As filed with the Securities and Exchange Commission on March 31,
1995.
Registration No. 33- 54103
======================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM S-3 A-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
GENENTECH, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2347624
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) No.)
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)
John P. McLaughlin
Senior Vice President, General Counsel and Secretary
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)
Approximate date of commencement of proposed sale to the
public:
As soon as possible after this Registration Statement becomes
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 ].
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
=====================================================================
<CAPTION>
Proposed Amount
Title of Each Proposed Maximum Maximum of
Class of Amount Offering Aggregate Regis-
Securities to to be Price Per Offering tration
be Registered Registered Share(1) Price (1) Fee
<S> <C> <C> <C> <C>
Redeemable
Common Stock
$.02 par value 4,500,000 $48.375 $217,687,500 $75,065
shares
=====================================================================
<FN>
(1) Based upon the average of the high and low prices of the
Registrant's Redeemable Common Stock, as reported on the New
York Stock Exchange on June 6, 1994, in accordance with Rule 457.
</TABLE>
====================================================================
This Registration Statement shall hereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
GENENTECH, INC.
----------------
Cross-Reference Sheet
Form S-3 Item Number and Heading Location in Prospectus
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 DESCRIPTION OF THE
be Registered REDEEMABLE COMMON STOCK
10. Interests of Named Experts
and Counsel LEGAL MATTERS
11. Material Changes MATERIAL CHANGES
12. Incorporation of Certain Information INCORPORATION OF CERTAIN
by Reference DOCUMENTS BY REFERENCE
13. Disclosure of Commission DISCLOSURE OF COMMISSION
Position on Indemnification POSITION ON INDEMNIFICATION
for Securities Act FOR SECURITIES ACT LIABILITIES
Liabilities
<PAGE>
GENENTECH, INC.
4,500,000 Shares Redeemable Common Stock
---------------------------------
This Prospectus covers 4,500,000 shares of Redeemable Common
Stock of Genentech, Inc. issuable upon exercise of stock options
under Genentech, Inc.'s 1994 Stock Option Plan (the "Option Plan").
------------------------------------
The Redeemable Common Stock is traded on the New York Stock
Exchange and the Pacific Stock Exchange under the symbol GNE. On June
6, 1994 the closing sales price for the Redeemable Common Stock on
the New York Stock Exchange was $48.25.
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>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(3)
- --------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $48.25 $ 0 $217,125,000
Total $48.25 $ 0 $217,125,000
- --------------------------------------------------------------------
=====================================================================
<FN>
(1) Based upon the closing price of the Redeemable Common Stock on
June 6, 1994. 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 $91,065
payable by the Company.
</TABLE>
________________________________
The date of this Prospectus is March 31, 1995
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 2
THE COMPANY 2
USE OF PROCEEDS 3
THE 1994 STOCK OPTION PLAN 3
Information About Genentech 4
A. Regular Option Grant Program 4
1. Am I eligible for option grants? 4
2. Who determines the terms of my option? 5
3. Do special rules apply to me if I am an officer or
director of the Company? 5
4. What happens to my option or stock issued under the
Option Plan in the event Roche Holdings Inc.
("Roche") redeems the Redeemable Common Stock? 5
5. How many shares of Redeemable Common Stock will my
option cover? 6
6. How is the exercise price of an option determined? 6
7. When can I exercise my option? 7
8. How do I exercise my option? 7
9. Do I have to pay the exercise price with cash? 7
10. Will I continue to receive options as long as I stay
with the Company? 7
11. Can the stockholders of the Company change the terms
of the Option Plan? 8
12. What happens if I leave the Company? 8
13. What if I leave the Company because of disability? 8
14. What are the rights of my heirs? 8
15. Can a relative or friend exercise my option? 9
16. Can I transfer my options? 9
17. Can I sell the stock I receive from exercising my
option right away? 9
18. How do I sell stock I received under the option? Do
I have to pay a commission when I exercise my option
or sell the stock I received under the option? 9
<PAGE>
19. I have heard about cashless exercise programs
through brokers, how do these work? 9
20. How can I make a gift of stock I receive under the
Option Plan? 10
21. Does the Company go out on the market to buy the
stock which I will receive on exercise of my option? 10
22. Does the Option Plan have any of the same benefits
as a qualified retirement plan (including a 401(k)
plan) and will my participation in the Option Plan
affect my participation in the Company's 401(k) plan? 10
23. Do I have to pay tax when I receive a stock option
or exercise the stock option? Will the Company
withhold the amount of taxes due? 11
24. How much tax do I have to pay when I sell stock
received pursuant to the exercise of a non-statutory
stock option? 11
25. What is the difference between ordinary income and
capital gains? 11
26. When do I pay tax on stock received pursuant to the
exercise of an incentive stock option? 12
27. How is my profit taxed? What if I lose money? 12
28. Is there any withholding on the exercise of my
incentive stock option or the sale of the stock
acquired on exercise? 13
29. Do I have to complete any forms after I sell or
transfer my stock? 13
30. Are there any special tax rules which apply to me if
the Company has the right to repurchase my stock
after I exercise my option? 13
NON-QUALIFIED STOCK OPTION 14
INCENTIVE STOCK OPTION 15
31. What are the tax consequences if I use shares I
already own to pay the exercise price of my non-
qualified stock option? 16
32. What are the tax consequences if I use shares I
already own to pay the exercise price of incentive
stock options? 17
33. What are the tax consequences of my exercise of
options if I am subject to the alternative minimum
tax? 18
<PAGE>
34. What happens to my option or stock issued under the
Option Plan in the event Genentech is acquired by a
person other than Roche? 18
35. What happens if the vesting of my options
accelerates upon a change of control? 19
B. Automatic Grant Program 19
36. Are non-employee directors eligible to receive
options under the Option Plan? 19
C. Miscellaneous 20
37. What are some of the other features of the Option
Plan? 20
PLAN OF DISTRIBUTION 21
DESCRIPTION OF THE REDEEMABLE COMMON STOCK 21
LEGAL MATTERS 24
EXPERTS 25
MATERIAL CHANGES 25
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 26
AVAILABLE INFORMATION
Genentech, Inc. ("Genentech" or the "Company") 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 Redeemable
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 Redeemable 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.
1
<PAGE>
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.
(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 Company's Redeemable Common
Stock (the "Redeemable 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
Redeemable 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.
2
<PAGE>
USE OF PROCEEDS
There can be no assurance that any options granted under the
Option Plan will be exercised. However, assuming all options granted
under the Option Plan are exercised for cash and that the exercise
price of such options is equal to the closing price of the Company's
Redeemable Common Stock on June 6, 1994, the net proceeds to be
received by the Company from the sale of the Redeemable Common Stock
offered hereby are estimated to be $217,125,000. 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 intends to invest such proceeds in readily
marketable, interest-bearing securities.
THE 1994 STOCK OPTION PLAN
To our Employees, Certain Consultants and Non-Employee Directors:
We are pleased with this opportunity to provide you with
information regarding our 1994 Stock Option Plan, referred to as the
"Option Plan." We believe that the Option Plan is an important part
of the benefits provided to our employees, certain consultants and
non-employee directors and we hope you will take the time to
carefully review this information.
Genentech, Inc. adopted the Option Plan in order to provide a
method whereby the Company may retain the services of persons now
employed by or serving as consultants or directors to it, secure and
retain the services of persons capable of filling such positions and
provide incentives for such persons to exert maximum efforts for the
success of the Company or its parent or subsidiary corporations.
The discussion of the Option Plan describes: (i) the terms of
the Regular Option Grant Program under the Option Plan, which
provides for the grant of what are called incentive stock options
(tax advantaged options) and non-statutory stock options (options
which do not have tax advantages but which may cover stock offered at
a discounted price); and (ii) the terms of the Automatic Grant
Program under the Option Plan, which provides for the automatic grant
of non-statutory stock options to non-employee members of the Board.
It also includes a description of provisions of the Option Plan that
are applicable to all rights granted under the Option Plan.
The attached materials may not answer all the questions you have
about the Option Plan and are not intended to go into every detail of
the Option Plan, copies of which are found at the end of this
package. Kathy Panko, Manager of Corporate Records and Karen Strand,
Senior Stock Services Coordinator located in the legal department
will be happy to answer further questions.
If you are granted a stock option under the Option Plan you will
receive an option grant form describing the terms of your option. If
you wish to exercise an option you will need to complete an option
exercise form provided with your option grant. You may always obtain
extra copies of the option exercise form from Kathy Panko or Karen
Strand.
3
<PAGE>
Information About Genentech
An important part of your participation in Genentech's 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
optionholder, 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.
A. Regular Option Grant Program
1. Am I eligible for option grants?
To receive an incentive stock option you must be an employee of
the Company, its parent, or any subsidiary (any corporation in which
the Company owns more than 50% of the outstanding voting power). To
receive a non-qualified stock option you must be an employee of, or a
consultant to, the Company, its parent, any subsidiary, or any other
business entity in which the Company directly or indirectly owns more
than 50% of the voting power, capital or profits. Non-employee
directors will only receive non-qualified stock options pursuant to the
terms of the Automatic Grant Program described below in Question 36.
The Option Plan currently provides for the grant of options to
directors, employees and consultants covering an aggregate of 4,500,000
shares of the Company's Redeemable Common Stock.
4
<PAGE>
2. Who determines the terms of my option?
The decision to grant an option to any particular individual
is made by the Compensation Committee of the Board of Directors of
the Company, generally after review of input from management. The
current members of the Compensation Committee of the Board are Armin
M. Kessler, J. Richard Munro, Thomas J. Perkins and Robert A. Swanson
and information about them is provided in the Company's proxy
statement for its last annual meeting.
Members of the Board are nominated by the Board and elected by
the stockholders of the Company. The members of the Board are
divided into three classes, each class consisting, as nearly as
possible, of one-third of the total number of directors, with each
class having a three year term. Each director holds office until his
or her term is complete and until his or her successor is elected, or
until his or her death, resignation or removal. Board members may be
removed from office by appropriate stockholder action. The
Compensation Committee currently consists of four board members
appointed by the Board of Directors as a whole.
3. Do special rules apply to me if I am an officer or director of
the Company?
Yes. If you are an officer or director of the Company you
should be aware of tax and securities laws which apply to your
transactions in stock received upon the exercise of options or if the
Company is bought out. In addition, you must comply with the
Company's policy permitting officers and directors to sell shares
only during "window" periods which generally open on the third
business day after a quarters' revenues and earnings have been
publicly released and close on the tenth calendar day of the last
month of each quarter. Furthermore, you are expected to check with
Kathy Panko before selling any shares and your sale must also be made
in accordance with Rule 144.
One of the laws that will apply to you as an officer or
director is Section 16 of the Securities Exchange Act of 1934. If you
are not familiar with how Section 16 operates, you should review the
Memorandum to Officers and Directors which you should have received
or ask Kathy Panko or Karen Strand for another copy of the
Memorandum.
4. What happens to my option or stock issued under the Option
Plan in the event Roche Holdings Inc. ("Roche") redeems the
Redeemable Common Stock?
If the Redeemable Common Stock is redeemed by Roche, all
outstanding options which are vested immediately prior to the date of
the redemption will be cashed out at the excess of the per share
redemption price over the per share option price. Following the
redemption, outstanding options which are not vested immediately
prior to the date of the redemption will be replaced by a comparable
incentive program. If the redemption does not occur and the
Redeemable Common Stock converts to Common Stock as provided in
Article Third of the Company's Certificate of Incorporation,
outstanding options shall continue to vest and become exercisable to
purchase shares of Common Stock of the Company pursuant to the
option's original vesting schedule.
5
<PAGE>
5. How many shares of Redeemable Common Stock will my option
cover?
When the Compensation Committee grants an option the
Compensation Committee determines the number of shares the option
will cover. There is no minimum number of shares for which an option
may be granted; however, the aggregate number of shares of stock that
may be subject to options granted to any employee in a calendar year
may not exceed two hundred fifty thousand (250,000) shares of the
Company's Redeemable Common Stock. Other limitations apply for
option grants to non-employee members of the Board (see Question 36).
The tax regulations do restrict the Board's ability to grant
incentive stock options under the following circumstances:
a. if you are granted an incentive stock option that is
immediately exercisable as to all the shares covered by the option
and the aggregate value of the shares on the date of grant (usually
determined on the basis of the trading price of the stock on the
trading day immediately preceding the grant date) is greater than
$100,000, then that number of shares with a value over $100,000 will
be treated by the IRS as non-statutory stock options not having the
tax advantages of incentive stock options, and
b. if you are granted an incentive stock option that vests over
a period of time (i.e., the option is not exercisable immediately but
becomes exercisable for all or a portion of the shares covered by the
options on a date or dates stated in the option grant) and the
aggregate value of shares (determined at the date of grant of each
option) under that option and all other incentive stock options
(granted after 1986) you hold, if any, become exercisable for the
first time during any calendar year is greater than $100,000, then
that number of those shares with a value over $100,000 will be
treated by the IRS as non-qualified stock options not having the tax
advantages of incentive stock options.
In addition, as is described more fully in the answers below,
incentive options have limitations on their exercise price, terms,
transferability, and duration following termination.
6. How is the exercise price of an option determined?
IRS regulations require the exercise price of an incentive
stock option to be at least 100% of the fair market value of the
Company's Redeemable Common Stock on the date the option is granted.
Because the Company's Redeemable Common Stock trades on the New York
Stock Exchange, the fair market value will be the closing sale price
of the Company's Redeemable Common Stock as quoted by New York Stock
Exchange on the trading day immediately preceding the date of grant.
We will refer to this price as the "market price." Special rules
apply to the exercise price of incentive stock options granted to
anyone who owns 10% or more of the voting power of the Company.
The Option Plan provides that the Board may set the exercise
price for a non-qualified stock option at any price not less than 50%
of the market price of the Company's Redeemable Common Stock on the
trading day immediately preceding the date the option is granted.
6
<PAGE>
7. When can I exercise my option?
When the Compensation Committee grants an option, the
Compensation Committee also determines certain terms of the option,
including the date or dates the option may be exercised. As an
example, options granted in April 1994 vest at the rate of 10% in
1996, 15% in 1997, 25% in 1998 and 50% in 1999. You may exercise
your option at any time for the number of shares that have actually
vested at the time of exercise. Options granted by the Company under
the Option Plan generally have a term of 20 years (incentive options
may not have a term longer than 10 years), so you must exercise your
option before it expires at the end of the 20 year period. The terms
of exercise of options granted by the Company are not required to be
the same for every employee and the terms of the option you receive
may vary from the terms described above. In addition, the
Compensation Committee has the power to accelerate the vesting
schedule of any outstanding option, either without conditions or
subject to a right to repurchase "unvested" shares. You may also
exercise your option prior to full vesting, subject to restrictions
described in the Option Plan, including without limitation,
restrictions on your ability to sell unvested shares and the
Company's ability to repurchase unvested shares at your option's
original exercise price upon termination of your employment.
8. How do I exercise my option?
You exercise your option by completing an option exercise form
and delivering the form, together with payment of the exercise price
(in cash or stock -- see Question 9 below) to Kathy Panko or Karen
Strand. You should receive a copy of the option exercise form with
your option grant. You can obtain additional copies of the form from
Kathy Panko or Karen Strand.
9. Do I have to pay the exercise price with cash?
No. You may also pay the exercise price with Company
Redeemable Common Stock that you have owned for more than six months.
Such stock will be valued at its closing price on the New York Stock
Exchange on the trading day before you exercise the option. The
Compensation Committee may determine, at the time of exercise of the
option, that the exercise price may be paid in installments (or that
the Company will make a loan or guaranty a third party loan for the
exercise price). The Compensation Committee will determine the terms
and conditions of any deferred payment arrangement.
10. Will I continue to receive options as long as I stay with the
Company?
Whether or not you receive stock options will depend on many
factors such as your performance, the Company's overall performance,
the Compensation Committee's current policy and the number of shares
remaining in the Option Plan. The Option Plan and therefore the
Compensation Committee's authority to grant options, terminates on
the date determined by the Board of Directors. However, any such
termination of the Option Plan will not affect your rights under your
outstanding options without your consent.
7
<PAGE>
11. Can the stockholders of the Company change the terms of the
Option Plan?
Generally, the Board of Directors decides whether to change
the terms of the Option Plan, usually because the number of shares
available under the Option Plan should be increased or to take into
account changes in the tax laws. These changes may be presented for
approval by the stockholders of the Company at the Company's annual
meeting. Stockholder approval will be obtained if tax, securities or
other laws require approval of the changes.
12. What happens if I leave the Company?
Whether you leave the Company voluntarily or your employment
is terminated by the Company for any reason, your right to exercise
any vested portion of your option generally will terminate three
months after your last day with the Company as determined between you
and the Company. However, the terms of your option may provide that
it may be exercised more than three months after termination of
employment and the Compensation Committee may, at the time of
termination, extend vesting for a period of up to three years and
exercisability for a period of up to five years. In the event of your
retirement or the termination of your employment by a "plant closing"
or "mass layoff " (as such terms are defined at 29 U.S.C. Section
2101), the Committee shall have discretion to provide that the option
will continue to vest during the limited period of exercisability
according to the vesting schedule that would have applied had your
employment continued. However, if the option is an incentive stock
option it must be exercised within three months of the date of
termination or else it will become a non-statutory option.
13. What if I leave the Company because of disability?
If your employment is terminated because of your permanent and
total disability it may be exercised by you or your spouse at any
time prior to its original termination date; however, if it is an
incentive stock option it must be exercised within twelve (12) months
of your date of termination or else it will become a non-statutory
stock option. In addition, the Compensation Committee may provide,
either at the time your option is granted or when your employment is
terminated due to your disability, that your options will continue to
vest up to the original date of termination of those options on the
schedule that would have applied had your employment not been
terminated or it may provide that your vesting will be accelerated.
Because disability, for these purposes, has a specific meaning found
in the Internal Revenue Code, you should ask Human Resources if you
have any questions regarding what constitutes permanent and total
disability.
14. What are the rights of my heirs?
Your estate or persons having rights to your option by will or
by the laws of descent have the right to exercise your option at any
time prior to its original termination date. In addition, the
Compensation Committee may provide, either at the time your option is
granted or upon your death, that your option will continue to vest or
that vesting will be accelerated.
8
<PAGE>
15. Can a relative or friend exercise my option?
No, except for options transferred to a trust (see Question
16) or options exercised after your death or total disability, only
you may exercise your option during your lifetime. You may, however,
provide for the transfer of the option in your will. Under certain
circumstances, your spouse may have community property rights in the
option.
16. Can I transfer my options?
You may not transfer an incentive stock option (except by will
or the laws of descent) nor may you transfer a non-statutory stock
option if you are an officer (or director) subject to Section 16(b)
of the Securities Exchange Act of 1934, as amended. You may transfer
a non-statutory stock option to a trust for your benefit or the
benefit of your immediate family.
17. Can I sell the stock I receive from exercising my option
right away?
Generally, yes. The stock you receive upon exercise of your
option is registered under the securities laws and freely tradeable
in most cases. If you are an officer or director of the Company
certain restrictions may apply, see Question 3. If you exercise an
incentive stock option, an immediate sale may have certain tax
consequences, see Question 27. However, if the terms of the option
permit you to exercise your option before it is vested, see Question
30, you may not sell shares of stock which the Company still has the
right to repurchase if your employment is terminated for any reason.
You should talk to Kathy Panko or Karen Strand if you think this
applies to you and you wish to sell stock.
18. How do I sell stock I received under the option? Do I have
to pay a commission when I exercise my option or sell the stock I
received under the option?
You pay no commission on exercise of options; however, if you
decide to sell the stock received on exercise you can expect to be
charged a fee or commission if you use a stock broker. To sell your
stock, you must generally take the stock certificate to a stock
broker who, for a commission, can arrange for its sale. Officers and
directors are subject to special limitations on the sale of their
stock. The Company will not buy or sell, or assist you in selling,
stock which you have purchased under the Option Plan.
19. I have heard about cashless exercise programs through
brokers, how do these work?
Cashless exercise programs involve the delivery to a broker of
a copy of your signed and completed option exercise form and your
irrevocable instructions to the Company to deliver stock to be
received upon exercise of the option to the broker rather than to
you. You can obtain an instruction form for your broker from Kathy
Panko or Karen Strand. Under Regulation T the broker can then
characterize the stock as margin stock, and deliver cash to the
Company in payment of the exercise price. The Company delivers the
stock certificate to the broker. After the stock is delivered to the
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broker the stock can be maintained as margin stock in an account
designated by you or sold pursuant to your instructions. However,
the Company will not participate in any Regulation T program which
would cause stock certificates to be delivered to the broker before
cash for the exercise price has been paid by the broker to the
Company.
20. How can I make a gift of stock I receive under the Option
Plan?
You may make a gift of stock by delivering the stock
certificate, with the transfer block on the back filled in, and
signed and with the signature guaranteed by a bank or stock broker
(or else by delivering the stock certificate together with an
"assignment separate from certificate" filled in, signed and the
signature similarly guaranteed) to the recipient of the gift. The
recipient may then send the certificate and associated paperwork to
the Company's transfer agent, Bank of Boston at P.O. Box 1865,
Boston, Massachusetts 02105-1865, to have the certificate transferred
to the recipient's name. If you have a brokerage account, your
broker will generally be willing to take care of the mechanics of
transfer.
21. Does the Company go out on the market to buy the stock which
I will receive on exercise of my option?
The shares you will receive upon exercise of your option may
be newly-issued shares or shares previously reacquired by the
Company.
22. Does the Option Plan have any of the same benefits as a
qualified retirement plan (including a 401(k) plan) and will my
participation in the Option Plan affect my participation in the
Company's 401(k) plan?
The Option Plan is not a qualified retirement plan and
therefore does not have the same tax deferral benefits. Your
participation in the Option Plan does not affect your ability to
participate in the Company's 401(k) plan.
The following materials respond to questions you may have
about the tax consequences of participating in the Option Plan. You
should understand, however, that this tax information is not
complete, nor does it address state or local tax laws or the
application of laws if you live outside the United States.
Furthermore, because tax laws and regulations are constantly
changing, and interpretations of these laws and regulations by the
courts and tax authorities can change the way the laws and
regulations apply to you, the information may need to be updated
after the date of issuance of this prospectus. Therefore, you should
consult with an accountant, lawyer or other person competent to give
tax advice if you have questions relating to the tax consequences of
participation in, and the sale of shares received under the Option
Plan.
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23. Do I have to pay tax when I receive a stock option or
exercise the stock option? Will the Company withhold the amount of
taxes due?
Normally, neither you nor the Company have to pay any tax or
receive any deductions when you are granted an option under the
Option Plan. Whether you will have to pay tax on exercise of an
option will depend on whether the option is an incentive stock option
or a non-qualified stock option.
If you exercise a non-qualified stock option when the market
price is higher than the exercise price, you generally are required
to pay tax on the "profit", that is the difference between the
exercise price and the market price of the stock on the date of
exercise. Your profit on the exercise will be characterized as
ordinary income.
Generally the Company is required by the IRS to withhold 28%
of your profit from your wages or to otherwise ensure that this
amount will be paid to the IRS. Additional amounts will usually be
withheld for state taxes. The Compensation Committee may provide you
with the option of having shares that would otherwise be delivered to
you on exercise of an option withheld or delivering shares you
already hold valued at the withholding amount.
If you exercise an incentive stock option, unless you are
subject to the alternative minimum tax (see Question 33), you do not
have to pay any tax at the time of exercise on the difference between
the exercise price and the market price of the stock on the date of
exercise. You may eventually pay tax on this amount when you sell
the stock.
24. How much tax do I have to pay when I sell stock received
pursuant to the exercise of a non-statutory stock option?
If you exercised your option when the exercise price was lower
than the market price, you generally should have paid tax on the
difference between the two. If you then sell your stock at a price
greater than the market price on the date of exercise, you generally
will have to pay tax on the difference between the selling price and
the market price at the time of exercise. Your profit will be
characterized as short or long-term capital gain depending on whether
you held the stock for more than one year from the date the option
was exercised.
If you exercised your option when the exercise price was lower
than the market price but you sell the stock at a price lower than
the market price at the time of exercise, you will be entitled to
report a capital loss equal to the difference between the sale price
and the market price at the time of exercise. Your loss will be
characterized as a long-term or short-term capital loss depending on
whether you held the stock for more than one year from the date the
option was exercised.
25. What is the difference between ordinary income and capital
gains?
Long-term capital gains of individuals are subject to a
maximum marginal federal income tax rate of 28%. This is in contrast
to a maximum rate of 39.6% for ordinary income of some individuals.
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Notwithstanding the presence or absence for any individual
taxpayer of a difference between the rate of tax on capital gains and
the rate of tax on ordinary income, there are other differences under
the Internal Revenue Code between capital gains and ordinary income.
For example, capital gains and losses are "netted" against other capital
gains and losses and only $3,000 of net capital losses may be deducted
against ordinary income in any year by any individual taxpayer.
26. When do I pay tax on stock received pursuant to the exercise
of an incentive stock option?
Except for the possible application of the alternative minimum
tax (see Question 33), you normally pay no tax on the exercise of an
incentive stock option until you sell or otherwise dispose of the
stock.
You should be aware that transfer of legal title to the stock
received upon exercise of an incentive stock option in a transaction
that is not a sale may still be taxable as a disposition of the
stock. Generally, such transfers include gifts, but do not include a
transfer into joint ownership with right of survivorship if you
remain one of the joint owners, a pledge or a transfer by bequest or
inheritance, exchanges qualifying under certain provisions of the
Internal Revenue Code regarding tax-free exchanges of stock, or
certain transfers to a spouse or former spouse incident to a divorce.
27. How is my profit taxed? What if I lose money?
How your profit or loss is characterized will depend on how
long you held the stock from the date the incentive stock option was
granted and the date you exercised the option.
If, before you dispose of the stock, you hold the stock for
two years or more from the date on which the incentive stock option
is granted and one year or more from the date on which you exercised
your option, your gain or loss is characterized as long-term capital
gain or loss.
If you dispose of your stock within two years from the date on
which the option was granted or within one year from the date on
which you exercised your option, a portion of your profit will be
characterized as ordinary income and the sale is called a
"disqualifying disposition."
The portion of your profit which is characterized as ordinary
income is equal to the lesser of
a. the difference between the market price of the stock on
the date you exercised the option and the exercise price of the
option but in no event less than zero, or
b. the difference between the sale price and the exercise
price of the option but in no event less than zero.
Any profit you make over the amount characterized as ordinary
income is characterized as capital gain which will be long-term or
short-term depending on whether the stock was held for more than one
year from the date of exercise.
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For example, assume you were granted an option on January 1, 1995
for 10 shares at an exercise price of $8.00 per share. You exercise the
option on January 1, 1996 when the market price is $10.00 per share and
you sell the stock on July 1, 1996 when the market price is $9.00 per
share for a $10.00 aggregate profit. Because you sold the stock before
January 1, 1997, the date which is two years after the date of grant and
one year from the date of exercise, all or a portion of your profit is
ordinary income. The amount of ordinary income is equal to the lesser of
(a) $10.00 (market price on date of exercise) - $8.00 (exercise price) =
$2.00 per share or $20.00 for 10 shares or (b) $9.00 (sale price) -
$8.00 (exercise price) = $1.00 per share or $10.00 for 10 shares. All
of your $10.00 profit will be ordinary income. If the market price on
the date of exercise had been $9.00 and the sale price had been $10.00,
then of your $20.00 profit, $10.00 would be characterized as ordinary
income and $10.00 would be characterized as short-term capital gain.
If you lose money on the sale of the stock you will be able to
report the loss as a capital loss which will be long-term or short-
term depending on whether the stock was held for more than one year
from the date of exercise.
Different rules will apply if, under the Internal Revenue Code,
you are not entitled to report a loss on the sale of your stock if you
were to lose money on the sale. For example, if you sell your stock to
your spouse at a loss, you are not entitled to report the sale as a loss
and any subsequent tax consequences on the further disposition of the
stock are determined under the section of the Internal Revenue Code
which governs such situations. Other dispositions of stock, described
in the Internal Revenue Code, may have similar consequences.
28. Is there any withholding on the exercise of my incentive
stock option or the sale of the stock acquired on exercise?
There is no withholding required upon the exercise of an
incentive stock option. The Company is required to report to the IRS
any ordinary income recognized by you as a result of a sale which is a
disqualifying disposition described in Question 27, if such information
is available to the Company. The Company may be required in the future
to withhold taxes on such ordinary income from your salary.
29. Do I have to complete any forms after I sell or transfer my
stock?
Yes, if you sell or transfer stock received pursuant to an
incentive stock option within two years after the date the option
covering the stock was granted to you or within one year after you
exercise your option, you should complete and deliver to Kathy Panko
or Karen Strand the disqualifying disposition survey provided to you.
30. Are there any special tax rules which apply to me if the Company
has the right to repurchase my stock after I exercise my option?
Yes. Generally, if the Company has the right to repurchase
your stock after you exercise your option it is because, under the
terms of your option, you were allowed to exercise all of your
option, even the unvested portion. In this situation the Company may
retain a right to repurchase any shares which are unvested under the
option until they vest.
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If the Company has the right to repurchase your stock after
you exercise your option, your stock is subject to what is called a
"risk of forfeiture." If there is a risk of forfeiture the amount of
ordinary income you must report and the time at which you must report
your income may be different than described above.
The special tax rules applicable to Non-Qualified Stock
Options and Incentive Stock Options are as follows:
NON-QUALIFIED STOCK OPTION.
In the case of stock issued pursuant to a non-qualified stock
option and subject to a right of repurchase by the Company, you do
not owe tax on the date of exercise but instead owe tax on the dates(s)
the risk of forfeiture with respect to the shares disappears, i.e., the
date the Company no longer has the right to repurchase the stock.
For example, assume that on April 1, 1994 you are granted an
option to purchase 20 shares of stock for $8.00 per share. The terms
of the option indicated that you vest in 10% of the shares on
December 31, 1996, an additional 15% of the shares on December 31,
1997, an additional 25% of the shares on December 31, 1998, and an
additional 50% of the shares on December 31, 1999. You may exercise
the option immediately but the Company has the right to repurchase
all of the stock if you leave the Company before December 31, 1996,
90% of the stock if you leave the Company before December 31, 1997,
and 75% of the stock if you leave the Company before December 31,
1998 and 50% of the stock if you leave the Company before December
31, 1999. On February 20, 1995 you exercise your option with respect
to all of the shares when the market price is $10.00. Normally you
would owe tax on $40.00, the difference between the exercise price
and the market price on the date of exercise. However, because all
the shares are subject to a risk of forfeiture you do not calculate
the tax on February 20. Assume that on December 31, 1996 the market
price is $11.00 per share. On that date a risk of forfeiture
disappeared with respect to 2 shares. In other words, the Company no
longer had the right to repurchase 2 of your 20 shares. Accordingly,
with respect to those 2 shares you owe tax on the difference between
the exercise price and the market price on December 31, or tax on $6.00.
If the market price of the stock continues to rise after
December 31, 1996, you will end up paying more ordinary income tax as
a result of your exercise of the option than you would have if the stock
you received upon exercise had not been subject to a risk of forfeiture
and you owed tax only on the difference between the exercise price and
the market price on the date of exercise.
If you want to avoid this result you can file what is called a
Section 83(b) election within 30 days after the exercise of the
option and report ordinary income equal to the difference, if any,
between the market price and the exercise price on the date of
exercise. When you later sell your shares, any additional gain or
any loss will be characterized as capital gain or loss, which will be
long-term or short-term depending on whether the shares are held for
more than one year from the date you exercised your option. You
should be aware, however, that if you file an 83(b) election and you
subsequently lose the right to own the shares because, for example,
you leave the Company and the Company repurchases the shares at cost,
you will not be able to report the amount you paid in taxes as a loss
on the stock and will not be able to have the taxes refunded.
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INCENTIVE STOCK OPTION.
If stock you received pursuant to the exercise of an incentive
stock option is subject to a right of repurchase by the Company and
you dispose of the stock after the right of repurchase has
disappeared in a disqualifying disposition (see Question 27) the
amount of ordinary income you must report is calculated differently.
In this case, the amount of ordinary income is equal to the lesser of
a. the difference, if any, between the exercise price and
the market price of the stock on the date or dates the risk of
forfeiture disappears but not less than zero, or
b. the profit, if any, on the sale of the stock but not less
than zero.
If your profit is more than the amount that must be reported
as ordinary income, then the remainder of the profit is characterized
as capital gain which will be long-term or short-term depending on
whether the stock was held for more than one year from the date of
sale.
For example, assume that on January 1, 1994 you received an
incentive stock option for 20 shares at a price per share of $10.00.
The terms of the option indicated that you vested in only 25% of the
shares initially with the remainder of the shares vesting at a rate
of 25% per quarter. On February 1, 1994 you exercise the option when
the stock is worth $10.00 per share. You do not have to pay any tax
at the time of exercise. On April l, 1994, when the second 25% of
the shares vests, the market price is $11.00 per share and on July 1,
1994, when the third 25% of the remaining shares vests the market
price is $9.00 per share. On August 1, 1994, you sell the 15 vested
shares when the market price is $12.00 per share for a total profit
of $30.00 (15 X $2.00). Because you did not hold the stock for more
than one year, the sale is a disqualifying disposition and you are
required to recognize ordinary income.
To calculate the ordinary income, you calculate the difference
between the exercise price of $10.00 and the market price of the
stock on the date of exercise, or, if later, the dates the risk of
forfeiture disappeared. On the date of exercise there was no spread
with respect to the first 25% vested installment. Therefore, you
recognize no ordinary income with respect to these 5 shares. On
April 1 the market price was $11.00 and the risk of forfeiture
disappeared with respect to 5 shares, so the difference between the
exercise price and the market price was $1.00 per share or an
aggregate of $5.00. On July 1, the market price was $9.00 and the
risk of forfeiture disappeared with respect to another 5 shares.
Since the market price was less than the exercise price you do not
put the negative difference in the calculation.
The aggregate difference between the exercise price and the
market prices on the dates the risk of forfeiture lapsed is $5.00,
which is less than the $20.00 profit made on the 10 shares with
respect to which there was a risk of forfeiture. Therefore, $5.00 of
your $30.00 profit will be treated as ordinary income and $25.00 will
be short-term capital gain.
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If you lose money on the sale of your stock, the loss will be a
capital loss and will be long-term or short-term depending on whether
the stock was held for more than one year from the date of exercise, or,
if later, the dates the risk of forfeiture disappeared.
In order to avoid having to calculate the ordinary income in the
manner discussed above you may make the 83(b) election discussed earlier
in this question. Once the election is filed, your ordinary income
should be calculated in the manner described in Question 27.
Please see Kathy Panko or Karen Strand for further information and the
form of election if you think you should be filing an 83(b) election.
Remember that this must be done within 30 days after you exercise your
option. Filing an 83(b) election may also affect your alternative
minimum tax liability, if any (see Question 33).
31. What are the tax consequences if I use shares I already own to
pay the exercise price of my non-qualified stock option?
If you pay the exercise price of your non-qualified stock option
with shares of the Company which you own immediately prior to the
exercise, you will have a tax-free exchange of the previously held
shares of stock for an equivalent number of the shares of stock received
under the option. If you receive additional shares in the exchange, you
will pay taxes on ordinary income equal to the difference between the
market value on the date of exercise of such additional shares and the
amount of cash, if any, you paid upon exercise.
The tax basis and capital-gain holding period of the shares
received under the option in the tax-free exchange will be the same as
the tax basis and holding period of the shares used to pay the exercise
price. The tax basis of the additional shares you receive will equal
the amount of ordinary income you had to report and the amount of any
cash paid on exercise, and your holding period for the additional shares
will begin on the date of exercise.
For example, assume that on January 1, 1996 you bought 10 shares
of stock on the open market when the market price was $6.00 per share.
The price of the stock goes up and on January 1, 1997, when the market
price is $10.00 per share, you exercise a non-qualified stock option to
purchase 20 shares at an exercise price of $9.00 per share for an
aggregate exercise price of $180.00. Using all of your previously
existing shares to pay $100.00 of the exercise price (10 x $10.00 market
price), you pay $80.00 cash for the remainder of the exercise price.
Accordingly, on the date of exercise you are deemed to have a tax-free
exchange of the 10 previously held shares for 10 of the new shares. You
will also recognize ordinary income equal to the market price of the 10
additional shares you received, $100.00, minus the amount of cash you
paid on exercise, $80.00, or $20.00.
If you sell the 10 shares which you received in the tax-free
exchange for $11.00 per share on March 1, 1997, you will recognize a
$5.00 per share profit, which will be a long-term capital gains because
you are allowed to add the period which you held the original 10 shares
to the period you held the new 10 shares. If on the same day you also
sell the 10 additional shares, you will have a taxable profit equal to
$110.00 minus the amount of cash you paid, $80.00, and the amount of
income you recognized, $20.00, or a taxable profit of $10.00. This
profit will be characterized as a short-term capital gain because you
held the stock for only two months.
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32. What are the tax consequences if I use shares I already own
to pay the exercise price of incentive stock options?
Under proposed regulations, if you pay the exercise price of
an incentive stock option, in whole or in part, with shares you
already own immediately prior to the exercise, you are deemed to have
made a tax-free exchange of the previously-held shares for an
equivalent number of shares received under the option. For example,
assume you purchased 10 shares on the open market for $6.00 per share
on January 1, 1996. On February 1, 1997 you exercise an incentive
stock option covering 20 shares at $10.00 per share using 10 of your
already owned shares as payment of $100.00 of the purchase price and
delivering $100.00 in cash in payment of the exercise price of the
additional shares. You are deemed to have made a tax free exchange
of 10 of your already owned shares for the 10 new shares received on
exercise. You recognize no profit at this point, even though you
have used shares you bought at $6.00 per share to buy the same number
of shares with a value of $10.00 per share.
However, ordinary income could be recognized (see Question 27)
if the already owned shares were acquired upon exercise of an
incentive stock option or under an employee stock purchase plan as
defined in Section 423 of the Internal Revenue Code and the exchange
were treated as a disposition. The exchange will be treated
as a disposition if the already owned shares are exchanged within two
years of the grant of option relating to the already owned shares or
within one year after the exercise of such option. The tax basis,
holding periods and consequences of a subsequent disposition of shares
received upon exercise will depend on whether the shares disposed of
are equivalent shares or additional shares received at the time of
exercise ("additional shares").
For purposes of calculating any capital gain or loss upon a
subsequent taxable disposition, your basis in the equivalent shares
will be equal to your basis in the shares surrendered plus any
ordinary income recognized by reason of the exchange, and the holding
period of the surrendered shares will carryover to the equivalent
shares.
If you use only shares you already own to pay the exercise
price, your basis in any additional shares will be zero for purposes
of calculating any capital gain upon a later disposition. For
purposes of calculating any ordinary income upon a disqualifying
disposition of the additional shares the amount treated as having
been paid for the additional shares will be zero. To the extent you
use other forms of payment, your basis should be equal to the amount
of the other form of payment, and it will reduce the amount of
ordinary income upon a disqualifying disposition by the same amount.
The holding period for the additional shares will begin on the date
of exercise for all purposes. In the event of a disqualifying
disposition of shares acquired upon such an exercise of an incentive
stock option with stock, the shares with the lowest basis (i.e., the
additional shares and not the equivalent shares) will be treated as
having been disposed of first.
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33. What are the tax consequences of my exercise of options if I
am subject to the alternative minimum tax?
The alternative minimum tax is a separately computed tax equal
to a marginal rate of up to 28% of alternative minimum taxable income
that is imposed only if and to the extent you would pay more tax if
your taxes are computed pursuant to the alternative minimum tax rules
than the tax you would pay if computed in the regular manner. The
alternative minimum tax takes into account what are called tax
preference items and other adjustments that are not taken into
account when calculating taxes in the regular manner. One of the
adjustments is the inclusion in taxable income of the difference
between the exercise price of an incentive stock option and the
market price of the stock option on the date of exercise, if that
amount constitutes a profit. When you sell the stock, you are
allowed, for purposes of calculating your alternative minimum tax in
the year of sale, to decrease the profit by the adjustment amount
previously included in the alternative minimum taxable income.
If you are subject to a risk of forfeiture, see Question 30, the
amount of the adjustment will be calculated using market prices on
the dates the forfeiture lapses rather than the date you exercise the
option, and the adjustment must be made in the year in which the risk
of forfeiture disappears. It may be possible, however, to make a
valid election under Section 83(b) within 30 days of the date of
exercise to have the market price on the date of exercise be the
price used in the calculation of your alternative minimum tax and to
make the adjustment in the year of exercise. However, if a Section
83(b) election is made, there may be implications for purposes of
calculating ordinary income, if any, in the event of a disqualifying
disposition.
34. What happens to my option or stock issued under the Option
Plan in the event Genentech is acquired by a person other than Roche?
The Option Plan provides that, in the event of a "corporate
transaction", each option outstanding under the Option Plan will be
automatically accelerated so that the option becomes fully
exercisable with respect to the total number of shares subject to
such option. However, an option will not be accelerated if, as part
of the corporate transaction, the option is either assumed by the
successor Company or replaced with a comparable option or the option
is replaced by a comparable cash incentive program or such
acceleration is otherwise limited by the terms of the option grant.
Corporate transactions include a merger or acquisition in which
Genentech does not survive, a sale or other disposition of all or
substantially all of the assets of Genentech or any reverse merger in
which Genentech survives but in which 50% or more of Genentech's
outstanding voting stock held by persons other than Roche or its
affiliates is transferred to new holders.
In addition, the Option Plan sets forth provisions applicable
upon a "change in control". Generally speaking, a change in control
is (i) the acquisition by a person, other than Genentech or a Company
controlling Genentech, of securities of Genentech representing 30% or
more of the voting power of Genentech's then outstanding securities
pursuant to a transaction not approved by the Board or (ii) a change
in composition of the Board within any 36 month period so that the
majority of the Board is not made up of members who either have been
members of the Board since the beginning of the period, or have been
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elected by at least a majority of the members who were members
continuously during the period. Upon such a change in control, each
option will be automatically accelerated immediately prior to the
change in control so that the option will be exercisable for all or
any portion of the shares subject to the option, at the election of
the optionee, unless limitations included in the option at the time
of grant preclude such treatment.
The Option Plan provides that exercise by Roche of its rights
to designate nominees to the Board of Directors constituted a change
in control. The Committee has authority under the Option Plan to
impose additional limitations at the date of grant with respect to
the acceleration of options and vesting upon corporate transactions
and changes in control.
35. What happens if the vesting of my options accelerates upon a
change of control?
In the event that there is a change in control of the Company,
payments received by certain optionees that are contingent upon the
change in control may constitute "parachute payments." If, by reason
of such change in control, the exercisability of outstanding options
is accelerated, the value of the acceleration is added to other
contingent payments, if any, in determining whether the optionee has
received "excess parachute payments." As used herein, the terms
"parachute payments" and "excess parachute payments" shall have the
meanings given to them in Section 280G of the Internal Revenue Code. In
general, if an optionee receives excess parachute payments, an excise
tax equal to 20% of the amount of such excess parachute payments is
imposed on the optionee, and the Company does not receive a deduction
for such amount.
B. Automatic Grant Program
36. Are non-employee directors eligible to receive options under
the Option Plan?
Yes. Under the Automatic Grant Program portion of the Option
Plan, on April 30, l995, each individual who is a non-employee member of
the Board will be automatically granted a non-statutory option to
purchase 15,000 shares of Redeemable Common Stock. Each non-employee
member of the Board who is first elected to the position after April 30,
l995 will be automatically granted a non-statutory option for the same
number of shares. All options granted under the Automatic Grant Program
will have an exercise price equal to 100% of the closing selling price
on the trading day prior to the grant date. Each option granted under
the Automatic Grant Program will vest in increments of 5,000 shares on
each of the first, second and third anniversaries of the grant date and
be exercisable until the expiration or earlier termination of the option
term. Such options will have a term of ten years, and will not be
assignable or transferable otherwise than by will or by the laws of
decent and distribution. Each employee member of the Board who becomes
a non-employee member of the Board following April 30, l995 will be
automatically granted such an option immediately upon the date of his or
her change of status. After April 30, 1995, options will no longer be
granted to non-employee board members under the Company's 1990 Stock
Option/Stock Incentive Plan.
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If a holder of an option issued under the Automatic Grant
Program ceases to be a member of the Board for a reason other than
the holder's death, the option will remain exercisable for a period
ending on the earlier of (i) the expiration of the three month period
following the cessation of membership on the Board or (ii) the
expiration of the option. If a holder of an option issued under the
Automatic Grant Program ceases to be a member of the Board due to the
holder's death, the option may be exercised by the holder's estate or
transferee pursuant to a will or applicable law for a period ending
on the earlier of (i) the expiration of the 12 month period following
the date of the optionee's death or (ii) the expiration of the
option.
In general, in the event of a corporate transaction, each
option shall automatically accelerate and become exercisable for any
or all of the shares subject to the option immediately prior to the
specified effective date for such corporate transaction. Upon the
consummation of a corporate transaction, all options to the extent
not exercised will terminate.
In general, in the event of a change in control, all options
will automatically accelerate and become fully exercisable. In
addition, each option that has been outstanding for at least six
months may be surrendered after the change in control for a cash
payment from the Company in an amount equal to the excess of the fair
market value of the shares of Redeemable Common Stock subject to such
option over the aggregate option price payable for such shares.
C. Miscellaneous
37. What are some of the other features of the Option Plan?
(i) The number of shares subject to the Option Plan is
4,500,000. Shares subject to options granted under the Option Plan
which expire or are canceled or terminated for any reason prior to
exercise shall be available for future option grants under the Option
Plan; however, shares repurchased by the Company pursuant to
repurchase rights shall not be available for subsequent issuance;
(ii) The number of shares available for issuance under the
Option Plan, the maximum number of shares that may be issued to an
employee, the number of shares that may be issued to non-employee
directors, the number of shares and the exercise price of each
outstanding option under the Option Plan shall all be appropriately
adjusted by the Compensation Committee to reflect any stock dividend,
stock split, combination, exchange or other change in the Company's
capital structure, including changes due to a Corporate Transaction,
subject to the terms of the Option Plan regarding Corporate
Transactions (see Question 34)
(iii) The Compensation Committee may, with the consent of
option holders, cancel any or all outstanding options granted under
the Option Plan and grant in substitution new options under the
Option Plan.
(iv) The cash proceeds received upon exercise of options
granted under the Option Plan will be used for general corporate
purposes;
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<PAGE>
(v) The implementation of the Option Plan and the granting of
any stock option shall be subject to the Company's procurement of all
approvals and permits required by applicable regulatory authorities;
(vi) Neither the establishment of the Option Plan, any term
thereunder nor any action by the Compensation Committee shall be
construed so as to grant any individual the right to remain employed
by the Company or its parent or subsidiaries for any period and the
Company (and any parent or subsidiaries employing such person) may
terminate any employee at any time and for any reason, with or
without cause; and
(vii) Nothing in the Option Plan shall limit the Company's
exercise of all of its rights and powers, including its right to
grant options outside of the Option Plan.
PLAN OF DISTRIBUTION
For a discussion of the factors relating to the grant and
exercise of stock options under the Option Plan please refer to the
information contained under the heading "The 1994 Stock Option Plan"
above. Sales of Redeemable Common Stock under the Option Plan will
be made directly by the Company upon exercise of options granted
under the Option Plan without the use of any underwriters or dealers.
DESCRIPTION OF THE REDEEMABLE COMMON STOCK
Set forth below is a description of the terms of the
Redeemable Common Stock.
Voting Rights
The holders of Redeemable Common Stock are, on all matters
submitted to a vote of the stockholders of the corporation, entitled
to one vote per share, voting as a single class with the shares of
Common Stock currently held by Roche (the "Shares") unless otherwise
provided for in the Certificate of Incorporation or required by
applicable law. According to a Schedule 13D filing of Roche dated April
27, 1994, on that date Roche owned 67,133,409 shares of Common Stock and
7,724,700 shares of Redeemable Common Stock.
Dividends; Reclassifications; Mergers
Holders of Redeemable Common Stock are entitled to receive
such dividends and other distributions in cash or property as may be
declared thereon by the Board of Directors from time to time out of
assets or funds of Genentech legally available therefor, and shall
share equally with the Shares 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 other than Preferred
Stock, including distributions pursuant to stock splits or divisions
of stock of Genentech other than Preferred Stock which occur after
the initial issuance of shares of Redeemable Common Stock by
Genentech, only Shares shall be paid or distributed with respect to
Shares and only shares of Redeemable Common Stock in an amount per
share equal to the amount per share paid or distributed with respect
to Shares shall be paid or distributed with respect to Redeemable
Common Stock. In the case of any combination or reclassification of
the Redeemable Common Stock or the Shares, the Shares or the
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Redeemable Common Stock, as the case may be, shall also be combined
or reclassified so that the number of Shares outstanding immediately
following such combination or reclassification shall bear the same
relationship to the number of Shares outstanding immediately prior to
such combination or reclassification as the number of shares of
Redeemable Common Stock outstanding immediately following such
combination or reclassification bears to the number of shares of
Redeemable Common Stock outstanding immediately prior to such
combination or reclassification.
In case Genentech enters into any consolidation, merger,
combination or other transaction in which the Shares are exchanged
for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Redeemable Common Stock
shall at the same time be similarly exchanged or changed into an
amount per share, equal to the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be,
into which or for which each Share 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 Redeemable Common
Stock is redeemable.
Liquidation
Upon any liquidation, dissolution or winding up of Genentech,
no distribution shall be made (1) to the holders of Shares unless,
prior thereto, the holders of shares of Redeemable Common Stock 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 Redeemable 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, or (2) to the holders of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with
the Redeemable Common Stock, except distributions made ratably on the
Redeemable 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.
Redemption
The Redeemable Common Stock may be redeemed, in whole but not
in part, at the option of Genentech, during the periods and at the
prices and upon the terms and conditions described below.
The redemption price for any Redemption Date during the
periods set forth below shall be the price set forth opposite such
period in the following table, adjusted as set forth below:
Period Price
January 1, 1995 to March 31, 1995 $58.75
April 1, 1995 to June 30, 1995 $60.00
The foregoing redemption prices are subject to appropriate
adjustment in the case of any dividend payable in shares of
Redeemable Common Stock, or any subdivision or combination of the
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<PAGE>
Redeemable Common Stock. In addition, if Genentech at any time after
the initial issuance of any Redeemable Common Stock declares or pays any
dividend on Redeemable Common Stock in cash, securities or other
property other than Redeemable Common Stock, the redemption prices in
effect for each period after such event will each be reduced by the per
share value of such dividend (as determined in good faith by the Board
of Directors, in the case of noncash dividends) multiplied by a
fraction, the numerator of which equals the redemption price which would
otherwise be in effect for such period and the denominator of which
equals the redemption price in effect at the time of such event;
provided that such adjustment will not be made with respect to cash
dividends determined by the majority of the Board of Directors to be in
the ordinary course and approved by the majority of the directors
nominated by Roche.
Notice of any proposed redemption of the Redeemable Common Stock
will be given by mail to the holders of record, not more than 30 nor
less than 10 days prior to the date fixed for redemption. On or prior
to the date such notice is first sent or given, Genentech will deposit
or cause to be deposited the aggregate of the redemption price (together
with accrued and unpaid dividends to such redemption date) of the shares
to be redeemed with a bank or trust Company (the "Depositary"),
designated in the notice of such redemption, in trust for payment to the
holders of the shares, 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 pursuant to the foregoing sentence will be reduced by
the aggregate redemption price of any shares of Redeemable Common Stock
held by Roche deposited in lieu of such funds. Notice of redemption
having been duly given, or the Depositary having been irrevocably
authorized by Genentech 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, all as aforesaid, then
all shares of Redeemable Common Stock with respect to which such deposit
shall have been made 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. No
shares of Redeemable Common Stock will be issued after the Redemption
Date.
An agreement provides that Genentech will effect the redemption
of the Redeemable Common Stock upon the request of Roche, and will not
effect such redemption absent such request.
Conversion
Each share of Redeemable Common Stock outstanding at the close of
business on June 30, 1995 or, if earlier, the thirtieth day after the
sale by Roche or any of its affiliates of any Shares to any person other
than Roche or any of its affiliates (the "Conversion Date") will, unless
previously called for redemption on or prior to such date, automatically
be converted into one Share. Other than the right of the Company to
redeem the Redeemable Common Stock as set forth in DESCRIPTION OF THE
REDEEMABLE COMMON STOCK, Redemption, there is no difference between the
Redeemable Common Stock and the Common Stock of the Company.
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<PAGE>
Notice of the Conversion Date shall be given by mail to the
holders of record of the shares of Redeemable 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 replacement
certificate for the number of Shares issuable upon conversion of such
Redeemable Common Stock. No shares of Redeemable Common Stock will be
issued after the Conversion Date.
Genentech will provide, free from preemptive rights, out of its
authorized but unissued Shares, or out of Shares held in its treasury,
sufficient Shares to provide for the conversion of the Redeemable Common
Stock of all issued and outstanding shares of Redeemable Common Stock on
the Conversion Date. The amendment will provide that all Shares which
may be issued upon conversion of Redeemable 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. The amendment will
further provide that, if on the Conversion Date the Redeemable Common
Stock shall be listed on the NYSE or on any other national securities
exchange or the NASDAQ National Market System, Genentech will, if
permitted by the rules of such exchange, seek to list on each such
exchange or the NASDAQ National Market System, as the case may be, all
Shares issuable upon conversion of the Redeemable Common Stock.
Legend
Each certificate representing shares of Redeemable Common
Stock will bear the following legend:
"The shares of Redeemable 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 and (ii) 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 Redeemable
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 affirmative vote required by law or the
Certificate of Incorporation, any amendment of the provisions of Article
Third of the Certificate of Incorporation will require the affirmative
vote of the holders of a majority of the Shares entitled to vote and of
the holders of a majority of the shares of Redeemable Common Stock
entitled to vote, each voting separately as a class.
LEGAL MATTERS
The validity of the Redeemable Common Stock offered hereby
will be passed upon by John P. McLaughlin, Senior Vice President,
Secretary and General Counsel of the Company. Mr. McLaughlin
receives the compensation and owns the securities described in the
Company's Annual Reports on Form 10-K which are incorporated herein.
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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 are (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, 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 shareholders except as
described below:
FDA INVESTIGATION:
In September, 1994 the United States Food and Drug Administration (the
FDA) initiated an investigation into Genentechs promotional practices
in connection with its products Protropin (registered trademark),
Activase (registered trademark), and Pulmozyme (registered trademark).
Genenetech believes that its promotional policies and practices for such
products comply with the FDAs regulations and Genentech is cooperating
with the FDA in its investigation. Genentech does not believe that the
FDAs investigation will have a material impact on the Company.
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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 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
26
<PAGE>
permissible under Delaware law, the burden of proving the defense
shall be on Genentech and neither the failure of Genentech's Board of
Directors 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.
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<PAGE>
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
Redeemable Common Stock being registered. All the amounts shown are
estimates except for the registration fee.
Registration fee $75,065.00
Blue Sky fees and expenses $ 0.00
Stock Exchange Listing Fees $ 9,000.00
Legal fees and expenses $0.00
Accounting fees and expenses $7,000.00
Total $91,065.00
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in summary, that directors and officers
of Delaware corporations are entitled, under certain circumstances, to
be indemnified against all expenses and liabilities (including
attorneys' fees) incurred by them as a result of suits brought against
them in their capacity as a director or officer, if they acted in good
faith and in a manner they reasonably believed to be in or not opposed
to the best interests of the corporation, and with respect to any
criminal action or proceeding, if they had no reasonable cause to
believe their conduct was unlawful; provided, that no indemnification
may be made against expenses in respect of any claim, issue or matter as
to which they shall have been adjudged to be liable to the corporation,
unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, they are fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper. Any such indemnification
may be made by the corporation only as authorized in each specific case
upon a determination by the stockholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable
standard of conduct.
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 of 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.
II - 1
<PAGE>
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 Genentech's Board of
Directors 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.
Item 16. Exhibits
Exhibit Number Description
4.1 Amended Certificate of Incorporation of the Company.(1)
4.2 Restated By-laws of the Company.(2)
5.1 Opinion of counsel as to the legality of the securities
being registered. (3)
23.1 Consent of Ernst & Young LLP, independent auditors.(5)
23.2 Consent of Counsel. (3)
24.1 Power of Attorney. (3)
99.1 1994 Stock Option Plan. (4)
II - 2
<PAGE>
(1) Filed as an exhibit to Registrant's Registration Statement on
Form S-4 dated May 2, 1990, and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1990, and incorporated herein by
reference.
(3) Previously filed as an Exhibit to the Registration Statement on Form
S-3 filed with the Commission on June 14, 1994.
(4) Filed as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993, and incorporated herein by
reference.
(5) Filed with this document.
Item 17. Undertakings
A. Rule 415 Offering
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 A(1)(a) and A(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.
B. Filings Incorporating Subsequent Exchange Act Documents by
Reference
II - 3
<PAGE>
The undersigned registrant hereby undertakes 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.
C. Incorporated Annual and Quarterly Reports
The undersigned registrant hereby undertakes 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.
II - 4
<PAGE>
D. Acceleration of Effectiveness
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company 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 Company will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of
such issue.
II - 5
<PAGE>
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 on Form S-3 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 31st of March,
1995.
GENENTECH, INC.
By /S/LOUIS J. LAVIGNE, JR.
_____________________
Louis J. Lavigne, Jr.
Senior Vice President and
Chief Financial Officer
II - 6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated, as of March 31,
1995.
Signature Title
*
-------------------- Chairman of the Board
Robert A. Swanson and Director
*
-------------------- President,
G. Kirk Raab Chief Executive
Officer and Director
/S/LOUIS J. LAVIGNE, JR. Senior Vice President and
----------------------- Chief Financial Officer
Louis J. Lavigne, Jr. (Principal Financial Officer)
*
-------------------- Vice President,Controller
Bradford S. Goodwin (Principal Accounting Officer)
*
-------------------- Director
Herbert W. Boyer
*
-------------------- Director
Jurgen Drews
*
-------------------- Director
Armin M. Kessler
*
-------------------- Director
Linda Fayne Levinson
*
-------------------- Director
J. Richard Munro
*
-------------------- Director
Donald L. Murfin
II-7
<PAGE>
*
--------------------. Director
John T. Potts, Jr.
*
-------------------- Director
C. Thomas Smith
*
-------------------- Director
David S. Tappan
* By: /S/LOUIS J. LAVIGNE, JR.
----------------------------
Louis J. Lavigne, Jr.
Attorney-in-Fact
II - 8
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3 A-3) and related prospectus of
Genentech, Inc. for the registration of 4,500,000 shares of its
redeemable common stock 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 schedule included therein, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
San Jose, California
March 28, 1995
