee.

13.Amendment and Termination; Electronic Delivery.  No amendment or termination of the Option shall be made by the Board or the Administrator at any time without the written consent of Optionee.  No amendment or termination of the Plan will adversely affect the rights, privileges and option of Optionee under the Option without the written consent of Optionee.  Optionee hereby consents and agrees to electronic delivery of any Plan documents, proxy materials, annual reports and other related documents.

14.No Guarantee of Board Service.  The Option shall not confer upon Optionee any right with respect to continuance of service on the Board, nor shall it interfere in any way with any right to terminate Optionee's Board service at any time.  

15.Withholding of Taxes.  Company shall have the right to (i) make deductions from the number of Shares otherwise deliverable upon exercise of the Option in an amount sufficient to satisfy withholding of any federal, state or local taxes required by law, or (ii) take such other action as may be necessary or appropriate to satisfy any such tax withholding obligations.

16.No Guarantee of Tax Consequences.  Neither Company nor any subsidiary nor the Administrator makes any commitment or guarantee that any federal or state tax treatment will apply or be available to any person eligible for benefits under the Option.

17.Severability.  In the event that any provision of the Option shall be held illegal, invalid, or unenforceable for any reason, such provision shall be fully severable, but shall not affect the remaining provisions of the Option, and the Option shall be construed and enforced as if the illegal, invalid, or unenforceable provision had never been included herein.

18.Governing Law.  The Option shall be construed in accordance with the laws of the State of Delaware to the extent federal law does not supersede and preempt Delaware law.

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