<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25, 1995.
REGISTRATION NO. 33-59949-04
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 4
ON
FORM S-3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933*
------------------------
GENENTECH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 94-2347624
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
460 POINT SAN BRUNO BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(415) 225-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEPHEN G. JUELSGAARD
VICE PRESIDENT AND GENERAL COUNSEL
GENENTECH, INC.
460 POINT SAN BRUNO BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(415) 225-1000
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
* Filed as a Post-Effective Amendment on Form S-3 to such Form S-4 Registration
Statement pursuant to the procedure described herein. See "INTRODUCTORY
STATEMENT".
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Post-Effective Amendment is declared effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
-------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED AMOUNT PROPOSED MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Callable Putable Common Stock $.02 par
value................................. 2,946,463 shares N.A. (2) N.A. (2) N.A. (2)
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</TABLE>
(1) This Registration Statement also relates to the 2,946,463 shares of Common
Stock, par value $.02, of the Registrant into which the 2,946,463 shares of
Callable Putable Common Stock offered hereby are subject to conversion in
accordance with the Certificate of Incorporation of the Registrant.
(2) All filing fees payable in connection with registration of these securities
were paid in connection with the filing of (a) the Registrant's Schedule 14A
dated June 2, 1995, (b) the Registrant's Form S-4, No. 33-59949, dated June
5, 1995 (the "Form S-4") and (c) Amendment No. 1 to the Form S-4 dated
September 8, 1995.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
GENENTECH, INC.
------------------------
CROSS-REFERENCE SHEET
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FORM S-3 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
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<S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus....... FRONT COVER PAGE
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... ADDITIONAL INFORMATION
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges................. THE COMPANY
4. Use of Proceeds.............................. USE OF PROCEEDS
5. Determination of Offering Price.............. NOT APPLICABLE
6. Dilution..................................... NOT APPLICABLE
7. Selling Security Holders..................... NOT APPLICABLE
8. Plan of Distribution......................... PLAN OF DISTRIBUTION
9. Description of Securities to be Registered... DESCRIPTION OF THE SPECIAL
COMMON STOCK
10. Interests of Named Experts and Counsel....... LEGAL MATTERS
11. Material Changes............................. MATERIAL CHANGES
12. Incorporation of Certain Information by
Reference.................................... INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 25, 1995
GENENTECH, INC.
2,946,463 SHARES CALLABLE PUTABLE COMMON STOCK
------------------------
This Prospectus covers 2,946,463 shares of Callable Putable Common Stock,
par value $.02 per share ("Special Common Stock") of Genentech, Inc. (including
any shares of Common Stock of Genentech, Inc. ("Common Stock") issued upon
conversion of such shares) issuable upon exercise of stock options under
Genentech, Inc.'s 1984 Incentive Stock Option Plan and Genentech, Inc.'s 1984
Non-Qualified Stock Option Plan (as amended, collectively, the "Option Plans").
------------------------
The Callable Putable Common Stock is traded on the New York Stock Exchange
(the "NYSE") under the symbol GNE. On October 24, 1995 the closing sales price
for the Common Stock (which was converted into Special Common Stock on October
25, 1995) on the NYSE was $48.875.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNTS AND COMPANY
COMMISSIONS
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<S> <C> <C> <C>
Per Share....................................... $48.875 (2) (3)
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Total........................................... $48.875 (2) (3)
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</TABLE>
(1) Based upon the closing price of the Common Stock on October 24, 1995. The
actual price to be paid upon exercise of options will be determined on the
date the options are granted.
(2) Sales will be made upon the exercise of options without the use of
underwriters or dealers and no compensation will be paid to any such person
in connection with the sale of shares upon exercise of options. See "Plan of
Distribution".
(3) Before deducting offering expenses estimated at $7,500 payable by the
Company.
------------------------
The date of this Prospectus is , 1995
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
INTRODUCTORY STATEMENT................................................................ 1
AVAILABLE INFORMATION................................................................. 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 1
THE COMPANY........................................................................... 2
USE OF PROCEEDS....................................................................... 2
OVERVIEW.............................................................................. 2
DESCRIPTION OF THE PLANS.............................................................. 3
General............................................................................. 3
Purpose............................................................................. 3
Administration...................................................................... 3
Duration, Amendment and Termination................................................. 4
Eligibility; Limitations on Participation........................................... 4
Stock Subject to the Plans.......................................................... 5
Adjustment Provisions............................................................... 5
Description of Terms of Options..................................................... 6
Extension of Vesting and Exercisability............................................. 7
Restrictions on Transfer............................................................ 7
Treatment of Options Upon Certain Redemption Events Relating to Special Common
Stock............................................................................ 8
Federal Income Tax Consequences of Options Under the Plans.......................... 8
Information About Genentech......................................................... 11
PLAN OF DISTRIBUTION.................................................................. 11
DESCRIPTION OF THE SPECIAL COMMON STOCK............................................... 12
LEGAL MATTERS......................................................................... 18
EXPERTS............................................................................... 18
MATERIAL CHANGES...................................................................... 18
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES...................................................... 18
</TABLE>
i
<PAGE> 5
INTRODUCTORY STATEMENT
Genentech, Inc. ("Genentech", or the "Company" or the "Registrant") hereby
amends its Registration Statement on Form S-4 (No. 33-59949) (the "Form S-4"),
by filing this Post-Effective Amendment No. 4 on Form S-3 ("Amendment No. 4")
relating to the issuance of options and the subsequent issuance of up to
2,946,463 shares of Callable Putable Common Stock, par value $.02 per share
("Special Common Stock") in connection with the Company's 1984 Incentive Stock
Option Plan (as amended, the "ISO Plan") and the Company's 1984 Non-Qualified
Stock Option Plan (as amended, the "Non-Qualified Plan" and together with the
ISO Plan, the "Option Plans" or the "Plans"). This Amendment No. 4 also relates
to the sale of a like number of shares of the Company's Common Stock, par value
$.02 per share ("Common Stock"), into which the Special Common Stock issuable in
connection with the Option Plans is subject to conversion in accordance with the
Company's Certificate of Incorporation. All of such shares were previously
registered under the Form S-4.
On October 25, 1995, HLR (U.S.) II, Inc., a Delaware corporation and a
wholly owned subsidiary of Roche Holdings, Inc., a Delaware corporation
("Roche"), was merged into the Company (the "Merger"). As a result of the
Merger, each outstanding share of Common Stock (other than shares held by Roche
and its affiliates) was converted into one share of Special Common Stock. As a
result of the Merger, shares of Common Stock will no longer be issued pursuant
to the Option Plans. Instead, participants in the Plan will receive, in lieu of
each share of Common Stock which would have been acquired under the Plan, one
share of Special Common Stock.
The designation of Amendment No. 4 as Registration No. 33-59949-04 denotes
that Amendment No. 4 relates only to the shares of Special Common Stock (or,
upon conversion thereof, Common Stock) issuable pursuant to the Option Plans and
that this is the fourth Post-Effective Amendment to the Form S-4 filed with
respect to such shares.
AVAILABLE INFORMATION
Genentech is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should be available for copying and inspection at the Regional Offices of the
Commission at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7
World Trade Center, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the Commission, at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's Special
Common Stock is listed on the New York Stock Exchange and the Pacific Stock
Exchange and such reports, proxy statements and other information concerning
Genentech should be available for inspection and copying at their respective
offices at 20 Broad Street, New York, New York 10005 and 301 Pine Street, San
Francisco, California 94104.
The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Special Common Stock offered by this Prospectus. This Prospectus does not
contain all the information set forth in the Registration Statement. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement, including the
exhibits filed therewith or incorporated by reference therein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein
by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and Amendment No. 1 thereto filed on September 18, 1995.
<PAGE> 6
(b) All reports filed pursuant to Sections 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual report
referred to in clause (a) above.
(c) The Company's Proxy Statement dated March 17, 1995.
(d) The description of the Special Common Stock filed pursuant to the
Exchange Act and any amendment or report filed to update such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all securities
remaining unsold shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statements contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been incorporated by reference in the
Registration Statement filed with the Commission under the Securities Act with
respect to the Special Common Stock offered by this Prospectus, other than
certain exhibits to such documents. Such requests should be directed to the
Corporate Secretary, Genentech, Inc., 460 Point San Bruno Boulevard, South San
Francisco, California 94080, telephone (415) 225-1000.
THE COMPANY
Genentech, Inc. is an international biotechnology Company that discovers,
develops, manufactures and markets human pharmaceuticals for significant medical
needs. Genentech was incorporated in 1976 as a California corporation but
changed its state of incorporation in 1987 to Delaware. Genentech's executive
offices are located at 460 Point San Bruno Boulevard, South San Francisco,
California 94080, telephone (415) 225-1000.
USE OF PROCEEDS
There can be no assurance that any options granted under the Option Plans
will be exercised. However, assuming all options to be granted under the Option
Plans are granted and exercised for cash and that the exercise price of such
options is equal to the closing price of the Company's Common Stock on October
24, 1995, the net proceeds to be received by the Company from the sale of the
Special Common Stock offered hereby are estimated to be $144 million. Such
proceeds will be used for general corporate purposes including additions to
working capital and capital expenditures. A portion of the net proceeds may also
be used for the acquisition of technology or products, although no material
acquisitions are currently being negotiated. Pending such uses, the Company may
invest such proceeds in readily marketable, interest-bearing securities.
OVERVIEW
This Prospectus covers a pool of shares of Special Common Stock offered for
sale pursuant to options granted under the ISO Plan and the Plans. Shares may be
issued under either Plan as determined by the Company's Board of Directors. The
terms and conditions of the offer and sale of the Special Common Stock,
including the prices of the shares, are governed by the provisions of the
respective Plans and the agreements thereunder between the Company and the
optionees.
2
<PAGE> 7
The Company's principal executive office is located at 460 Point San Bruno
Boulevard, South San Francisco, California 94080 and its telephone number at
that location is (415) 225-1000.
The Company delivers a copy of the relevant Plan to each employee at the
time he or she is granted an option under such Plan. The following descriptions
of the essential features of the Plans are qualified in their entirety by
reference to the full text of such Plans.
DESCRIPTION OF THE PLANS
GENERAL
The Plans were originally adopted by the Board of Directors of Genentech
(the "Board" or the "Genentech Board") in February 1984 and approved by the
shareholders in April 1984. Options granted under the ISO Plan are intended to
be "incentive stock options" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code"), while options granted under the
Non-Qualified Plan are not intended to be treated as incentive stock options
under the Code. See "Federal Income Tax Consequences of Options Under the Plans"
below for information concerning the tax treatment of stock options.
Neither the ISO Plan nor the Non-Qualified Plan is a qualified deferred
compensation plan under Section 401(a) of the Code. The Company is not aware of
any provisions of the Employment Retirement Income Security Act of 1974
("ERISA") to which either of the Plans is subject.
The Company will seek from appropriate regulatory agencies all authority
necessary to issue and sell stock upon the exercise of options granted pursuant
to the Plans. If the Company is unable to obtain authority which counsel for the
Company deems necessary for the lawful issuance of stock under the Plans, the
Company is relieved of liability for failure to issue such stock unless and
until such authority is obtained.
The Company is subject to, and intends to comply with, the requirements of
Regulation G promulgated by the Board of Governors of the Federal Reserve
System, which governs the extension of credit by the Company to its employees
for the purpose of purchasing the Company's stock.
PURPOSE
The Plans were adopted to provide a means by which eligible employees,
directors, and consultants of the Company and its parents and subsidiaries (as
those terms are defined in the Code) could be given an opportunity to purchase
common stock of the Company, to assist the Company in retaining the services of
persons holding key positions with the Company, to secure and retain the
services of persons capable of filling key positions with the Company, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
ADMINISTRATION
The Plans are administered by the Board and the Compensation Committee of
the Board. In general, each director holds office until the next annual meeting
of shareholders and until his successor has been elected or until his death,
resignation or removal. Members of the Board of Directors may be removed from
office by appropriate action of the shareholders or, under certain circumstances
and for cause, by the Board or a court. Each member of the Board may be
contacted in care of the Company at 460 Point San Bruno Boulevard, South San
Francisco, California 94080.
The Plans authorize the Board to delegate administration of the Plans to a
committee composed of not less than three members of the Board. If such is then
required in order for transactions under the Plans to qualify for exemption
under Rule 16b-3 promulgated under the Exchange Act, ("Rule 16b-3"), each of the
members of such committee must be a "disinterested person". Subject to certain
limited exceptions, a person is disinterested for purposes of the Plans if he is
not at the time and has not for one year prior to that time been eligible under
any plan of the Company or its affiliates to acquire stock, stock options or
stock appreciation rights of the Company or any of its affiliates. The powers of
any committee to which administration of the
3
<PAGE> 8
Plans is delegated are subject to such resolutions as the Board may adopt from
time to time and such action as the Board may take in the exercise of its final
power to determine questions of policy and expediency which arise in connection
with the Plans. The Board of Directors may, at any time, abolish such committee
and revest in the Board the administration of the Plans. As used hereafter in
this Prospectus, the "Board" refers to any committee to which the Board of
Directors has delegated its authority with respect to the Plans, as well as to
the Board of Directors itself.
Within the limits imposed by the Plans, the Board has the power to
determine the persons to whom and the dates on which options will be granted,
the number of shares to be subject to each option, the time or times during the
term of each option within which all or a portion of such option may be
exercised, the type of consideration, and other terms of the options. Subject to
such limits, the Board also has the power to construe and interpret the Plans
and to establish, amend and revoke rules and regulations for their
administration and to correct defects, omissions or inconsistencies therein.
The Non-Qualified Plan will be administered by the Compensation Committee.
Determinations of the Committee on all matters relating to the Non-Qualified
Plan and any discretionary option grants or stock issuances made under the
Non-Qualified Plan will be final, binding and conclusive, and the Board may not
continue to determine questions arising in these areas which have been delegated
to the Committee.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Plans at any time. Unless sooner
terminated, the Plans will terminate on February 28, 1994.
The Board may amend the Plans at any time or from time to time. However, if
an amendment would (i) increase the number of shares reserved for options under
the Plans (except for certain adjustments upon a change in the Company's
capitalization); (ii) materially modify the requirements relating to eligibility
for participation in the Plans; or (iii) materially increase the benefits
accruing to participants under the Plans, then such amendment must be approved
by the holders of a majority of the outstanding shares of the Company entitled
to vote within twelve months before or after the adoption of the amendment by
the Board. The Board may amend the ISO Plan in any respect the Board deems
necessary or advisable to provide persons granted options under the ISO Plan
with maximum benefits under the Code and/or to bring the ISO Plan or the options
to be granted thereunder into compliance with the Code.
The rights and obligations under any option granted under either of the
Plans may not be altered or impaired by the subsequent suspension, termination,
or amendment of such Plan, except with the consent of the person to whom the
option was granted.
ELIGIBILITY; LIMITATIONS ON PARTICIPATION
Options may be granted under the ISO Plan only to key employees of the
Company or any parent or subsidiary of the Company (as those terms are defined
in the Code). Officers who are key employees are also eligible under the ISO
Plan. Options may be granted under the Non-Qualified Plan to key employees,
officers and directors of, and consultants to, the Company or any parent or
subsidiary of the Company. The determination as to which persons shall receive
options under the Plans and the number of shares to be covered by options
granted to each is made by the Board. The Plans do not provide a fixed formula
for granting options to any person.
A director is not eligible to be granted options under the ISO Plan unless
he is also a key employee of the Company or a parent or subsidiary of the
Company. Furthermore, a director is not eligible to be granted options under
either of the Plans unless the Board expressly declares him eligible to
participate and, if such is then required by Rule 16b-3, only if, at any time
discretion is exercised by the Board in granting an option to such director, a
majority of the Board and a majority of the directors acting in such matter are
disinterested persons as defined in the Plans.
4
<PAGE> 9
Subject to other limitations contained in the ISO Plan and to the
provisions therein relating to adjustments upon changes in stock, no more than
400,000 shares of Special Common Stock may be subject to options granted under
the ISO Plan to all persons who are directors of the Company at the time such
options are granted, and no single director of the Company may be granted
options under the ISO Plan to purchase more than 200,000 shares. Subject to
other limitations contained in the Non-Qualified Plan and to the provisions
therein relating to adjustments upon changes in stock, no more than 1,200,000
shares of Special Common Stock may be subject to options granted under the
Non-Qualified Plan to all persons who are directors of the Company at the time
such options are granted, no single director who is not an employee of the
Company or a parent or a subsidiary of the Company may be granted options under
the Non-Qualified Plan to purchase more than 40,000 shares, and no single
director who is an employee of the Company or a parent or subsidiary of the
Company may be granted options under the Non-Qualified Plan to purchase more
than 600,000 shares. Furthermore, under either Plan, options may be granted to
directors only during the first month of each calendar quarter, and directors
may only exercise options during the ten business days beginning on the third
business day after a quarterly or annual summary statement of the Company's
revenues and earnings is made generally available to the public.
An option may be granted under the ISO Plan only if such option, and any
other options previously granted under the ISO Plan to such person during the
calendar year in which such option is proposed to be granted, are for the
purchase of shares of stock of the Company having an aggregate fair market value
(determined as of the times the respective options are granted) not in excess of
$100,000 plus any unused limit carryover (as defined in the Code) applicable to
that calendar year. The ISO Plan provides that, should it be determined that any
option granted under the ISO Plan exceeds such maximum, the option will be
considered not to qualify for treatment as an incentive stock option to the
extent of such excess. However, recently proposed regulations provide that if an
option intended to be an incentive stock option exceeds such maximum, no portion
of such option shall be an incentive stock option unless the maximum was
exceeded as a result of the failure of a good faith attempt to value accurately
the stock subject to the option. (See "Federal Income Tax Consequences of
Options under the Plans -- Incentive Stock Options" below).
STOCK SUBJECT TO THE PLANS
Fifteen million, ninety four thousand, three hundred and ninety seven
(15,094,397) shares of Special Common Stock of the Company are authorized for
issuance under the Plans. These shares may be shares of any series of common
stock authorized by the Company's charter documents, including the Special
Common Stock and any other series that may in the future be authorized. The
Company currently does not contemplate issuing options covering any shares of
stock other than Special Common Stock. The shares subject to the Plans may be
unissued shares or reacquired shares, bought on the market or otherwise.
If options granted under a Plan expire, lapse, or otherwise terminate
without being exercised, the shares not purchased under such options again
become available for issuance under such Plan.
ADJUSTMENT PROVISIONS
If there is any change in the common stock subject to the Plans or subject
to any option granted under the Plans (through merger, recapitalization, stock
dividend or split, or similar corporate event or otherwise), the Board shall
make appropriate adjustments in the maximum number of shares subject to the
Plans and the number of shares and price per share of stock subject to
outstanding options. For example, in connection with the Merger, the Board
adjusted the Plans to provide that only Special Common Stock would be issued
upon exercise of options granted under the Plans.
In the event of (i) a dissolution or liquidation of the Company, (ii) a
merger or consolidation in which the Company is not the surviving corporation,
(iii) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, or (iv) any
other capital reorganization in which more than 50% of the shares of the Company
entitled to vote are exchanged, then to the extent permitted by
5
<PAGE> 10
applicable law, any surviving corporation will be required to assume, substitute
similar options for, or permit the exercise prior to such event of, any options
then outstanding under the Plans. However, any options which are exercisable and
are not exercised prior to such event may be terminated upon such event.
DESCRIPTION OF TERMS OF OPTIONS
The following is a description of the terms of options permitted by the
Plans. Individual option grants in any given case may be more restrictive as to
any or all of the terms of options permitted by the Plans as described below.
Option Term. Options granted under the Non-Qualified Plan may have a term
of up to and including 20 years. Options granted under the ISO Plan may have a
maximum term of ten years, except that under the ISO Plan the maximum term of
any option granted to a person who owns more than 10% of the total combined
voting power of the Company is five years.
In addition, options under the Plans terminate three months after the
optionee ceases to be employed by the Company or any parent or subsidiary of the
Company, unless (i) the termination of employment is due to such person's
permanent and total disability (as defined in the Code), in which case the
option may, but need not, provide that it may be exercised at any time within
one year of such termination; (ii) the optionee dies while employed by the
Company or any parent or subsidiary of the Company, or within three months after
termination of such employment, in which case the option may, but need not,
provide that it may be exercised within eighteen months of the optionee's death
(to the extent the option was exercisable at the time of the optionee's death)
by the person or persons to whom the rights to such option pass by will or by
the laws of descent and distribution; or (iii) the option by its terms specifies
that it shall terminate sooner than or may be exercised more than three months
after termination of the optionee's employment with the Company or any parent or
subsidiary of the Company. Options may be exercised following termination of
employment only as to that number of shares as to which the option was
exercisable on the date of termination of employment.
See also "Adjustment Provisions" above.
Option Exercise Price and Payment Terms. The exercise price for any option
granted under the ISO Plan may not be less than the fair market value of the
stock subject to the option on the date of grant, and in the case of an option
granted to a person who owns more than 10% of the total combined voting power of
the Company, may not be less than 110% of the fair market value on the date of
grant. The exercise price for any option granted under the Non-Qualified Plan
may not be less than 85% of the fair market value of the stock subject to the
option on the date of grant.
The exercise price of options granted under the Plans must be paid to the
Company either (i) in cash at the time the option is exercised or (ii) at the
discretion of the Board (A) by delivery to the Company of other common stock of
the Company, (B) pursuant to a deferred payment or other arrangement, or (C) in
any other form of legal consideration that may be acceptable to the Board.
Individual option agreements will typically provide that shares purchased
pursuant to a deferred payment arrangement must be pledged as security to the
Company under a Security Agreement executed by the employee. Pledged shares are
released from pledge according to a formula specified in the Security Agreement
as the purchase price of the shares is paid and, if the shares are purchased
prior to vesting, as the shares vest. Promissory notes executed by employees who
choose to defer payment will typically provide for acceleration of unpaid
principal and interest in the event the employee ceases to be employed by the
Company for any reason other than death or in the event of a default in timely
payment of principal or interest due under such notes. Upon default under any
such note, the Company may enforce its security interest in any pledged shares
or otherwise attempt to collect the note from the optionee or the optionee's
other assets.
Option Exercise. The Plans do not require a minimum holding period before
options may be exercised. However, individual option agreements may provide that
options will vest, that is, become unconditionally exercisable, in periodic
installments or in their entirety at a specified time or times during the
optionee's employment.
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<PAGE> 11
The Plans permit the Board or the Compensation Committee to accelerate the
time during which an option vests or may be exercised. In addition, options
granted under the Plans may permit the optionee to elect during his or her
employment with the Company or any parent or subsidiary of the Company to
purchase shares on exercise of the option prior to the stated vesting date for
those shares. Any shares so purchased will be subject to a repurchase agreement
giving the Company the right to repurchase the shares upon termination of the
optionee's employment at a purchase price equal to the price paid by the
optionee for the shares. The Company's repurchase right will terminate on a
schedule identical to the vesting schedule of the option.
If the total number of shares subject to an option is allotted in periodic
installments, then during each of the installment periods (subject to any other
limitations contained in the option), the option may be exercised with respect
to the shares allotted to such period or a prior period as to which the option
was not fully exercised, or both. During the remainder of the term of the option
(if its term extends beyond the end of the installment periods) the option may
be exercised with respect to any shares remaining subject to the option.
The Plans do not set forth any minimum number of shares with respect to
which an option may be exercised. However, it is expected that individual option
agreements will provide that an option may be exercised only with respect to a
specified minimum number of shares and only a specified number of times during
any year.
No option granted under the ISO Plan may be exercised by an optionee while
there is outstanding (as defined in the Code) any other incentive stock option
to purchase stock of the Company, of any corporation that (at the time of the
granting of such option) is a parent or subsidiary of the Company, or of any
predecessor corporation of any of such corporations, which was granted to such
optionee prior to the grant of the option proposed to be exercised.
EXTENSION OF VESTING AND EXERCISABILITY
In the event an Optionee ceases to continue in Service as a result of death
or permanent disability, the Committee has the discretion to specify, either at
the time the option is granted or at the time 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 to
up to the full remaining term of the option.
RESTRICTIONS ON TRANSFER
Except for options granted to Section 16(b) insiders, an option granted
under the Non-Qualified Plan may be exercisable only by the Optionee or, in the
event an Optionee is permanently disabled, by his or her spouse or designee. An
option granted under the Non-Qualified Plan to a Section 16(b) insider will,
during the lifetime of such Optionee, be exercisable only by that Optionee.
Options granted under either of the Plans may not be transferred by the Optionee
otherwise than by will or by the laws of descent and distribution.
The repurchase agreements governing shares of stock purchased prior to
vesting will prohibit the transfer of shares that are subject to the Company's
repurchase right. In addition, these agreements will require that the
certificates for the unvested shares be held in escrow by the Company's
Secretary pursuant to Joint Escrow Instructions in order to ensure that the
Company will be able to exercise its repurchase right in the event that the
optionee's employment with the Company terminates prior to vesting of the
shares.
Similarly, shares held in pledge by the Company pursuant to deferred
payment arrangements generally may not be transferred while they are subject to
the pledge, and the certificates for such shares will be held by the Company as
pledgee.
Participants who, at the time they desire to sell stock acquired under
either of the Plans, are officers, directors, or "affiliates" of the Company (as
that term is defined under the Securities Act), may do so only pursuant to Rule
144 promulgated under the Securities Act, unless there exists a separate
effective registration statement under the Securities Act covering their resale
of such stock or unless an exemption from registration for such resale is
available. Resales or reoffers may not be made pursuant to this Prospectus.
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Officers and directors of the Company are subject to the provisions of
Section 16 of the Exchange Act with respect to purchases and sales of the
Company's equity securities and related reporting obligations. Under Section
16(b) of the Exchange Act any officer or director of the Company who makes any
purchase or sale, or sale and purchase (including any purchase upon exercise of
an option) of shares within any 6-month period will be obligated to pay to the
Company any profit resulting from such transactions.
Officers, directors, and affiliates of the Company are advised to consult
counsel prior to effecting transactions in the Company's securities.
TREATMENT OF OPTIONS UPON CERTAIN REDEMPTION EVENTS RELATING TO SPECIAL COMMON
STOCK
In the event that Roche causes the Special Common Stock to be redeemed in
accordance with Article THIRD, Section (c)(ii) of the Company's Certificate of
Incorporation, any options granted under the Plan that are exercisable for
Special Common Stock and that are outstanding on the date of redemption (whether
or not such options are exercisable on such date) will become exercisable for
consideration of the same type and amount as the holders thereof would have
received had they exercised such options prior to such date of redemption.
In the event that the shares of Special Common Stock are converted into
shares of Common Stock, par value $0.02 per share, of the Company ("Common
Stock"), each option granted under the Plan which is outstanding on the
Conversion Date (as such term is defined in Article THIRD of the Company's
Certificate of Incorporation) may automatically be canceled, and the holder
thereof may receive, in exchange therefor, a substitute option to purchase, at a
per share exercise price equal to the per share exercise price of such canceled
option, the number of shares of Common Stock equal to the number of shares of
Special Common Stock subject to such canceled option. Such substitute option
will be subject to the same terms and conditions as the option for which it is
exchanged, including with respect to vesting (such that such substitute option
vests at the same time as the option for which it is exchanged would have
vested) and the conditions relating to the exercise of the option. From and
after the Conversion Date, all references in the Plan to "shares", "stock", or
the "Company's Common Stock" will be deemed to be references to shares of Common
Stock.
The Plans permit the Board or the Compensation Committee to accelerate the
time during which an option vests or may be exercised. Under the Amended and
Restated Governance Agreement entered into by the Company and Roche on October
25, 1995, Roche and the Company have agreed to make appropriate provisions to
assure that any options outstanding on the date Roche causes redemption of the
Special Common Stock or the final day of the Put Period (as defined below)
(whether or not vested on such date) become exercisable for the same
consideration that the option holder would have received had he or she exercised
such options prior to such dates. The Compensation Committee will either (i)
accelerate the vesting schedule of all options prior to the earlier of (x) the
date Roche causes redemption of the Special Common Stock or (y) the final day of
the Put Period or (ii) take such other appropriate action as may be necessary to
effect the result described in the preceding sentence.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS UNDER THE PLANS
Options under the ISO Plan are intended to be eligible for the federal
income tax treatment accorded incentive stock options under the Code. Options
under the Non-Qualified Plan are subject to federal income tax treatment
pursuant to rules governing options that are not incentive stock options.
INCENTIVE STOCK OPTIONS. Favorable tax treatment is provided for stock
options that qualify as "incentive stock options" under the Code. The following
discussion of the federal income tax consequences associated with incentive
stock options is based on the Code itself and on final, temporary and proposed
Treasury Regulations.
Grant. There are generally no federal income tax consequences to the
optionee by reason of the grant of an incentive stock option.
Exercise. Upon exercise of an incentive stock option, the optionee
does not recognize taxable income for regular federal income tax purposes.
However, the amount by which the fair market value of
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<PAGE> 13
the stock acquired at the time of exercise exceeds the option exercise
price will be included in income for purposes of the alternative minimum
tax. Each optionee should consult a tax adviser if it is believed that the
alternative minimum tax may be imposed.
Disposition. The federal income tax consequences of disposing of
stock acquired through the exercise of an incentive stock option depend on
the timing of the disposition in relation to the dates on which the option
was granted and on which the stock was transferred to the optionee upon
exercise of the option (generally, the exercise date). A disposition
generally includes any transfer of legal title (including a gift) but does
not include a transfer into joint ownership with right of survivorship if
the optionee remains one of the joint owners, a pledge or a transfer by
bequest or inheritance, or any exchange qualifying under provisions of the
Code regarding tax-free exchanges of stock. However, if an optionee
exchanges stock acquired through the exercise of an incentive stock option
as payment of the exercise price of an incentive stock option, then such
exchange will be treated as a disposition of such stock, and will be a
disqualifying disposition, unless the applicable holding periods of such
stock were met (see "Disqualifying Disposition" below).
Qualifying Disposition. If an optionee holds stock acquired through
exercise of an incentive stock option for more than two years from the date
on which the option is granted and more than one year from the date on
which the shares are transferred to the optionee upon exercise of the
option, under current law any gain or loss on a disposition of such stock
will be taxed to the optionee as a long-term capital gain or loss equal to
the difference between the consideration received upon such disposition and
the optionee's basis in such stock (generally the option exercise price).
Disqualifying Disposition. Generally, if the optionee disposes of the
stock before the expiration of either of the holding periods described
above, and the transaction is one in which any loss, if sustained, would be
recognized under the Code, then at the time of disposition the optionee
will realize taxable ordinary income equal to the lesser of (i) the excess
of the fair market value of the stock on the date of exercise over the
optionee's basis in the stock, or (ii) the optionee's actual gain, if any,
on the purchase and sale (i.e., the excess, if any, of the amount received
upon disposition over the optionee's basis in the stock). The optionee's
additional gain, if any, will be a capital gain. If the optionee has
incurred a loss on the purchase and sale, then the optionee will realize no
ordinary income and the loss will be a capital loss. Such capital gain or
loss, as recognized under current law, will be long-term or short-term
depending on whether the stock was held for more than one year from the
date of exercise.
Under proposed regulations, an exception to these general
disqualifying disposition rules will apply with respect to optionees who
acquire stock subject to a risk of forfeiture (including officers subject
to Section 16(b) of the Exchange Act and optionees who purchase stock
subject to a repurchase option.) In such event, ordinary income generally
will be equal to the lesser of (i) the excess, if any, of the fair market
value of the stock on the date(s) the risk of forfeiture lapses over the
option exercise price, or (ii) the excess, if any, of the amount received
upon disposition over the option exercise price. It may be possible,
however, to make a valid election under Section 83(b) of the Code to have
the fair market value on the date of exercise (determined without regard to
the risk of forfeiture) be controlling. If the amount received upon
disposition exceeds the stock's fair market value on the date on which
ordinary income is measured, then the optionee will have capital gain to
the extent of such excess. If the optionee has incurred a loss on the
purchase and sale, then the optionee will realize no ordinary income and
the loss will be a capital loss. Any capital gain or loss, as recognized
under current law, will be long-term or short-term depending on whether the
stock was held for more than one year from the date on which ordinary
income is measured.
If the optionee disposes of the stock before the expiration of either
of the holding periods described above, and the transaction is one in which
loss, if sustained, is not recognized under the Code (for example, the sale
of stock to the optionee's spouse), the optionee will still recognize
ordinary income as discussed above (but not limited by the amount received
on the disposition). No loss will be recognized, and subsequent tax
consequences will be determined under the section of the Code which governs
such non-recognition.
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The Company will be required to report to the Internal Revenue Service
any ordinary income realized by the optionee by reason of a disqualifying
disposition if such information is available to the Company but, under
current law, is not required to withhold taxes from the optionee's
compensation with respect to such income.
Consequences to the Company. There are no federal income tax
consequences to the Company by reason of the grant or exercise of an
incentive stock option. To the extent the optionee recognizes ordinary
income by reason of a disqualifying disposition, the Company will be
entitled (subject to the requirement of reasonableness) to a corresponding
compensation expense deduction in the tax year in which the disposition
occurs.
NON-QUALIFIED STOCK OPTIONS. Options under the Non-Qualified Plan
(referred to herein as "nonstatutory stock options") generally have the
following federal income tax consequences:
Grant. There are normally no tax consequences to the optionee or the
Company by reason of the grant of nonstatutory stock options.
Exercise. Upon exercise of a nonstatutory stock option normally the
optionee will recognize taxable ordinary income in the amount by which the
fair market value of the stock purchased on the date of exercise exceeds
the exercise price. Generally, the Company is required to withhold from
regular wages or supplemental wage payments an amount based on the ordinary
income recognized, or the Company may be required to ensure that the amount
of tax required to be withheld is available for payment.
Subject to the requirement of reasonableness, the Company will be
entitled to a compensation expense deduction in the amount of the taxable
ordinary income realized by the optionee.
Disposition. Upon disposition of stock acquired upon exercise of a
nonstatutory option, under current law, the optionee will recognize a
capital gain or loss in an amount equal to the difference between the
selling price and the sum of the amount paid for such shares plus any
amount recognized as ordinary income upon exercise of the option. Such gain
or loss will be long or short-term depending on whether the stock was held
for more than one year from the date the option was exercised.
There are no tax consequences to the Company by reason of the
disposition by the optionee of stock acquired upon exercise of a
nonstatutory option.
Stock of Officers and Directors Subject to Section 16(b) and Stock
Subject to a Repurchase Option. Under Section 83 of the Code, shares
acquired upon exercise of a nonstatutory stock option by an officer subject
to Section 16(b) of the Exchange Act and shares acquired subject to a
repurchase option are deemed to be subject to a substantial risk of
forfeiture. Generally the optionee will not recognize any income with
respect to the shares purchased until the shares are no longer subject to
such substantial risk of forfeiture, at which time the optionee will
recognize ordinary income equal to the excess, if any, of the then fair
market value of such shares over the purchase price for such shares. If,
however, such an optionee makes an effective election under Section 83(b)
of the Code within thirty days after the exercise of a nonstatutory stock
option, the optionee will recognize ordinary income in the taxable year of
exercise equal to the excess, if any, of the fair market value of the stock
purchased on the date of exercise, determined without regard to the risk of
forfeiture, over the purchase price for the shares. The optionee's basis in
the shares will be the amount paid for such shares plus any amount
recognized as ordinary income. Any gain or loss recognized by the optionee
upon disposition of the shares will be taxable under current law as a
capital gain or loss, which will be long or short-term depending on whether
the shares are held for more than one year from the date the risk of
forfeiture lapses or the date of exercise if an effective Section 83(b)
election has been made. If a Section 83(b) election is made and the
optionee subsequently forfeits the benefit of owning the shares (i.e., due
to the application of Section 16(b) of the Exchange Act or the exercise by
the Company of its repurchase option), the optionee will recognize an
economic loss equal to the amount of tax paid due to the election, if any,
and that loss will not be recognizable as a loss for tax purposes.
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OTHER TAX CONSEQUENCES. The foregoing discussion is not a complete
description of the federal income tax aspects of incentive and nonstatutory
stock options. In addition, administrative and judicial interpretations of the
application of the federal income tax laws are subject to change. Furthermore,
no information is given with respect to state or local taxes that may be
applicable. Each optionee should consult a tax adviser.
Participants who are residents of or are employed in a country other than
the United States may be subject to taxation in accordance with the tax laws of
that particular country in addition to or in lieu of United States federal
income taxes. Each such participant should consult with his or her own tax
adviser regarding the tax consequences and compliance requirements associated
with the granting of options and the purchase and sale of shares under the
Plans.
INFORMATION ABOUT GENENTECH
An important part of your participation in the Option Plan is understanding
the Company, its products, operations and financial condition. Like any
stockholder of the Company, you can keep yourself informed about the Company by
reviewing reports which the Company prepares for stockholders and the general
public.
If you have not already received a copy of Genentech's most recent annual
report as a current stockholder of the Company, the report should be delivered
to you with these materials. Whether or not you have already received the annual
report, you may always request a copy from the Company.
If you are already a stockholder of the Company or an option holder, you
should receive copies of the Company's proxy statement, reports to stockholders
and other stockholder communications. If you do not receive this information you
should notify Diane Schrick, Investor Relations, Building 5, extension 1599. You
may always request additional copies of this information.
The United States securities laws require the Company to provide
information about its business and financial status in annual reports, commonly
known as "10-K's" and quarterly reports, commonly known as "10-Q's." These
reports are filed with the Securities and Exchange Commission. In addition, if
important corporate events occur during the year, the Company may file reports
commonly known as "8-K's." From time to time the Company may file other
documents with the Securities and Exchange Commission.
All of these reports constitute part of the information required by
securities laws to be provided or made available to you in connection with your
purchase of stock under the Option Plan, that is, these reports are incorporated
by reference into these materials, which constitute the prospectus for the
Option Plan.
For a copy of these reports, which are available without charge and upon
written or oral request, please contact Diane Schrick, Investor Relations,
Building 5, extension 1599, who will be happy to assist you.
PLAN OF DISTRIBUTION
For a discussion of the factors relating to the grant and exercise of stock
options under the Plans please refer to the information contained under the
heading "Description of the Plans" above. Sales of Special Common Stock under
the Plans will be made directly by the Company upon exercise of options granted
under the Plans without the use of any underwriters or dealers.
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DESCRIPTION OF THE SPECIAL COMMON STOCK
Set forth below is a description of the terms of the Special Common Stock.
Effective upon consummation of the Merger, the Certificate of Incorporation
of Genentech was amended by operation of the Merger to, among other things,
authorize the issuance by Genentech of Special Common Stock.
Under Article Third of the Certificate of Incorporation ("Article Third"),
as amended in connection with the Merger ("Amended Article Third"), the rights,
preferences, privileges and restrictions of the Special Common Stock and the
Common Stock are identical in all respects, except as specifically set forth in
Article Third. Set forth below is a description of the terms of the Special
Common Stock, including (i) the differences between such terms and the terms of
the Common Stock as set forth in Article Third and (ii) the differences between
the Special Common Stock and the Redeemable Common Stock. THE FOLLOWING
DESCRIPTION OF THE TERMS OF THE SPECIAL COMMON STOCK DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT OF AMENDED
ARTICLE THIRD.
As indicated above, Amended Article Third sets forth the terms of and the
rights and preferences with respect to the Special Common Stock. In addition, as
was the case in Article Third, it provides that Preferred Stock (as hereinafter
defined) may be issued from time to time in one or more series. The Genentech
Board is authorized to fix or alter the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences of any wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, or any of them;
and to increase or decrease the number of shares of any series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series. Were Roche not to own its current position in Genentech,
the authorized but unissued shares of Preferred Stock could be used by the
Genentech Board to make a change in control of Genentech more difficult, or to
discourage an attempt to acquire control of Genentech. For example, the
Genentech Board could, subject to certain limitations, authorize and issue a
class of Preferred Stock which is entitled to vote as a class with respect to
mergers or other extraordinary transactions. The Genentech Board has no current
intention of using the authorized and unissued shares of Preferred Stock for any
such purposes.
AUTHORIZED SHARES
Article Third authorized the issuance of 100,000,000 shares of preferred
stock ("Preferred Stock"), 100,000,000 shares of Redeemable Common Stock and
200,000,000 shares of Common Stock. Amended Article Third did not change the
number of authorized shares of capital stock of the Company, but replaced the
Redeemable Common Stock with the Special Common Stock and amended the terms
thereof as described below.
VOTING RIGHTS
As was the case in Article Third, Amended Article Third provides that the
holders of Special Common Stock (or Redeemable Common Stock, in the case of
Article Third) and Common Stock are, on all matters submitted to a vote of the
stockholders, entitled to one vote per share, voting together as a single class
unless otherwise provided for in the Certificate of Incorporation or required by
applicable law.
DIVIDENDS; RECLASSIFICATIONS; MERGERS
Holders of Special Common Stock and Common Stock are entitled to receive
such dividends and other distributions in cash or property as may be declared
thereon by the Genentech Board from time to time out of assets or funds of
Genentech legally available therefor, and shall share equally on a per share
basis in all such dividends and other distributions. In the case of dividends or
other distributions payable in stock of Genentech
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other than Preferred Stock, including distributions pursuant to stock splits or
divisions of stock of Genentech other than Preferred Stock, only shares of
Common Stock shall be paid or distributed with respect to shares of Common Stock
and only shares of Special Common Stock in an amount per share equal to the
amount per share paid or distributed with respect to shares of Common Stock
shall be paid or distributed with respect to Special Common Stock. In the case
of any combination or reclassification of the Special Common Stock or the Common
Stock, the Special Common Stock or the Common Stock, as the case may be, shall
also be combined or reclassified so that the number of shares of Common Stock
outstanding immediately following such combination or reclassification shall
bear the same relationship to the number of shares of Common Stock outstanding
immediately prior to such combination or reclassification as the number of
shares of Special Common Stock outstanding immediately following such
combination or reclassification bears to the number of shares of Special Common
Stock outstanding immediately prior to such combination or reclassification.
Amended Article Third did not effect any substantive amendments to this
provision.
In the event Genentech enters into any consolidation, merger, combination
or other transaction in which the Common Stock is exchanged for or changed into
other stock or securities, cash and/or any other property, then in any such case
each share of Special Common Stock shall at the same time be similarly exchanged
or changed into an amount per share, equal to the aggregate amount of stock or
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged;
provided that any such stock may be made redeemable on terms no less favorable
to the holder thereof than the terms upon which the Special Common Stock is
redeemable pursuant to the Call Rights; and provided, further, that any such
stock shall be subject to a right on the part of the holder to put such stock on
terms no less favorable to the holder thereof than the terms upon which the
Special Common Stock is required to be redeemed by the Company pursuant to the
provisions of Amended Article Third providing holders of Special Common Stock
the right to require the purchase of all or a portion (at the election of the
holder) of their shares of such stock for 30 business days beginning in July
1999 (unless such right is accelerated following the occurrence of certain
Insolvency Events (as hereinafter defined) at a price of $60 per share (the "Put
Rights"). Except for such requirements with respect to the Put Rights, Amended
Article Third did not effect any substantive amendments to this provision.
LIQUIDATION
As was the case in Article Third, Amended Article Third provides that upon
any liquidation, dissolution or winding up of Genentech, no distribution shall
be made (1) to the holders of shares of Common Stock unless, prior thereto, the
holders of shares of Special Common Stock (Redeemable Common Stock in the case
of Article Third) shall have received $.01 per share, plus an amount equal to
declared and unpaid dividends and distributions thereon to the date of such
payment; provided that the holders of shares of Special Common Stock shall be
entitled to receive an aggregate amount per share equal to the aggregate amount
to be distributed per share to holders of shares of Common Stock, or (2) to the
holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Special Common Stock, except
distributions made ratably on the Special Common Stock and all such other parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.
CALL RIGHTS
Subject to the provisions of the Amended and Restated Governance Agreement
between Genentech and Roche, as such agreement may be amended from time to time
(the "Amended Governance Agreement"), the Special Common Stock may, and where
the Amended Governance Agreement so requires, shall be redeemed, in whole but
not in part, at the option of Genentech, during certain periods, at certain
prices and upon certain terms and conditions (the "Call Rights"). Under the
Amended Governance Agreement, Genentech has agreed that it shall, subject to the
provisions of the Amended Governance Agreement, redeem the Special Common Stock
at the request of Roche and not otherwise. Amended Article Third provides that
the redemption price for any date of redemption (the "Redemption Date") during
the periods set forth below (and prior to final court approval of the proposed
settlement of certain Stockholder Litigation relating to the
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<PAGE> 18
Merger and related transactions (the "Stockholder Litigation")) shall be the
price per share set forth opposite such period in the following table, adjusted
if necessary as described below:
<TABLE>
<CAPTION>
PERIOD PRICE
------ -----
<S> <C>
October 1, 1995 to December 31, 1995........................................ $ 62.50
January 1, 1996 to March 31, 1996........................................... $ 63.75
April 1, 1996 to June 30, 1996.............................................. $ 65.00
July 1, 1996 to September 30, 1996.......................................... $ 66.25
October 1, 1996 to December 31, 1996........................................ $ 67.50
January 1, 1997 to March 31, 1997........................................... $ 68.75
April 1, 1997 to June 30, 1997.............................................. $ 70.00
July 1, 1997 to September 30, 1997.......................................... $ 71.50
October 1, 1997 to December 31, 1997........................................ $ 73.00
January 1, 1998 to March 31, 1998........................................... $ 74.50
April 1, 1998 to June 30, 1998.............................................. $ 76.00
July 1, 1998 to September 30, 1998.......................................... $ 77.50
October 1, 1998 to December 31, 1998........................................ $ 79.00
January 1, 1999 to March 31, 1999........................................... $ 80.50
April 1, 1999 to June 30, 1999.............................................. $ 82.00
</TABLE>
Upon final court approval of the settlement of the Stockholder Litigation,
each of the redemption prices applicable pursuant to the Call Rights set forth
above will be increased by $0.50 per share of Special Common Stock, resulting in
a final price of $82.50, as provided by the settlement. If such final court
approval occurs after payment of the applicable redemption price pursuant to the
Call Rights, such $0.50 increase will be promptly thereafter paid by Genentech
to such person to whom payment of the applicable redemption price was previously
made. "Final court approval" of the settlement of the Stockholder Litigation is
defined in the settlement papers to mean that the Delaware Court of Chancery has
entered an order approving the settlement on the terms contemplated by the
parties, and that such order is finally affirmed on appeal or is no longer
subject to appeal. The applicable appeal period under Delaware law is 30 days
from the entry of a final order approving the settlement.
Notice of any proposed redemption of the Special Common Stock will be given
by mailing a copy of such notice (the "Call Notification") to the holders of
record of the shares of Special Common Stock, not more than 30 or less than 10
days prior to the date fixed for redemption.
The redemption prices for the Redeemable Common Stock from September 1990
through June 30, 1995 were as follows:
<TABLE>
<CAPTION>
PERIOD PRICE
------ -----
<S> <C>
Prior to December 31, 1990.................................................. $ 38.00
January 1 to March 31, 1991................................................. $ 39.00
April 1, 1991 to June 30, 1991.............................................. $ 40.00
July 1, 1991 to September 30, 1991.......................................... $ 41.25
October 1, 1991 to December 31, 1991........................................ $ 42.50
January 1, 1992 to March 31, 1992........................................... $ 43.75
April 1, 1992 to June 30, 1992.............................................. $ 45.00
July 1, 1992 to September 30, 1992.......................................... $ 46.25
October 1, 1992 to December 31, 1992........................................ $ 47.50
January 1, 1993 to March 31, 1993........................................... $ 48.75
April 1, 1993 to June 30, 1993.............................................. $ 50.00
July 1, 1993 to September 30, 1993.......................................... $ 51.25
October 1, 1993 to December 31, 1993........................................ $ 52.50
January 1, 1994 to March 31, 1994........................................... $ 53.75
April 1, 1994 to June 30, 1994.............................................. $ 55.00
July 1, 1994 to September 30, 1994.......................................... $ 56.25
October 1, 1994 to December 31, 1994........................................ $ 57.50
January 1, 1995 to March 31, 1995........................................... $ 58.75
April 1, 1995 to June 30, 1995.............................................. $ 60.00
</TABLE>
14
<PAGE> 19
PUT RIGHTS
Amended Article Third provides that, unless the Call Rights have been
previously exercised, during the Put Period (as hereinafter defined), each
holder of the Special Common Stock will have (by delivery of the Put Notice (as
hereinafter defined)) the option pursuant to the Put Rights to require the
purchase of all or part of the Special Common Stock held by such holder at a
price of $60 per share, subject to adjustment (the "Put Price"). Holders of the
Redeemable Common Stock did not (and the holders of Common Stock do not) have
any rights comparable to the Put Rights.
At least 10 and not more than 30 days prior to the beginning of the Put
Period or, in the event of an acceleration of the Put Rights described below, as
soon as practicable following the date of the occurrence of the Insolvency Event
giving rise to such acceleration (but in no event later than the tenth day
following such date), the Company will mail the Put Notification (as hereinafter
defined) to each holder of Special Common Stock. To facilitate the giving of the
Put Notification to the holders of Special Common Stock, the Genentech Board may
fix a record date for determination of holders of Special Common Stock entitled
to be given the Put Notification, which record date may not be more than five
days prior to the date the Put Notification is given pursuant to Amended Article
Third.
ADJUSTMENTS
The redemption prices pursuant to the Call Rights and the Put Rights are
subject to appropriate adjustment in the case of any dividend payable in shares
of Special Common Stock, or any subdivision or combination of the Special Common
Stock and, subject to certain exceptions, in the event of certain other
extraordinary dividends payable in respect of the Special Common Stock.
CONDITION TO THE COMPANY'S OBLIGATIONS
Notwithstanding any other provision of Amended Article Third, the Company's
obligation to pay the Put Price in respect of shares of Special Common Stock
with respect to which Put Rights have been properly exercised (and to deposit
with the Depositary the requisite funds) is conditioned upon Genentech's having
received from Roche, or any affiliate of Roche, (i) funds in an amount equal to
the product of the number of shares of Special Common Stock with respect to
which Put Rights have been properly exercised multiplied by the Put Price plus
(ii) such additional funds, if any, sufficient to permit the Company to redeem
the shares of Special Common Stock with respect to which Put Rights have been
properly exercised without violating Section 160 of the General Corporation Law
of the State of Delaware, any bankruptcy or insolvency law or other law or
regulation for the protection of creditors.
ENFORCEMENT OF ROCHE OBLIGATIONS
Amended Article Third provides that Genentech will take (and will have no
corporate power or capacity not to take) such action as may be necessary to
enforce the obligations of Roche and its affiliates to pay the Put Price (and
any other amounts payable pursuant to the provisions of the Amended Governance
Agreement), including, without limitation, all actions required to cause Roche
and its affiliates to perform their respective obligations described under The
Amended Governance Agreement and under the Guaranty of Roche Holding Ltd.
relating to Roche's obligations in connection with the foregoing.
PAYMENT
Call Rights. Under Amended Article Third, on or prior to the date any Call
Notification (as hereinafter defined) is first sent or given, the Company will
deposit the aggregate redemption price (together with accrued and unpaid
dividends to such date) of the shares to be redeemed with the Depositary, in
trust for payment to the holders of the Special Common Stock, and deliver
irrevocable written instructions authorizing the Depositary to apply such
deposit solely to the redemption of the shares to be redeemed. The amount of
funds required to be deposited in connection with the Call Rights pursuant to
the foregoing sentence will be reduced by the aggregate redemption price of any
shares of Special Common Stock deposited by Roche in lieu of such funds. In the
case of the exercise of the Call Rights, each holder of shares of Special Common
Stock will be
15
<PAGE> 20
paid the redemption price for such shares within three business days following
the surrender of the certificate or certificates representing such shares to a
depositary agent (the "Depositary"), together with a properly executed letter of
transmittal covering such shares. The Company's written instructions to the
Depositary may provide that any of such deposit remaining unclaimed at the
expiration of two years after the date fixed for redemption pursuant to the Call
Rights by the holder of any of such shares be returned to the Company and revert
to the general funds of the Company, after which return such holder will have no
claim against the Depositary but will have a claim as an unsecured creditor
against the Company for the redemption price together with accrued and unpaid
dividends to such redemption date, without interest. The Call Notification
having been duly given, or the Depositary having been irrevocably authorized by
the Company to give said notice, and the redemption price (together with accrued
and unpaid dividends to such redemption date) of the shares to be redeemed
having been deposited then all shares of Special Common Stock with respect to
which such deposit will have been made pursuant to exercise of the Call Rights
will forthwith, whether or not the date fixed for such redemption shall have
occurred or the certificates for such shares shall have been surrendered for
cancellation, be deemed no longer to be outstanding for any purpose, and all
rights with respect to such shares will thereupon cease and terminate, except
the right of the holders of such shares to receive, out of such deposit in
trust, on the redemption date the redemption price (together with accrued and
unpaid dividends to such redemption date) to which they are entitled, without
interest.
Put Rights. Under the terms of Amended Article Third, promptly following
the end of the Put Period, the Company (or under certain circumstances, Roche)
will deposit or cause to be deposited with the Depositary funds in an amount
sufficient to pay the Put Price for all shares of Special Common Stock with
respect to which the Put Rights have been properly exercised. Each holder of
shares of Special Common Stock who has properly exercised the Put Rights, and
who has surrendered the shares of Special Common Stock with respect to which the
Put Rights have been exercised, will be paid promptly following the end of the
Put Period. In the event of the exercise of the Put Rights for less than all of
the shares of Special Common Stock represented by a certificate, a new
certificate representing the shares of Common Stock into which the shares of
Special Common Stock not redeemed pursuant to the exercise of the Put Rights
have been converted will be issued to the holder of such shares.
DEFAULT AND ACCELERATION OF PUT RIGHTS
Unless the Call Rights have been previously exercised, if, prior to the
last day of the Put Period, (i) the Company files a voluntary petition in
bankruptcy or seeks reorganization in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
(the "Bankruptcy Code"), or under any state or federal law granting relief to
debtors, or (ii) any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against the Company and the same is not dismissed within 30 days, or the Company
files an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition, or (iii) the Company is adjudicated a
bankrupt, or an order for relief is entered by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors, then,
and upon the occurrence of such event (an "Insolvency Event"), without notice of
any kind whatsoever, the right of the holders of the Special Common Stock to
exercise the Put Rights will accelerate, and the Put will be exercisable
immediately upon the occurrence of such event and until the end of the Put
Period.
CONVERSION
Each share of Special Common Stock outstanding following the close of
business on the last day of the Put Period (the "Conversion Date") will, unless
previously called for redemption on or prior to such date, automatically be
converted into one share of Common Stock.
Notice of the Conversion Date will be given by mail to the holders of
record of the shares of Special Common Stock, not more than 30 nor less than 10
days prior to the Conversion Date. Upon request of any holder, Genentech will
issue and deliver to the holder, as promptly as practicable after the Conversion
Date, a
16
<PAGE> 21
replacement certificate for the number of Shares issuable upon conversion of
such Special Common Stock. No shares of Special Common Stock will be issued
after the Conversion Date.
Genentech will provide, free from preemptive rights, out of its authorized
but unissued shares of Common Stock, or out of shares of Common Stock held in
its treasury, sufficient shares of Common Stock to provide for the conversion of
the Special Common Stock outstanding on the Conversion Date. Amended Article
Third will provide that all shares of Common Stock which may be issued upon
conversion of Special Common Stock will upon issue be fully paid and
nonassessable by Genentech and free from all taxes, liens and charges with
respect to the issue thereof. Amended Article Third will further provide that,
if on the Conversion Date the Special Common Stock shall be listed on the NYSE
or on any other national securities exchange or the NASDAQ National Market,
Genentech will, if permitted by the rules thereof, seek to list on each such
exchange or the NASDAQ National Market, as the case may be, all shares of Common
Stock issuable upon conversion of the Special Common Stock.
LEGEND
Each certificate representing shares of Special Common Stock bears the
following legend:
"The shares of Callable Putable Common Stock represented hereby are
subject to (i) redemption at the option of the corporation during the
periods, at the prices and on the terms and conditions specified in the
corporation's certificate of incorporation, (ii) an option on the part of
the holder, under certain circumstances, to require the corporation to
redeem such shares of Callable Putable Common Stock, at the price and on
the terms and conditions specified in the corporation's certificate of
incorporation and (iii) conversion into Common Stock, par value $.02, of
the corporation on the date specified, and upon the terms and conditions
set forth in, such certificate of incorporation. After redemption the
shares represented by this certificate shall cease to be outstanding for
all purposes and the holder hereof shall be entitled to receive only the
redemption price of such shares, without interest. After conversion this
certificate shall represent the shares of Common Stock into which the
shares of Callable Putable Common Stock represented hereby shall have been
converted, and this certificate may be exchanged for a new certificate
representing such shares of Common Stock."
CLASS VOTE
In addition to any other affirmative vote required by law or the Genentech
Certificate of Incorporation, any amendment of the provisions of Amended Article
Third requires the affirmative vote of the holders of a majority of the shares
of Common Stock entitled to vote and of the holders of a majority of the shares
of Special Common Stock entitled to vote, each voting separately as a class.
PUT AND CALL NOT BUSINESS COMBINATIONS
Amended Article Third provides that the transactions to be consummated
pursuant to the Call Rights or the Put Rights will not be deemed to be "Business
Combinations" for purposes of Article Eleventh of the Genentech Certificate of
Incorporation.
CERTAIN DEFINITIONS
For purposes of the foregoing discussion of Amended Article Third, the
following terms will have the following meanings:
"Business Day" means any day which is not a Saturday, Sunday or a
federal holiday.
"Depositary" means the bank or trust company in the Borough of
Manhattan, the City and State of New York, having combined capital, surplus
and undivided profits of at least $500 million which is appointed by the
Company to serve as agent for the purpose of receiving certificates
representing shares of the Special Common Stock upon exercise of the Put
Rights or Call Rights, as the case may be, and distributing the Redemption
Price or the Put Price therefor, as the case may be.
17
<PAGE> 22
"Put Notice" means a written notice electing to have shares of Special
Common Stock redeemed by the Company pursuant to the exercise of the Put
Rights.
"Put Notification" means a written notice from the Company to the
holders of the Special Common Stock and the holders of options to purchase
shares of the Special Common Stock informing each such holder of (A) the
rights of such holder to cause the Company to redeem shares of Special
Common Stock during the Put Period, (B) the date of the commencement and
termination of the Put Period, (C) the Put Price, (D) the identity and
address of the Depositary and (E) instructions as to how to exercise the
Put Rights. The Put Notification will, in all respects, comply with the
requirements of the Exchange Act.
"Put Period" means, subject to acceleration upon the occurrence of
certain Insolvency Events, the period commencing on July 1, 1999 and ending
on the close of business on the thirtieth Business Day thereafter or such
later date as may be required under the Exchange Act; provided that, in the
event of acceleration of the Put Period following the occurrence of an
Insolvency Event, the Put Period will be the period commencing as soon as
practicable following the date of the occurrence of the Insolvency Event
giving rise to such acceleration (but in no event later than ten days
following such date) and ending on the close of business on the 60th
Business Day thereafter or such later date as may be required under the
Exchange Act.
LEGAL MATTERS
The validity of the Special Common Stock offered hereby will be passed upon
by Stephen G. Juelsgaard, Vice President and General Counsel of the Company.
EXPERTS
The consolidated financial statements of Genentech, Inc., incorporated by
reference in the Company's Annual Report (Form 10-K) for the year ended December
31, 1994, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are, and audited financial
statements to be included in subsequently filed documents will be, incorporated
herein in reliance upon the reports of Ernst & Young LLP pertaining to such
financial statements (to the extent covered by consents filed with the
Securities and Exchange Commission) given upon the authority of such firm as
experts in accounting and auditing.
MATERIAL CHANGES
As of the date of this Prospectus, and other than the Merger and the
transactions related thereto, no material changes in the Company's affairs,
which have not been described in a report on Form 10-Q, 10-K or 8-K filed under
the Exchange Act, have occurred since the end of the latest fiscal year for
which certified financial statements were included in the latest annual report
to stockholders.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
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
18
<PAGE> 23
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.
Article SEVENTH of Genentech's Certificate of Incorporation ("Article
SEVENTH") provides that a director of Genentech is not personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for paying a dividend or approving a stock repurchase in
violation of Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit.
Article SEVENTH also provides that directors, officers and other
individuals will be indemnified by Genentech to the full extent permitted by law
and shall not be exclusive of any other right which any person may otherwise
have or acquire. It provides that each person who was or is made a party to or
is involved in, any action, suit or proceeding by reason of the fact that he is
or was a director, officer, employee or agent of Genentech (or is or was serving
at the request of Genentech as a director, officer, employee or agent for
another entity) while serving in such capacity shall be indemnified and held
harmless by Genentech, to the full extent authorized by the DGCL, as in effect
(or, to the extent indemnification is broadened, as it may be amended), against
all expense, liability or loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably
incurred by such person in connection therewith. It allows such indemnified
persons to bring suit against Genentech to recover unpaid amounts claimed
thereunder, and if such suit is successful, the expense of bringing such suit
shall be reimbursed by Genentech. It further provides that while it is a defense
to such a suit that the person claiming indemnification has not met the
applicable standards of conduct making indemnification permissible under
Delaware law, the burden of proving the defense shall be on Genentech and
neither the failure of the Board to have made a determination that
indemnification is proper, nor an actual determination by Genentech that the
claimant has not met the applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Genentech's Certificate of Incorporation and By-laws provide that Genentech
may maintain insurance, at its expense, to protect itself and any of its
officers, employees or agents against any expense, liability or loss, whether or
not Genentech would have the power to indemnify such person against such
expense, liability or loss under Delaware law. Genentech maintains such
insurance for such purposes.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
19
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company in
connection with the issuance and distribution of the Special Common Stock being
registered. All the amounts shown are estimates except for the registration fee.
<TABLE>
<S> <C>
Registration fee.................................................... *
Blue Sky fees and expenses.......................................... $ 500
Stock Exchange Listing Fees......................................... $ *
Legal fees and expenses............................................. $5,000
Accounting fees and expenses........................................ $1,500
Miscellaneous expenses.............................................. $ 500
------
Total..................................................... $7,500
======
</TABLE>
- ---------------
* All filing fees payable in connection with registration of these securities
were paid in connection with the filing of (a) the Registrant's Schedule 14A
dated June 2, 1995, (b) the Registrant's Form S-4, No. 33-59949, dated June 5,
1995 (the "Form S-4") and (c) Amendment No. 1 to the Form S-4 dated September
8, 1995, which filings related to the issuance of Special Common Stock
(including shares subject to options) as a result of the Merger).
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
See "Disclosure of Commission Position on Indemnification for Securities
Act Liabilities" contained in the prospectus forming a part of this
Post-Effective Amendment No. 4.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<S> <C>
5-A(4) Opinion of counsel as to the legality of the securities being registered.
15-A(4) Letter re: unaudited financial information.
23-A(4) Consent of Ernst & Young LLP, independent auditors.
23-B(4) Consent of Counsel (included in Exhibit 5-A(4)).
24-A(4) Powers of Attorney.(1)
99-A(4) 1984 Incentive Stock Option Plan; as amended and restated as of October 25, 1995.
99-B(4) 1984 Non-Qualified Stock Option Plan; as amended and restated as of October 25,
1995.
99-C(4) Letter distributed to option holders, relating to effects of the Merger.
</TABLE>
- ---------------
(1) Filed as Exhibit 24.1 to the Registrant's Registration Statement on Form S-4
(No. 33-59949), filed June 5, 1995, and Amendment No. 1 thereto, filed
September 8, 1995.
II-1
<PAGE> 25
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) 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;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(a) and (1)(b) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) 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.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 or Regulation
S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 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 Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing this Post-Effective Amendment No. 4 on Form S-3 to the
Registration Statement on Form S-4 (No. 33-59949) and has duly caused this
Amendment to the 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 the 25th day of October, 1995.
GENENTECH, INC.
By: /s/ LOUIS J. LAVIGNE, JR.
----------------------------------
Louis J. Lavigne, Jr.
Senior Vice President and
Chief Financial Officer
<TABLE>
<S> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ ARTHUR D. LEVINSON President and Chief Executive Officer
- ---------------------------------------------
Arthur D. Levinson
PRINCIPAL FINANCIAL OFFICER:
/s/ LOUIS J. LAVIGNE, JR. Senior Vice President and Chief Financial
- --------------------------------------------- Officer
Louis J. Lavigne, Jr.
PRINCIPAL ACCOUNTING OFFICER:
/s/ BRADFORD S. GOODWIN Vice President and Controller
- ---------------------------------------------
Bradford S. Goodwin
DIRECTORS:
/s/ ARTHUR D. LEVINSON
- ---------------------------------------------
Arthur D. Levinson
/s/ HERBERT W. BOYER*
- ---------------------------------------------
Herbert W. Boyer
/s/ JURGEN DREWS*
- ---------------------------------------------
Jurgen Drews
/s/ FRANZ B. HUMER*
- ---------------------------------------------
Franz B. Humer
/s/ LINDA F. LEVINSON*
- ---------------------------------------------
Linda F. Levinson
/s/ J. RICHARD MUNRO*
- ---------------------------------------------
J. Richard Munro
</TABLE>
II-3
<PAGE> 27
<TABLE>
<S> <C>
/s/ DONALD L. MURFIN*
- ---------------------------------------------
Donald L. Murfin
/s/ JOHN T. POTTS, JR.*
- ---------------------------------------------
John T. Potts, Jr.
/s/ C. THOMAS SMITH, JR.*
- ---------------------------------------------
C. Thomas Smith, Jr.
/s/ ROBERT A. SWANSON*
- ---------------------------------------------
Robert A. Swanson
/s/ DAVID S. TAPPAN, JR.*
- ---------------------------------------------
David S. Tappan, Jr.
*By: /s/ JOHN P. MCLAUGHLIN
----------------------------------------
Attorney-in-Fact
October 25, 1995
</TABLE>
II-4
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<S> <C>
5-A(4) Opinion of Counsel.
15-A(4) Letter re: unaudited financial information.
23-A(4) Consent of Ernst & Young LLP, independent auditors.
23-B(4) Consent of Counsel (included in Exhibit 5-A(4)).
24-A(4) Powers of Attorney.(1)
99-A(4) 1984 Incentive Stock Option Plan; as amended and restated as of October 25, 1995.
99-B(4) 1984 Non-Qualified Stock Option Plan; as amended and restated as of October 25,
1995.
99-C(4) Letter distributed to option holders, relating to effects of the Merger.
</TABLE>
- ---------------
(1) Filed as Exhibit 24.1 to the Registrant's Registration Statement on Form S-4
(No. 33-59949), filed June 5, 1995, and Amendment No. 1 thereto, filed
September 8, 1995.
<PAGE> 1
EXHIBIT 5-A(4)
<PAGE> 2
EXHIBIT 5-A(4)
[LETTERHEAD OF GENENTECH, INC.]
October 25, 1995
Genentech, Inc.
460 Point San Bruno Boulevard
South San Francisco, California 94080
Ladies and Gentlemen:
I am General Counsel of Genentech, Inc. (the "Company") and am rendering
this opinion in connection with the filing by the Company of a Post-Effective
Amendment on Form S-3 (the "Amendment") to a Registration Statement on Form S-4
(No. 33-59949) (the "Registration Statement") with the Securities and Exchange
Commission covering the offering of up to 2,946,463 shares of the Company's
Callable Putable Common Stock, $.02 par value ("Special Common Stock"), and the
2,946,463 shares of Common Stock, par value $0.02 per share, into which such
shares of Special Common Stock are subject to conversion in accordance with the
provisions of the Company's Certificate of Incorporation (together with the
shares of Special Common Stock, the "Shares"), pursuant to the Company's 1984
Incentive Stock Option Plan and its 1984 Non-Qualified Stock Option Plan
(together, the "Plans").
In connection with this opinion, I have examined the Amendment, and related
Prospectus, the Registration Statement, the Company's Certificate of
Incorporation and By-laws, as amended, and such other documents, records,
certificates, memoranda and other instruments as in my judgment are necessary as
a basis for this opinion.
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 Plan, the
Registration Statement and related Prospectus, will be validly issued, fully
paid, and nonassessable.
I consent to the filing of this opinion as an exhibit to the Amendment.
Very truly yours,
By: /s/ STEPHEN G. JUELSGAARD
---------------------------------
Stephen G. Juelsgaard
Vice President and
General Counsel
<PAGE> 1
EXHIBIT 15-A(4)
<PAGE> 2
EXHIBIT 15-A(4)
[LETTERHEAD OF ERNST & YOUNG, LLP]
October 24, 1995
The Board of Directors and Stockholders
Genentech, Inc.
We are aware of the incorporation by reference in the Post-Effective
Amendment No. 4 on Form S-3 to the Registration Statement on Form S-4 (No.
33-59949) of Genentech, Inc. for the registration of up to 2,946,463 shares of
its Callable Putable Common Stock (and the Common Stock into which such Callable
Putable Common Stock may be converted) of our reports dated April 10, 1995 and
July 14, 1995 relating to the unaudited condensed consolidated interim financial
statements of Genentech, Inc. which are included in its Forms 10-Q for the
quarters ended March 31, 1995 and June 30, 1995, respectively.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a
part of 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,
ERNST & YOUNG LLP
<PAGE> 1
EXHIBIT 23-A(4)
<PAGE> 2
EXHIBIT 23-A(4)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Post-Effective Amendment No. 4 on Form S-3 to the Registration Statement on Form
S-4 (No. 33-59949), pertaining to the 1984 Incentive Stock Option Plan and the
1984 Non-Qualified Stock Option Plan of Genentech, Inc. for the registration of
up to 2,946,463 shares of Callable Putable Common Stock (and Common Stock into
which Callable Putable Common Stock may be converted) and to the incorporation
by reference therein of our report dated January 17, 1995, with respect to the
consolidated financial statements of Genentech, Inc. incorporated by reference
in its Annual Report (Form 10-K) for the year ended December 31, 1994, and the
related financial statement schedules included therein, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
San Jose, California
October 24, 1995
<PAGE> 1
EXHIBIT 99-A(4)
<PAGE> 2
GENENTECH, INC.
1984 INCENTIVE STOCK OPTION PLAN, AS AMENDED AND RESTATED
(EFFECTIVE OCTOBER 25, 1995)
1. PURPOSE
(a) The purpose of the Plan is to provide a means by which selected key
employees of GENENTECH, INC. (the "Company") and its affiliates, as defined in
subparagraph 1(b), may be given an opportunity to purchase stock of the Company.
(b) The word "affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now holding key positions, to secure and retain the services of persons
capable of filling such positions, and to provide incentives for such persons to
exert maximum efforts for the success of the Company.
(d) The Company intends that the options issued under the Plan be incentive
stock options as that term is used in Section 422 of the Code.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board relegates administration to a
committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted options; when and how the option shall be
granted; the provisions of each option granted (which need not be
identical), including the time or times during the term of each option
within which all or portions of such option may be exercised; and the
number of shares for which an option shall be granted to each person.
(2) To construe and interpret the Plan and options granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement,
in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(3) To amend the Plan as provided in paragraph 10.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than three (3) members of the Board. If such is then
required in order for transactions under the Plan to qualify for exemption under
Rule 16b-3 promulgated under the Securities and Exchange Act of 1934, as amended
("Rule 16b-3"), all of the members of such committee shall be disinterested
persons, as defined by the provisions of subparagraph 2(d). If administration is
delegated to a committee, the committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the committee at any time and revest in the Board the administration of
the Plan.
<PAGE> 3
(d) The term "disinterested person", as used in this Plan, shall mean an
administrator of the Plan, whether a member of the Board or of any committee to
which responsibility for administration of the Plan has been delegated pursuant
to subparagraph 2(c), who is not at the time he or she exercises discretion in
administering the plan eligible and has not at any time within one year prior
thereto been eligible for selection as a person to whom stock may be allocated
or to whom stock options or stock appreciation rights may be granted pursuant to
the Plan or any other plan of the Company or any of its affiliates entitling the
participants therein to acquire stock, stock options or stock appreciation
rights of the Company or any of its affiliates. Any such person shall otherwise
comply with the requirements of Rule 16b-3, as from time to time in effect.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 9 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
this Plan shall not exceed in the aggregate Fifteen Million Ninety Four Thousand
Three Hundred and Ninety Seven (15,094,397) shares of the Company's common
stock; provided, however, that such aggregate number of shares shall be reduced
to reflect the number of shares of the Company's common stock which has been
sold under, or may be sold pursuant to outstanding options granted under, the
Company's 1984 Non-Qualified Stock Option Plan (the "Non-Qualified Plan") to the
same extent as if such sales had been made or options had been granted pursuant
to this Plan. As used in this Plan, the "Company's common stock" includes all
series of common stock authorized by the Company's charter documents, including
the Common Stock and Earnings Convertible Restricted Stock now authorized and
any other series that may in the future be authorized. If any option granted
under this Plan or the Non-Qualified Plan shall for any reason expire or
otherwise terminate without having been exercised in full, the stock not
purchased under such option shall again become available for this Plan and the
Non-Qualified Plan.
(b) For options granted after December 31, 1986, an option may be granted
to an eligible person under the Plan only if the aggregate fair market value
(determined at the time the option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time by such
optionee during any calendar year under all such plans of the Company and its
affiliates does not exceed one hundred thousand dollars ($100,000). Should it be
determined that any option granted under the Plan exceeds such maximum, such
option shall be considered a nonstatutory stock option to the extent, but only
to the extent, of such excess.
(c) Subject to the limitations contained elsewhere herein and to the
provisions of paragraph 9 relating to adjustments upon changes in stock, the
aggregate number of shares of stock that may be subject to options granted to
all persons who are directors of the Company at the time such Options are
granted shall not exceed four hundred thousand (400,000) shares of the Company's
common stock, and no single director of the Company may be granted options to
purchase more than two hundred thousand (200,000) shares of the Company's common
stock.
4. ELIGIBILITY
(a) Options may be granted only to key employees (including officers) of
the Company or its affiliates. A director of the Company shall not be eligible
to be granted an option under the Plan unless such director is also a key
employee (including an officer) of the Company or an affiliate of the Company.
(b) A director shall in no event be eligible to be granted an option under
the Plan unless and until such director is expressly declared eligible to
participate in the Plan by action of the Board or the committee, and only if, at
any time discretion is exercised by the Board in the selection of a director as
a person to whom options may be granted, or in the determination of the number
of shares which may be covered by options granted to a director, a majority of
the Board and a majority of the directors acting in such matter are
disinterested persons, as defined in subparagraph 2(d), if such is then required
by Rule 16b-3. The Board shall otherwise comply with the requirements of Rule
16b-3, as from time to time in effect.
(c) No person shall be eligible for the grant of an option under the Plan
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock assessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its
2
<PAGE> 4
affiliates unless the options price is at least one hundred ten percent (110%)
of the fair market value of such stock at the date of grant and the term of the
option does not exceed five (5) years from the date of grant.
5. OPTION PROVISIONS
Each option shall be in such form and shall contain such terms and
conditions as the Board or the committee shall deem appropriate. The provisions
of separate options need not be identical, but each option shall include
(through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten (10) years
from the date it was granted.
(b) The exercise price of each option shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
option on the date the option is granted.
(c) The purchase price of stock acquired pursuant to an option shall
be paid, as specified in the option, either (i) in cash at the time the
option is exercised, or (ii) at the discretion of the Board or the
committee, (A) by delivery to the Company of other shares of the Company's
common stock, (B) according to a deferred payment or other arrangement
(which may include, without limiting the generality of the foregoing, the
use of other common stock of the Company) with the person to whom the
option is granted or to whom the option is transferred pursuant to
subparagraph 5(d), or (C) in any other form of legal consideration that may
be acceptable to the Board or the committee in their discretion, either at
the time of grant or exercise of the option.
In the case of any deferred payment arrangement specified at the time
of grant, an interest rate shall be stated which is not less than the rate
then specified which will prevent any imputation of higher interest under
Section 483 of the Code.
(d) An 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 person to whom the option is granted only by such person.
(e) The total number of shares of stock subject to an option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). From time to time during each of such installment periods, the
option may be exercised with respect to some or all of the shares allotted
to that period, and/or with respect to some or all of the shares allotted
to any prior period as to which the option was not fully exercised. During
the remainder of the term of the option (if its term extends beyond the end
of the installment periods), the option may be exercised from time to time
with respect to any shares then remaining subject to the option. The
provisions of this subparagraph 5(e) are subject to any option provisions
governing the minimum number of shares as to which an option may be
exercised.
(f) [RESERVED]
(g) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 5(d), as a condition of exercising
any such option to make such representations, warranties and agreements as
the Company may deem appropriate to assure that issuance of the Company's
common stock upon exercise of such option is in compliance with then
applicable federal and state securities laws.
(h) An option shall terminate three (3) months after termination of
the optionee's employment with the Company or an affiliate, unless (i) the
termination of employment of the optionee is due to such person's permanent
and total disability, within the meaning of Section 422(c)(6) of the Code,
in which case the option may, but need not, provide that it may be
exercised at any time within one (1) year following such termination of
employment; or (ii) the optionee dies while in the employ of the Company or
an affiliate, or within not more than three (3) months after termination of
such employment, in which case the option may, but need not, provide that
it may be exercised at any time within eighteen (18) months following the
death of the optionee by the person or persons to whom the optionee's
rights under such option pass by will or by the laws of descent and
distribution; or (iii) the option by its terms specifies either (a) that it
shall terminate sooner than three (3) months after termination of the
optionee's
3
<PAGE> 5
employment, or (b) that it may be exercised more than three (3) months
after termination of the optionee's employment with the Company or an
affiliate. This subparagraph 5(h) shall not be construed to extend the term
of any option or to permit anyone to exercise the option after expiration
of its term, nor shall it be construed to increase the number of shares as
to which any option is exercisable from the amount exercisable on the date
of termination of the optionee's employment.
(i) The option may, but need not, include a provision whereby the
optionee may elect any time during the term of his or her employment with
the Company or any affiliate to exercise the option as to any part or all
of the shares subject to the option prior to the stated vesting data of the
option or of any installment or installments specified in the option. Any
shares so purchased from any unvested installment or option may be subject
to a repurchase right in favor of the Company or to any other restriction
the Board or the committee determines to be appropriate.
(j) Options may be granted to directors of the Company only during the
first month of each calendar quarter. Any option held by a director of the
Company may only be exercised during any period of ten business days
beginning on the third business day after a quarterly or annual summary
statement of the Company's revenues and earnings appears on a wire service
or in a newspaper of general circulation, or is otherwise made generally
available to the public.
6. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act of 1933, as amended, either the Plan, any
option granted under the Plan or any stock issued or issuable pursuant to any
such option. If the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
8. MISCELLANEOUS
(a) The Board or the committee shall have the power to accelerate the time
during which an option may be exercised or the time during which the option or
any part thereof will vest pursuant to subparagraph 5(e), notwithstanding the
provisions in the option stating the time during which it may be exercised or
the time during which it will vest.
(b) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
9. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Board shall make
appropriate adjustments in the maximum number of shares subject to the Plan and
the number of shares and price per share of stock subject to outstanding
options.
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<PAGE> 6
(b) In the event of a Change of Control (as defined in subparagraph 9(c)),
then as to options which are not then exercisable, the time during which such
options may be exercised shall be accelerated to the 60-day period from and
after a Change of Control, unless, in the opinion of the Board, it is clearly in
the best interests of the optionholders and the shareholders taken together that
the Company or a surviving corporation (if the Change of Control results in the
Company not surviving) assume any outstanding options or substitute similar
options for those outstanding under the Plan, in which case the Board may take
appropriate action to effect an assumption or substitution.
(c) "Change of Control" shall mean any of the following events:
(1) the acquisition by any person (including a group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended), other than the Company or any of its subsidiaries, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended) of 50% or more of the
combined voting power of the Company's then outstanding voting securities;
or
(2) approval by stockholders of the Company of a merger,
consolidation, liquidation or dissolution of the Company or of the sale of
all or substantially all of the Company's assets.
(d) Notwithstanding any provision to the contrary set forth herein, the
consummation of the merger contemplated by the Agreement and Plan of Merger
dated as of May 23, 1995, among the Company, Roche Holdings, Inc. and HLR (U.S.)
II, Inc. shall not be deemed to be a Change of Control under the Plan.
(e) From and after October 25, 1995, all references herein to "shares",
"stock", or "the Company's common stock" shall be deemed to be references to
shares of Callable Putable Common Stock, par value $0.02 per share, of the
Company ("Special Common Stock"), except for the references to the shares of
Common Stock of the Company contained in subparagraph 9(g).
(f) Notwithstanding any provision to the contrary set forth herein, in the
event that the Special Common Stock is redeemed in accordance with Article
THIRD, Section (c)(ii) of the Company's Certificate of Incorporation, any
options granted under the Plan that are exercisable for Special Common Stock and
that are outstanding on the date of redemption (whether or not such options are
exercisable on such date) shall become exercisable for consideration of the same
type and amount as the holders thereof would have received had they exercised
such options prior to such date of redemption.
(g) Notwithstanding any provision to the contrary set forth herein, in the
event that the shares of Special Common Stock are converted into shares of
Common Stock, par value $0.02 per share, of the Company ("Common Stock")
pursuant to Article THIRD, Section (c)(vi) of the Company's Certificate of
Incorporation, each option granted under the Plan which is outstanding on the
Conversion Date as such term is defined in Article THIRD, Section (c)(vi) of the
Company's Certificate of Incorporation) shall automatically be canceled, and the
holder thereof shall receive, in exchange therefor, a substitute option to
purchase, at a per share exercise price equal to the per share exercise price of
such canceled option, the number of shares of Common Stock equal to the number
of shares of Special Common Stock subject to such canceled option. Such
substitute option shall be subject to the same terms and conditions as the
option for which it is exchanged, including with respect to vesting (such that
such substitute option vests at the same time as the option for which it is
exchanged would have vested) and the conditions relating to the exercise of the
option. From and after the Conversion Date, all references herein to "shares",
"stock", or the "Company's Common Stock" which in accordance with subparagraph
9(e) are deemed to be references to shares of Special Common Stock, shall be
deemed to be references to shares of Common Stock.
10. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved
5
<PAGE> 7
by a majority of the outstanding shares of the Company entitled to vote within
twelve (12) months before or after the adoption of the amendment, where the
amendment will:
(i) Increase the number of shares reserved for options under the Plan;
(ii) Materially modify the requirements as to eligibility for
participation in the Plan; or
(iii) Materially increase the benefits accruing to participants under
the Plan.
It to expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee incentive stock
options and/or to bring the Plan and/or options granted under it into compliance
therewith.
(b) Rights and obligations under any option granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom the option was granted.
11. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate within ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
12. EFFECTIVE DATE OF PLAN
The Plan shall become effective as determined by the Board, but no options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the holders of a majority of the outstanding shares of the Company
entitled to vote, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.
6
<PAGE> 1
EXHIBIT 99-B(4)
<PAGE> 2
GENENTECH, INC.
1984 NON-QUALIFIED STOCK OPTION PLAN, AS AMENDED AND RESTATED
(EFFECTIVE OCTOBER 25, 1995)
1. PURPOSE
(a) The purpose of the Plan is to provide a means by which selected key
employees and directors (if declared eligible under paragraph 4) of and
consultants to GENENTECH, INC. (the "Company") and its affiliates, as defined in
subparagraph 1(b), may be given an opportunity to purchase stock of the Company.
(b) The word "affiliate" as used in the Plan means any Parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now holding key positions to secure and retain the services of persons
capable of filling such positions, and to provide incentives for such persons to
exert maximum efforts for the success of the Company.
(d) The Company intends that the options issued under the Plan not be
incentive stock options as that term is used in Section 422 of the Code.
(e) For purposes of the Plan, the following definitions shall apply:
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).
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.
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").
2. ADMINISTRATION
(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, none of whom shall be eligible to participate in this Plan or any other
stock option, stock appreciation, stock bonus or other stock plan of the Company
or its parent or subsidiary corporations (except to the extent such member
becomes entitled to the special option grant to be made pursuant to automatic
grant provisions of Section VII of Article Two or to option grants made pursuant
to the automatic grant provisions of Article Three of the 1990 Stock Option/
Stock Incentive Plan). 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 a
Committee, however caused.
(b) Discretionary option grants to Board members who are Employees shall be
either (i) made by the Committee whose membership shall, at the time of any such
grant, be limited to three or more disinterested persons within the meaning of
paragraph (d)(3) of Rule 16b-3 of the Securities and Exchange Commission (or any
successor rule), as such term is interpreted from time to time or (ii) subject
to the following terms and conditions:
(i) The exercise price per share shall not be less than one hundred
percent (100%) of the Closing Selling Price per share of Common Stock on
the date of the option grant.
<PAGE> 3
(ii) The Committee shall have complete discretion in determining the
number of shares of Common Stock for which options may be granted to such
Employee-members of the Board; provided, however, that no such
Employee-member of the Board may acquire more than is permitted under
paragraph 3(d).
(iii) Any stock option granted to such an Employee-member of the Board
shall not become exercisable in whole or in part during the one-year period
following the grant date, except in the event of the optionee's death or
disability or in the event of either a stockholder-approved Corporate
Transaction or a Change of Control. Following the expiration of the
applicable waiting period, the option shall become exercisable at such time
or times as the Committee shall specify in the instrument evidencing the
grant.
(iv) Unless the members of the Committee qualify as disinterested
individuals under Rule 16b-3 prior to December 31, 1999, no further stock
option grants shall be made to any Employee-member of the Board from and
after such date.
(c) The Committee, whether or not comprised of disinterested persons, 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.
(d) Subject to the express provisions of the Plan, the Committee shall have
plenary authority:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted options; when and how the option shall be
granted; the provisions of each option granted (which need not be
identical), including the time or times during the term of each option
within which all or portions of such option may be exercised; and the
number of shares for which an option shall be granted to each such person.
(ii) To construe and interpret the Plan and options granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Committee, in the exercise of this power, may correct
any defeat, omission or inconsistency in the Plan or in any option
agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) Generally, to exercise such powers and to perform such acts as
the Committee deems necessary or expedient to promote the best interests of
the Company.
(e) 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.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 9 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
this Plan shall not exceed in the aggregate Fifteen Million Ninety Four Thousand
Three Hundred and Ninety Seven (15,094,397) shares of the Company's common
stock; provided, however, that such aggregate number of shares shall be reduced
to reflect the number of shares of the Company's common stock which have been
sold under, or may be sold pursuant to outstanding options granted under, the
Company's 1984 Incentive Stock Option Plan (the "ISO Plan") to the same extent
as if such sales had been made or options had been granted pursuant to this
Plan. As used in this Plan, the "Company's common stock" includes all series of
common stock authorized by the Company's charter documents, including the Common
Stock and Earnings Convertible Restricted Stock now authorized and any other
series that may in the future be authorized. If any option granted under this
Plan or the ISO Plan shall for any reason expire or otherwise terminate without
having been exercised in full, the stock not purchased under such option shall
again become available for this Plan and the ISO Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
2
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(c) There is no maximum limit on the aggregate fair market value
(determined as of the times the respective options are granted) of the stock for
which any eligible person may be granted options under the Plan in any calendar
year.
(d) Subject to the limitations contained elsewhere herein and to the
provisions of paragraph 9 relating to adjustments upon changes in stock, the
aggregate number of shares of stock that may be subject to options granted to
all persons who are directors of the Company at the time such options are
granted shall not exceed one million two hundred thousand (1,200,000) shares of
the Company's common stock, and no single director of the Company who is not an
employee of the Company or an affiliate thereof may be granted options to
purchase more than forty thousand (40,000) shares of the Company's common stock;
and no one director of the Company who is an employee of the Company or an
affiliate thereof may be granted options to purchase more than six hundred
thousand (600,000) shares of the Company's common stock.
4. ELIGIBILITY
(a) Options may be granted only to key employees (including officers) or
directors of or consultants to the company or its affiliates.
(b) A director shall in no event be eligible to be granted an option under
the Plan unless and until such director is expressly declared eligible to
participate in the Plan by action of the Committee.
(c) Notwithstanding the above or any provision to the contrary set forth
herein, no options shall be granted to any non-Employee director under this Plan
after April 30, 1992.
5. OPTION PROVISIONS
Each option shall be in such form and shall contain such terms and
conditions as the Committee shall deem appropriate. The provisions of separate
options need not be identical, but each option shall include (through
incorporation of provisions hereof by reference in the option or otherwise) the
substance of each of the following provisions:
(a) The term of any option shall not be greater than twenty (20) years
from the date it was granted.
(b) The exercise price of each option shall be not less than
eighty-five percent (85%) of the fair market value of the stock subject to
the option on the date the option is granted.
(c) The purchase price of stock acquired pursuant to an option shall
be paid, as specified in the option, either (i) in cash at the time the
option is exercised, or (ii) at the discretion of the Committee, (A) by
delivery to the Company of other shares of the Company's common stock, (B)
according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common
stock of the Company) with the person to whom the option is granted or to
whom the option is transferred pursuant to subparagraph 5(f), or (C) in any
other form of legal consideration that may be acceptable to the Committee
in their discretion, either at the time of grant or exercise of the option.
In the case of any deferred payment arrangement specified at the time
of grant, an interest rate shall be stated which is not less than the rate
then specified which will prevent any imputation of higher interest under
Section 483 of the Code.
(d) The total number of shares of stock subject to an option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). From time to time during each of such installment periods, the
option may be exercised with respect to some or all of the shares allotted
to that period, and/or with respect to some or all of the shares allotted
to any prior period as to which the option was not fully exercised. During
the remainder of the term of the option (if its term extends beyond the end
of the installment periods), the option may be exercised from time to time
with respect to any shares then remaining subject to the option. The
provisions of this subparagraph 5(d) are subject to any option provisions
governing the minimum number of shares as to which an option may be
exercised.
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(e) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 5(f), as a condition of exercising
any such option to make such representations, warranties and agreements as
the Company may deem appropriate to assure that issuance of the Company's
common stock upon exercise of such option is in compliance with then
applicable federal and state securities laws.
(f) (1) Should an Optionee cease to continue in Service for any reason
(other than termination due to death or permanent disability) while the
holder of one or more outstanding options under this Plan, 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 accelerated and that the
applicable period set forth in subclause (ii) may be increased, as provided
in paragraph 8(a).
(2) Except for options granted to Section 16(b) Insiders, 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)(3) of the
Code), by his or her spouse or designee. An option granted to a Section
16(b) Insider shall, during the lifetime of such Optionee, be exercisable
only by that Optionee. Options shall not be assignable or transferrable by
the Optionee otherwise than by will or by the laws of descent and
distribution.
(3) Should an Optionee cease to continue in Service due to death or
permanent disability while the holder of one or more outstanding options
under this Plan, 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 in 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.
(4) Any option granted to an Optionee under this Plan 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 Plan 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 clause (3).
(g) The option may, but need not, include a provision whereby the
optionee may elect at any time during the term of his or her employment
with the Company or any affiliate to exercise the option as to any part or
all of the shares subject to the option prior to the stated vesting date of
the option or of any installment or installments specified in the option.
Any shares so purchased from any unvested installment or option may be
subject to a repurchase right in favor of the Company or to any other
restriction the Committee determines to be appropriate.
(h) Options may be granted to directors of the Company only during the
first month of each calendar quarter. Any option held by a director of the
Company may only be exercised during any period of ten business days
beginning on the third business day after a quarterly or annual summary
statement of the Company's revenues and earnings appears on a wire service
or in a newspaper of general circulation, or is otherwise made generally
available to the public.
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6. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act of 1933, as amended, either the Plan, any
option granted under the Plan or any stock issued or issuable pursuant to any
such option. If the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
8. MISCELLANEOUS
(a) The Committee shall have the power to accelerate or increase the time
during which an option any be exercised or the time during which the option or
any part thereof will vest pursuant to subparagraph 5(d), notwithstanding the
provisions in the option stating the time during which it may be exercised or
the time during which it will vest.
(b) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(f) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
9. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Committee shall make
appropriate adjustments in the maximum number of shares subject to the Plan and
the number of shares and price per share of stock subject to outstanding
options.
(b) In the event of a Change of Control (as defined in subparagraph 9(c)),
then as to options which are not then exercisable, the time during which such
options may be exercised shall be accelerated to the 60-day period from and
after a Change of Control, unless, in the opinion of the Committee, it in
clearly in the best interests of the optionholders and the shareholders taken
together that the Company or a surviving corporation (if the Change of Control
result as in the Company not surviving) assume any outstanding options or
substitute similar options for those outstanding under the Plan, in which case
the Committee may take appropriate action to effect an assumption or
substitution.
(c) "Change of Control" shall mean any of the following events:
(1) the acquisition by any person (including a group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended), other than the Company or any of its subsidiaries, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934) as amended) of 50% or more of the
combined voting power of the Company's then outstanding voting securities;
or
(2) approval by stockholders of the Company of a merger,
consolidation, liquidation or dissolution of the Company or of the sale of
all or substantially all of the Company's assets.
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(d) Notwithstanding any provision to the contrary set forth herein, the
consummation of the merger contemplated by the Agreement and Plan of Merger
dated as of May 23, 1995, among the Company, Roche Holdings, Inc. and HLR (U.S.)
II, Inc. shall not be deemed to be a Change of Control under the Plan.
(e) From and after October 25, 1995, all references herein to "shares",
"stock", or "the Company's common stock" shall be deemed to be references to
shares of Callable Putable Common Stock, par value $0.02 per share, of the
Company ("Special Common Stock"), except for the references to the shares of
Common Stock of the Company contained in subparagraph 9(g).
(f) Notwithstanding any provision to the contrary set forth herein, in the
event that the Special Common Stock is redeemed in accordance with Article
THIRD, Section (c)(ii) of the Company's Certificate of Incorporation, any
options granted under the Plan that are exercisable for Redeemable Common Stock
and that are outstanding on the date of redemption (whether or not such options
are exercisable on such date) shall become exercisable for consideration of the
same type and amount as the holders thereof would have received had they
exercised such options prior to such date of redemption.
(g) Notwithstanding any provision to the contrary set forth herein, in the
event that the shares of Special Common Stock are converted into shares of
Common Stock, par value $0.02 per share, of the Company ("Common Stock")
pursuant to Article THIRD, Section (c)(vi) of the Company's Certificate of
Incorporation, each option granted under the Plan which is outstanding on the
Conversion Date (as such term is defined in Article THIRD, Section (c)(vi) of
the Company's Certificate of Incorporation) shall automatically be canceled, and
the holder thereof shall receive, in exchange therefor, a substitute option to
purchase, at a per share exercise price equal to the per share exercise price of
such canceled option, the number of shares of Common Stock equal to the number
of shares of Redeemable Common Stock subject to such canceled option. Such
substitute option shall be subject to the same terms and conditions as the
option for which it is exchanged, including with respect to vesting (such that
such substitute option vests at the same time as the option for which it is
exchanged would have vested) and the conditions relating to the exercise of the
option. From and after the Conversion Date, all references herein to "shares",
"stock", or the "Company's Common Stock" which in accordance with subparagraph
9(e) are deemed to be references to shares of Special Common Stock, shall be
deemed to be references to shares of Common Stock.
10. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by a majority of the
outstanding shares of the Company entitled to vote within twelve (12) months
before or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for options under the Plan;
(ii) Materially modify the requirements as to eligibility for
participation in the Plan; or
(iii) Materially increase the benefits accruing to participants under
the Plan.
(b) Rights and obligations under any option granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom the option was granted.
11. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate within ten (10) years from the date the
Plan is adopted by the Board or approved by the shareholders of the Company,
whichever is earlier. No options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
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12. EFFECTIVE DATE OF PLAN
The Plan shall become effective as determined by the Board, but no options
granted under the Plan shall be exercised unless and until the Plan has been
approved by a majority of the outstanding shares of the Company entitled to
vote, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.
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EXHIBIT 99-C(4)
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EXHIBIT 99-C(4)
[LETTERHEAD OF GENENTECH, INC.]
Dear Genentech Option Holder:
As you may know, Genentech, Inc. (the "Company") recently merged (the
"Merger") with a wholly owned subsidiary of Roche Holdings, Inc. ("Roche"). As a
result of the Merger, each outstanding share of the Company's Common Stock, par
value $.02 per share ("Common Stock") (other than shares held by Roche and its
affiliates), was converted into one share of Callable Putable Common Stock, par
value $.02 per share, of the Company ("Special Common Stock"). In connection
with the Merger, the Company's Board of Directors (the "Board") adjusted the
plans pursuant to which your options were granted in order to provide that, upon
exercise of such options, option holders would receive shares of Special Common
Stock in lieu of Common Stock. The differences between the shares of Special
Common Stock and the Common Stock, as well as the details of the Merger itself,
are described more fully in the Proxy Statement/Prospectus, which was
distributed to the Company's stockholders and all employees of the Company prior
to voting on the Merger. If you would like an additional copy of the Proxy
Statement/Prospectus, please call Karen Strand in the legal department.
Again, the effect of this change on your options is that each option to
acquire shares of Common Stock (which, prior to July 1, 1995 constituted
Redeemable Common Stock) now represents an option to acquire a like number of
shares of Special Common Stock. The Board has determined, pursuant to the
provisions of such plans, that this change, and the transactions with Roche,
will have no other effect on your options.
As a result, the appropriate references to "Redeemable Common Stock" or
"Common Stock" in your plan documents are now deemed to refer, as appropriate,
to Special Common Stock. The number of shares which may be acquired by
exercising your options and the price at which such shares may be purchased
remain unaffected.
You should attach a copy of this letter to any options or option agreements
in your possession.
GENENTECH, INC.
