GENENTECH INC, S-4, 1995-06-05

GENENTECH INC
S-4, 1995-06-05
MEDICINAL CHEMICALS & BOTANICAL PRODUCTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

GENENTECH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 2834 94-2347624
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
JOHN P. MCLAUGHLIN, ESQ.
SENIOR VICE PRESIDENT AND SECRETARY
GENENTECH, INC.
460 POINT SAN BRUNO BOULEVARD 460 POINT SAN BRUNO BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080-4990 SOUTH SAN FRANCISCO, CALIFORNIA 94080-4990
(415) 225-1000 (415) 225-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL NUMBER,
EXECUTIVE OFFICER) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>

------------------------

COPIES OF ALL COMMUNICATIONS TO:

<TABLE>
<S> <C>
RICHARD D. KATCHER, ESQ. PETER R. DOUGLAS, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ DAVIS POLK & WARDWELL
51 WEST 52ND STREET 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10019-6150 NEW YORK, NEW YORK 10017
(212) 403-1000 (212) 450-4000
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of the Registration
Statement and the effective time of the merger (the "Merger") of Genentech, Inc.
("Genentech") and HLR (U.S.) II, Inc. ("Merger Sub") as described in the
Agreement and Plan of Merger dated as of May 23, 1995, among Genentech, Roche
Holdings, Inc. ("Roche") and Merger Sub attached as Annex A to the Proxy
Statement/Prospectus forming a part of this Registration Statement.
------------------------

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /

CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------
Special Common Stock,
par value $.02 per share........ 57,198,521(1) N.A. (2)(3) $951,666(2)(3)
- ----------------------------------------------------------------------------------------------------------
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</TABLE>

(1) Based upon the number of outstanding shares of Common Stock, par value $.02
per share ("Common Stock"), of Genentech, assuming the exercise of all
Genentech warrants and stock options (whether or not currently exercisable),
not including shares of Common Stock held by Roche and its affiliates.

(2) The registration fee was computed pursuant to Rule 457(f) under the
Securities Act of 1933, as amended (the "Securities Act"), by multiplying
(i) $48.25, the average of the high and low sales price of a share of Common
Stock quoted on the New York Stock Exchange on May 31, 1995 as reported in
published financial sources, by (ii) 57,198,521, the number of outstanding
shares of Common Stock calculated as set forth in note (1) above. The result
was then divided by 2,900.

(3) Pursuant to Rule 457(b) under the Securities Act and Section 14(g) of the
Securities Exchange Act of 1934, as amended, and Rule 0-11 thereunder, the
total registration fee of $951,666 is offset by the filing fee of $555,000
previously paid by Genentech in connection with the filing of a Schedule 14A
on June 2, 1995. Accordingly, the fee payable upon the filing of this
Registration Statement is $396,666.
------------------------

THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2

GENENTECH, INC.

SHARES OF SPECIAL COMMON STOCK
TO BE ISSUED IN CONNECTION WITH THE MERGER
OF GENENTECH, INC.
AND
A WHOLLY OWNED SUBSIDIARY OF ROCHE HOLDINGS, INC.
------------------------

CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B)
OF REGULATIONS S-K SHOWING THE LOCATION IN THE PROSPECTUS
OF THE INFORMATION REQUIRED BY PART I OF FORM S-4

<TABLE>
<CAPTION>
LOCATION OR CAPTION IN
ITEM OF FORM S-4 PROXY STATEMENT/PROSPECTUS
- ------------------------------------------------------- --------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page of the Registration
Statement; Outside Front Cover Page of
Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus................................. Available Information; Incorporation
of Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Outside Front Cover Page of Proxy
Statement/Prospectus; Summary and
Special Factors; Selected Historical
Financial Information; Business of
Genentech
4. Terms of the Transaction..................... Summary and Special Factors -- Terms
of the Proposed Transactions; The
Proposed Transactions -- Purpose and
Structure of the Transactions; The
Merger Agreement; The Charter
Amendment; Description of the Special
Common Stock; Certain Federal Income
Tax Considerations; The Proposed
Transactions -- Recommendation of the
Board of Directors; Fairness of the
Transaction; The Proposed
Transactions -- Opinion of the
Financial Advisor
5. Pro Forma Financial Information.............. Not Applicable
6. Material Contacts with the Company Being
Acquired................................... Summary and Special Factors -- The
Existing Governance Agreement; -- The
Licensing Agreement; -- Terms of the
Proposed Transactions; The Proposed
Transactions; The Merger Agreement;
The Amended Governance Agreement;
Guaranty of Roche Holding; The
Licensing Agreement; Certain
Relationships and Related Transactions
7. Additional Information Required for
Reoffering
by Persons and Parties Deemed to be
Underwriters............................... Not Applicable
</TABLE>

i
<PAGE> 3

<TABLE>
<CAPTION>
LOCATION OR CAPTION IN
ITEM OF FORM S-4 PROXY STATEMENT/PROSPECTUS
---------------- --------------------------
<S> <C> <C>
8. Interests of Named Experts and Counsel....... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants................................ Available Information; Incorporation
of Documents by Reference
11. Incorporation of Certain Information
by Reference............................... Available Information; Incorporation
of Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants................................ Not Applicable
13. Incorporation of Certain Information
by Reference............................... Not Applicable
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants................ Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies.... Not Applicable
16. Information with Respect to S-2 or S-3
Companies.................................. Not Applicable
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies.................. Certain Information Concerning Roche
and Roche Holding
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited......... Outside Front Cover Page of Proxy
Statement/Prospectus; Available
Information; Incorporation of
Documents by Reference; General
Information; Security Ownership of
Management; Certain Information
Concerning Directors and Executive
Officers; Certain Relationships and
Related Transactions
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited or
in an Exchange Offer....................... Not Applicable
</TABLE>

ii
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JUNE 2, 1995

PRELIMINARY COPY

460 Point San Bruno Boulevard
South San Francisco, CA 94080

G. Kirk Raab
President and
Chief Executive Officer June , 1995

Dear Fellow Stockholder:

You are cordially invited to attend the Special Meeting of Stockholders of
Genentech, Inc., which will be held on [day], July , 1995, at [10:00] a.m.,
local time, at [location].

As you may know, at the close of business on June 30, 1995, each
outstanding share of Genentech Redeemable Common Stock will automatically be
converted into one share of Genentech Common Stock. At the Special Meeting, you
will be asked to consider and vote upon a Proposal to approve a Merger Agreement
that results in each outstanding share of Genentech Common Stock (other than
shares held by Roche Holdings, Inc. and its affiliates) being converted into one
share of Genentech Special Common Stock.

This Proposal arose because, based on discussions with Roche, we concluded
that Roche would not exercise its existing option to cause Genentech to redeem
the outstanding Redeemable Common Stock prior to July 1, 1995. Consequently,
after considerable negotiation with Roche, we developed and agreed to submit to
a vote of the stockholders the Proposal described in the following paragraph.

The purpose of the Merger is, through the conversion to Special Common
Stock, to, among other matters, (i) extend by four years the period during which
Genentech's publicly traded Special Common Stock is subject to redemption at the
option of Roche at prices per share beginning at $61.25 during the quarter
ending September 30, 1995 and increasing at $1.25 per quarter for seven quarters
and then $1.50 per quarter for the following eight quarters to $82.00 in the
quarter ending June 30, 1999; and (ii) provide holders of Special Common Stock
the right to require the purchase of some or all of their shares at a price of
$60.00 per share in the event that Roche does not exercise its right to cause
Genentech to redeem the shares on or before June 30, 1999. Currently,
stockholders have no such put rights, and Roche's right to cause redemption of
such shares, at the current redemption price of $60.00 per share, expires on
June 30, 1995.

If the Proposal is approved, (i) Genentech and Roche will enter into an
extension of the current Governance Agreement and (ii) Genentech and Roche will
enter into a Licensing Agreement in which Roche will have the right to market
certain Genentech products on an exclusive basis outside of the United States
and have an option, on a product-by-product basis, to develop and market on an
exclusive basis outside the United States all other Genentech products which
conclude Phase II trials during the next 10 years. Roche will be obligated to
pay 50% of the vast majority of Genentech development expenses with respect to
those products Roche markets or exercises the right to develop and market and
will be obligated to pay royalties ranging from 12.5% to 20% of sales depending
on the product and the level of sales.

The Proposal, together with the extension of the Governance Agreement and
the Licensing Agreement, protects against downward pressure on Genentech's stock
price and provides downside protection for stockholders and, to the extent
Roche's option under the Licensing Agreement is exercised, reduces Genentech's
development expenses in the United States as well as development and
commercialization expenses outside the United States in return for reasonable
royalties.
<PAGE> 5

The Genentech Board of Directors believes that the redemption prices leave
substantial room for future growth of the Company to be recognized in its stock
price and that the "downside protection" afforded by the put rights is a
significant advantage to the Genentech public stockholders which mitigates any
"upside limitations" that may result from the existence of the Roche redemption
rights.

GENENTECH'S BOARD OF DIRECTORS (OTHER THAN THE DIRECTORS DESIGNATED BY
ROCHE, WHO DID NOT PARTICIPATE IN THE DELIBERATIONS) HAS DETERMINED THE MERGER
AGREEMENT AND RELATED TRANSACTIONS TO BE FAIR TO AND IN THE BEST INTERESTS OF
GENENTECH AND ITS STOCKHOLDERS (NOT INCLUDING ROCHE), HAS UNANIMOUSLY APPROVED
AND DECLARED ADVISABLE THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE
PROPOSAL AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL.

Please read carefully the accompanying Notice of Special Meeting of
Stockholders and Proxy Statement/Prospectus for details of the Proposal and
additional related information.

The approval of the Proposal requires the affirmative vote of the holders
of at least a majority of the outstanding shares of Common Stock unaffiliated
with Roche. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, IT IS
IMPORTANT TO GENENTECH'S FUTURE THAT YOU COMPLETE, SIGN, DATE AND RETURN
PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If
you attend the Special Meeting, you may vote in person if you wish, even though
you have previously returned your proxy card. Your prompt cooperation will be
greatly appreciated.

Finally, I want you to know that we followed a thoughtful and thorough
process to reach this recommendation and to conclude what is in the best
interests of our stockholders. As you can tell from the enclosed proxy
statement, I have a significant personal stake in the value of Genentech stock.
I have analyzed this Proposal compared to what I believe are the real
alternatives. Because I believe, based on many discussions with Roche, that,
regardless of whether the Proposal was being submitted to Genentech
stockholders, Roche would not exercise its current option to cause the publicly
traded Genentech stock to be redeemed, I find the Proposal to be in all of our
best interests, as did all of my fellow non-Roche Board members, and so
recommend it for your approval.

Sincerely,

G. KIRK RAAB,
President and Chief Executive Officer

-2-
<PAGE> 6

GENENTECH, INC.
460 POINT SAN BRUNO BOULEVARD
SOUTH SAN FRANCISCO, CA 94080

------------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY , 1995
------------------------

TO THE STOCKHOLDERS OF GENENTECH, INC.:

NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders (the
"Special Meeting") of Genentech, Inc., a Delaware corporation ("Genentech" or
the "Company"), will be held on [day], July , 1995 at [10:00] a.m., local time,
at [location].

The purpose of the Special Meeting will be to consider and vote upon a
proposal (the "Proposal") to approve the Agreement and Plan of Merger, dated as
of May 23, 1995 (the "Merger Agreement"), among Genentech, Roche Holdings, Inc.,
a Delaware corporation ("Roche"), and HLR (U.S.) II, Inc., a Delaware
corporation and a wholly-owned subsidiary of Roche ("Merger Subsidiary"),
pursuant to which, among other things, (i) Merger Subsidiary will be merged with
and into Genentech (the "Merger"), with Genentech being the surviving
corporation, (ii) the Certificate of Incorporation of Genentech will be amended
to authorize the issuance by Genentech of Special Common Stock, par value $.02
per share (the "Special Common Stock"), (iii) each outstanding share of Common
Stock, par value $.02 per share, of Genentech (the "Common Stock") (other than
shares of Common Stock held by Roche and its affiliates) will be converted into
one share of Special Common Stock, (iv) each outstanding share of Common Stock
held by Roche will be cancelled, and (v) the outstanding common stock of Merger
Subsidiary will be converted into shares of Common Stock representing the same
number of shares of Common Stock held by Roche immediately prior to the Merger.

HOLDERS OF REDEEMABLE COMMON STOCK ARE NOT REQUIRED TO SURRENDER OR
EXCHANGE THEIR SHARE CERTIFICATES IN CONNECTION WITH THE AUTOMATIC CONVERSION OF
SUCH SHARES ON JULY 1, 1995 INTO SHARES OF COMMON STOCK.

If Genentech's future growth and/or market conditions were to warrant a per
share valuation of Genentech prior to June 30, 1999 in excess of the redemption
prices applicable under the Call Rights, the existence of the Call Rights under
the Special Common Stock will prevent the Special Common Stock from trading
above its applicable redemption price. If the Special Common Stock were to be
redeemed through exercise of the Call Rights, holders of Special Common Stock
would participate in any increased valuation of Genentech only to the extent
permitted by the applicable redemption price. Holders of Special Common Stock
will, however, benefit from the ability to sell their shares of Special Common
Stock to the Company pursuant to the Put Rights at a price of $60.00 per share
in July 1999 if the Call Rights have not been exercised. The Special Committee
of the Genentech Board of Directors (consisting of all directors of Genentech
other than the two Roche designees) believes that the redemption prices of the
Call Rights leave substantial room for future growth of the Company to be
recognized in its stock price and that the "downside protection" afforded by the
Put Rights is a significant advantage to the Genentech public stockholders which
mitigates any "upside limitations" that may result from the existence of the
Call Rights.
<PAGE> 7

GENENTECH'S BOARD OF DIRECTORS (OTHER THAN THE DIRECTORS DESIGNATED BY
ROCHE, WHO DID NOT PARTICIPATE IN THE DELIBERATIONS) HAS DETERMINED THE PROPOSED
TRANSACTIONS TO BE FAIR TO AND IN THE BEST INTERESTS OF GENENTECH AND ITS
STOCKHOLDERS (OTHER THAN ROCHE), HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE
THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE PROPOSAL AND
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL.

Under Genentech's Certificate of Incorporation, approval of the Proposal
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock held by persons other than Roche or any of
its affiliates. ACCORDINGLY, THE PROPOSAL WILL NOT BE APPROVED UNLESS THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK HELD BY PERSONS
OTHER THAN ROCHE AND ITS AFFILIATES VOTE IN FAVOR OF THE PROPOSAL. Thus, failure
to submit a proxy card (or vote in person at the Special Meeting) or the
abstention from voting by a stockholder will have the same effect as a vote
"Against" the Proposal.

Under the Merger Agreement, Roche, which currently owns approximately 65%
of the total number of outstanding shares of Redeemable Common Stock and Common
Stock, has agreed, for purposes of the vote required by the Delaware General
Corporation Law (i.e., a majority of the stock outstanding and entitled to vote)
to vote all shares owned by it or any of its affiliates in favor of the
Proposal.

Consideration of the Proposal by stockholders of Genentech will not
preclude Roche from exercising its right to cause Genentech to exercise the
redemption option currently applicable to the Redeemable Common Stock at a price
of $60.00 per share by Roche's delivery of a written request to Genentech at
least 10 days prior to the close of business on June 30, 1995. As indicated
above, after June 30, 1995, each outstanding share of Redeemable Common Stock
will automatically be converted into a share of Common Stock.

The Board of Directors of Genentech has fixed the close of business on July
, 1995 as the record date for determining the stockholders entitled to receive
notice of, and to vote at, the Special Meeting or any adjournment or
postponement thereof. A complete list of such stockholders will be available at
Genentech's headquarters, 460 Point San Bruno Boulevard, South San Francisco,
California 94080, for ten days before the Special Meeting. Detailed information
relating to the Proposal and related matters is contained in the accompanying
Proxy Statement/Prospectus, and the annexes thereto, which form a part of this
Notice.

All stockholders are cordially invited to attend the Special Meeting. To
ensure your representation at the Special Meeting, however, you are urged to
complete, date, sign and return the enclosed proxy as promptly as possible. A
postage-prepaid envelope is enclosed for that purpose. Any stockholder attending
the Special Meeting may vote in person even if that stockholder has returned a
proxy.

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE. PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS
TIME. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY SIGNING AND
RETURNING A LATER DATED PROXY WITH RESPECT TO THE SAME SHARES, BY FILING WITH
THE SECRETARY OF GENENTECH A WRITTEN REVOCATION BEARING A LATER DATE, OR BY
ATTENDING AND VOTING AT THE SPECIAL MEETING.

By Order of the Board of Directors

JOHN P. MCLAUGHLIN,
Secretary

South San Francisco, California
June , 1995

2
<PAGE> 8

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JUNE 2, 1995

PRELIMINARY COPY

GENENTECH, INC.
460 POINT SAN BRUNO BOULEVARD
SOUTH SAN FRANCISCO, CA 94080
------------------------

PROXY STATEMENT/PROSPECTUS

FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY , 1995
------------------------

This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") of
Genentech, Inc., a Delaware corporation ("Genentech" or the "Company"), relates
to the solicitation of proxies by the Board of Directors for use at a Special
Meeting of Stockholders of Genentech scheduled to be held on [day], July ,
1995, at [10:00] a.m., local time, at the [location], and any adjournments or
postponements thereof (the "Special Meeting"). The purpose of the Special
Meeting will be to consider and vote upon a proposal (the "Proposal") to approve
the Agreement and Plan of Merger, dated as of May 23, 1995 (the "Merger
Agreement"), among Genentech, Roche Holdings, Inc., a Delaware corporation
("Roche"), and HLR (U.S.) II, Inc., a Delaware corporation and a wholly-owned
subsidiary of Roche ("Merger Subsidiary"), pursuant to which, among other
things, (i) Merger Subsidiary will be merged with and into Genentech (the
"Merger"), with Genentech being the surviving corporation, (ii) the Certificate
of Incorporation of Genentech will be amended to authorize the issuance by
Genentech of Special Common Stock, par value $.02 per share (the "Special Common
Stock"), (iii) each outstanding share of Common Stock, par value $.02 per share,
of Genentech (the "Common Stock") (other than shares of Common Stock held by
Roche and its affiliates) will be converted into one share of Special Common
Stock, (iv) each outstanding share of Common Stock held by Roche will be
cancelled, and (v) the outstanding common stock of Merger Subsidiary will be
converted into shares of Common Stock representing the same number of shares of
Common Stock held by Roche immediately prior to the Merger.

Pursuant to the current Genentech Certificate of Incorporation, at the
close of business on June 30, 1995, each outstanding share of Genentech's
Redeemable Common Stock, par value $.02 per share (the "Redeemable Common
Stock"), will automatically be converted into one share of Common Stock. As
noted above, in the Merger, such Common Stock would then be converted into
Special Common Stock. See "The Merger Agreement." The purpose of the Merger and
of the resulting conversion of such Common Stock into Special Common Stock is
to, among other matters, (i) extend by four years the period during which the
publicly traded stock of Genentech is subject to redemption by Genentech at the
option of Roche, with such redemption during such four year period being at
specified prices per share ranging from $61.25 during the quarter ending
September 30, 1995 and increasing $1.25 per quarter for the next seven quarters
and $1.50 per quarter for the next eight quarters to $82.00 during the quarter
ending June 30, 1999 (the "Call Rights"), and (ii) provide holders thereof the
right to require Genentech to redeem all or a portion (at the election of the
holder) of their shares of such stock for 30 business days beginning in July
1999 (unless such right is accelerated following the occurrence of certain
Insolvency Events (as hereinafter defined)) at a price of $60.00 per share (the
"Put Rights") in the event that Roche does not cause the exercise of the Call
Rights. See "The Charter Amendment; Description of the Special Common Stock."
Under an existing agreement between Genentech and Roche, Genentech is currently
prohibited from effecting a redemption of the Redeemable Common Stock without
Roche's consent, and Roche has the right to cause such a redemption to occur on
or before June 30, 1995. Other than pursuant to the Put Rights, Genentech will
continue to be similarly prohibited from redeeming the Special Common Stock
under the Amended Governance Agreement (as defined below), a copy of which is
attached hereto as Exhibit A to Annex A. See "The Amended Governance Agreement."
Currently, holders of Redeemable Common Stock do not have a right to require
Genentech to purchase their shares, but Roche has the right, by delivery of a
written request to Genentech at least 10 days prior to the close of business on
June 30, 1995, to cause redemption of such shares at the current redemption
price of $60.00 per share. The Common Stock into which the Redeemable Common
Stock will be converted after June 30, 1995 if Roche does not exercise such
right will be traded on the New York Stock Exchange (the "NYSE") and the Pacific
Stock Exchange (the "PSE"), and it is expected that the Special Common Stock
will trade on the NYSE and the PSE. Listing of the shares of Special Common
Stock by the NYSE is a condition to Genentech's and Roche's obligations to
consummate the foregoing transactions.

This Proxy Statement also constitutes the Prospectus of Genentech with
respect to the shares of Special Common Stock to be issued pursuant to the
Merger. Genentech has filed a Registration Statement on Form S-4 (the
"Registration Statement"), of which this Proxy Statement/Prospectus is a part,
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), covering the shares
of Special Common Stock to be issued pursuant to the Merger.

The Merger Agreement also contemplates the execution by Genentech and
Roche, immediately prior to effectiveness of the Merger, of an Amended and
Restated Governance Agreement (the "Amended Governance Agreement") pursuant to
which, among other things, the principal terms of the Governance Agreement,
dated as of September 7, 1990,
<PAGE> 9

between Roche and Genentech (the "Existing Governance Agreement") will be
modified in certain respects and otherwise extended and remain in effect. If the
Merger is consummated, an affiliate of Roche, F. Hoffmann-La Roche Ltd ("HLR"),
will enter into a licensing agreement (the "Licensing Agreement") with Genentech
pursuant to which HLR will have the right to market certain Genentech products
on an exclusive basis outside of the United States and have an option on a
product-by-product basis to develop and market on an exclusive basis outside of
the United States all other Genentech products developed within the 10 years
following execution of the Licensing Agreement. See "The Licensing Agreement."
The transactions contemplated by the Merger Agreement, the Amended Governance
Agreement and the Licensing Agreement, are hereinafter collectively referred to
as the "Proposed Transactions."

If Genentech's future growth and/or market conditions were to warrant a per
share valuation of Genentech prior to June 30, 1999 in excess of the redemption
prices applicable under the Call Rights, the existence of the Call Rights under
the Special Common Stock will prevent the Special Common Stock from trading
above its applicable redemption price. If the Special Common Stock were to be
redeemed, holders of the Special Common Stock would participate in any increased
valuation of Genentech only to the extent permitted by the applicable redemption
price. Holders of Special Common Stock will, however, benefit from the ability
to put their shares of Special Common Stock to the Company at a price of $60.00
per share for 30 business days beginning in July 1999 (unless such right is
accelerated following the occurrence of certain Insolvency Events) if the Call
Rights have not been exercised. The Special Committee of the Genentech Board
(consisting of all directors of Genentech other than the two Roche designees)
(the "Special Committee") believes that the redemption prices of the Call Rights
leave substantial room for future growth of the Company to be recognized in its
stock price and that the "downside protection" afforded by the Put Rights is a
significant advantage to the Genentech public stockholders which mitigates any
"upside limitations" that may result from the existence of the Call Rights.

GENENTECH'S BOARD OF DIRECTORS (OTHER THAN THE DIRECTORS DESIGNATED BY
ROCHE, WHO DID NOT PARTICIPATE IN THE DELIBERATIONS) HAS DETERMINED THE
TRANSACTIONS TO BE FAIR TO AND IN THE BEST INTERESTS OF GENENTECH AND ITS
STOCKHOLDERS (OTHER THAN ROCHE), HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE
THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE PROPOSAL AND
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL.

Under Genentech's Certificate of Incorporation, approval of the Proposal
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock held by persons other than Roche or any of
its affiliates. ACCORDINGLY, THE PROPOSAL WILL NOT BE APPROVED UNLESS THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK HELD BY PERSONS
OTHER THAN ROCHE AND ITS AFFILIATES VOTE IN FAVOR OF THE PROPOSAL. Thus, the
failure to submit a proxy card (or vote in person at the Special Meeting) or the
abstention from voting by a stockholder will have the same effect as a vote
"Against" the Proposal.

Under the Merger Agreement, Roche, which currently owns approximately 65%
of the total number of shares of Redeemable Common Stock and Common Stock, taken
together (the "Genentech Shares"), has agreed, for purposes of the vote required
by the Delaware General Corporation Law (the "Delaware Law") (i.e., a majority
of the stock outstanding and entitled to vote), to vote all shares owned by it
or any of its affiliates in favor of the Proposal.

This Proxy Statement/Prospectus is first being mailed to Genentech's
stockholders on or about June , 1995.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. UNDER THE RULES AND REGULATIONS OF THE COMMISSION, THE PROPOSAL
TO APPROVE THE MERGER CONSTITUTES AN OFFER OF SPECIAL COMMON STOCK TO HOLDERS OF
COMMON STOCK. THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED HEREBY OR A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR THE ISSUANCE OF ANY SECURITIES HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF GENENTECH SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE
DATE HEREOF.

NEITHER THE SPECIAL COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER NOR THE
PROPOSED TRANSACTIONS HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION. THE COMMISSION HAS NOT PASSED UPON THE
FAIRNESS OR MERITS OF THE PROPOSED TRANSACTIONS NOR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.

-ii-
<PAGE> 10

AVAILABLE INFORMATION

As permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus omits certain information contained in the Registration
Statement. For such information, reference is made to the Registration Statement
and the annexes thereto. Genentech is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information with
the Commission. The Registration Statement of which this Proxy
Statement/Prospectus forms a part, as well as reports, proxy statements and
other information filed by Genentech can be inspected and copied at the
Commission's Public Reference Room, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the public reference facilities maintained by the
Commission at its regional offices located at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661; 7 World Trade Center,
13th Floor, New York, New York 10048; and Suite 500, East Tishman Building, 5757
Wilshire Blvd., Los Angeles, California 90036. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Redeemable Common Stock
is listed on the NYSE and the PSE and such reports, proxy statements and other
information concerning Genentech should be available for inspection at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE WITHOUT
CHARGE, UPON ORAL OR WRITTEN REQUEST BY ANY PERSON RECEIVING THIS PROXY
STATEMENT/PROSPECTUS, FROM THE CORPORATE SECRETARY OF GENENTECH, INC., 460 POINT
SAN BRUNO BOULEVARD, SOUTH SAN FRANCISCO, CALIFORNIA 94080, (415) 225-1706. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
JULY , 1995.

All information contained in this Proxy Statement/Prospectus concerning
Roche, Roche Holding (as hereinafter defined) and HLR was provided by Roche.
Genentech assumes no responsibility for the accuracy of such information.

INCORPORATION OF DOCUMENTS BY REFERENCE

The following documents previously filed with the Commission pursuant to
the Exchange Act are hereby incorporated by reference in this Proxy
Statement/Prospectus:

(a) Annual Report on Form 10-K of Genentech for the year ended December 31,
1994;

(b) Annual Report to Stockholders of Genentech for the year ended December
31, 1994;

(d) Proxy Statement of Genentech in connection with Genentech's 1995 Annual
Meeting of Stockholders; and

(e) The description of the Special Common Stock contained in Genentech's
Registration Statement filed pursuant to the Exchange Act, and any
amendment or report filed for the purpose of updating such description.

All documents filed by Genentech pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the Special
Meeting referred to herein shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing thereof. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein, modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement/Prospectus. At and
immediately after the time that the Proposal is approved and adopted, Genentech
will continue to be required to file periodic reports, proxy statements and
other information with the Commission pursuant to the Exchange Act; however,
based on Genentech's current capitalization, if Roche should elect to cause
Genentech to exercise the Call Rights, Genentech will no longer be, or, if Roche
does not so elect, depending on the number, if any, of holders of Special Common
Stock who exercise their Put Rights and upon other factors, it is possible that
Genentech may no longer be, required to file such reports. See
"Summary -- Possible Effects of Exercise of Put Rights on Market for Special
Common Stock."

-iii-
<PAGE> 11

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
AVAILABLE INFORMATION.................................................................. iii
INCORPORATION OF DOCUMENTS BY REFERENCE................................................ iii
SUMMARY AND SPECIAL FACTORS............................................................ 1
The 1990 Merger................................................................... 1
The Existing Governance Agreement................................................. 1
Terms of the Proposed Transactions................................................ 2
Genentech's Reasons for the Proposed Transactions................................. 4
Advantages and Disadvantages of the Proposal to Genentech Stockholders............ 5
Effects of a Failure to Approve the Proposal...................................... 6
Possible Effects of Exercise of Put Rights on Market for Special Common Stock..... 7
Composition of Genentech's Board of Directors Following the Proposed
Transactions..................................................................... 8
Certain Rights of Roche Following the Proposed Transactions....................... 8
Roche's Reasons for the Proposed Transactions..................................... 9
Interests of Certain Persons in the Proposed Transactions......................... 10
Guaranty of Roche Holding......................................................... 10
Licensing Agreement............................................................... 10
Certain Federal Income Tax Considerations......................................... 12
Stockholder Litigation............................................................ 12
GENERAL INFORMATION.................................................................... 14
Purpose of Special Meeting........................................................ 14
Record Date; Voting Rights; Proxies............................................... 14
Solicitation of Proxies........................................................... 14
Quorum............................................................................ 14
Required Vote..................................................................... 14
No Appraisal Rights............................................................... 15
BUSINESS OF GENENTECH.................................................................. 15
MARKET PRICES OF AND DIVIDENDS ON THE REDEEMABLE COMMON STOCK.......................... 16
SELECTED HISTORICAL FINANCIAL DATA..................................................... 17
THE PROPOSED TRANSACTIONS.............................................................. 18
Background of the Proposed Transactions........................................... 18
Purpose and Structure of the Transactions......................................... 26
Recommendation of the Board of Directors; Fairness of the Transaction............. 27
Opinion of Financial Advisor...................................................... 30
Interests of Certain Persons in the Proposed Transactions......................... 39
Source of Funds; Expenses......................................................... 40
Stockholder Litigation............................................................ 41
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.............................................. 41
Certain Federal Income Tax Consequences........................................... 41
Accounting Treatment.............................................................. 43
THE MERGER AGREEMENT................................................................... 44
General........................................................................... 44
The Merger........................................................................ 44
Effective Time.................................................................... 44
</TABLE>
<PAGE> 12

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Conversion and Exchange of Genentech Shares and Merger Subsidiary Common Stock.... 44
Exchange of Stock Certificates.................................................... 44
Additional Covenants and Agreements............................................... 45
Conditions to Consummation of the Merger.......................................... 47
Termination of the Merger Agreement............................................... 48
Additional Provisions of the Merger Agreement..................................... 48
THE CHARTER AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK......................... 48
Authorized Shares................................................................. 49
Voting Rights..................................................................... 49
Dividends; Reclassifications; Mergers............................................. 49
Liquidation....................................................................... 49
Call Rights....................................................................... 50
Put Rights........................................................................ 51
Adjustments....................................................................... 51
Payment........................................................................... 51
Default and Acceleration of Put Rights............................................ 52
Conversion........................................................................ 53
Legend............................................................................ 53
Class Vote........................................................................ 53
Certain Definitions............................................................... 54
ARTICLE ELEVENTH OF THE CERTIFICATE OF INCORPORATION................................... 54
THE AMENDED GOVERNANCE AGREEMENT....................................................... 55
Redemption of Special Common Stock................................................ 55
Put Rights with Respect to Special Common Stock................................... 55
Suspension of Obligations......................................................... 56
Indemnification................................................................... 56
Options........................................................................... 56
Further Acquisitions of Securities of Genentech by Roche.......................... 56
Capital Contribution and Assumption of Put Obligations by Roche................... 57
Board of Directors................................................................ 58
Certain Approval Rights........................................................... 59
Affiliation Arrangements.......................................................... 60
Certain Agreements of Roche as to Voting.......................................... 60
Restrictions on Transfers of Common Stock by Roche................................ 60
Registration Rights............................................................... 61
Certain Covenants................................................................. 62
Amendments; Termination........................................................... 62
GUARANTY OF ROCHE HOLDING.............................................................. 62
General........................................................................... 62
Covenants......................................................................... 63
THE LICENSING AGREEMENT................................................................ 63
Licenses, Options, Know-how and Trademarks........................................ 63
Commercialization Committees...................................................... 64
Development and Marketing......................................................... 64
Production and Supply............................................................. 64
Royalties and Other Payments...................................................... 65
Transition Provisions............................................................. 65
Term and Termination.............................................................. 66
HOLDERS OF GENENTECH'S DEBENTURES AND WARRANTS......................................... 66
CERTAIN PROJECTIONS OF FUTURE OPERATIONS AND OTHER INFORMATION......................... 67
CERTAIN INFORMATION CONCERNING ROCHE AND ROCHE HOLDING................................. 69
</TABLE>
<PAGE> 13

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
CONDUCT OF GENENTECH'S BUSINESS AFTER COMPLETION OF THE PROPOSED TRANSACTIONS; ROCHE'S
PLANS WITH RESPECT TO GENENTECH...................................................... 70
PRINCIPAL STOCKHOLDERS OF GENENTECH.................................................... 71
SECURITY OWNERSHIP OF MANAGEMENT....................................................... 72
Amount and Nature of Beneficial Ownership......................................... 72
CERTAIN INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY......... 74
Executive Officers................................................................ 74
Directors......................................................................... 75
Transactions in Securities of Genentech During the Last 60 Days................... 77
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE AND ROCHE
HOLDING.............................................................................. 78
Directors and Executive Officers of Roche......................................... 78
Directors and Executive Officers of Roche Holding................................. 79
Transactions in Securities of Genentech During the Last 60 Days................... 80
Transactions in Securities of Genentech During the Last Two Years................. 81
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................... 81
OTHER MATTERS.......................................................................... 83
AUDITORS' REPRESENTATIVES.............................................................. 83
LEGAL MATTERS.......................................................................... 84
EXPERTS................................................................................ 84

ANNEX A -- Agreement and Plan of Merger Among Roche Holdings, Inc., HLR (U.S.) II, Inc. and
Genentech, Inc., dated May 23. 1995 (including a Form of Amended and Restated
Governance Agreement (Exhibit A), a Form of Guaranty (Exhibit B) and a Form of
Amendment to the Certificate of Incorporation (Exhibit C)).

ANNEX B -- Opinion of Lehman Brothers.
</TABLE>
<PAGE> 14

INDEX OF DEFINED TERMS

<TABLE>
<CAPTION>
PAGE NO.
----------
<S> <C>
PAGE NO.
----------
1990 Merger.......................... 1
1990 Merger Agreement................ 1
1990 Merger Subsidiary............... 1

alpha................................ 81
Amended Article Third................ 48
Amended Governance Agreement......... cover
Article Eleventh..................... 54
Article Third........................ 48

Bankruptcy Code...................... 52
Base Terms........................... 22
Benchmark Multiples.................. 36
beta................................. 81
Business Combination................. 54

Call Notification.................... 51
Call Rights.......................... cover
Canada Products...................... 63
Certificates......................... 45
Code................................. 12
Collaborative Countries.............. 82
Commission........................... cover
Common Stock......................... cover
Company.............................. cover
Comparable P/E to Growth Rate
Multiple........................... 33
Comparable Transactions.............. 36
Comparable Universe.................. 32
Conversion Date...................... 53

Debentures........................... 66
Delaware Law......................... ii
Depositary........................... 54
Discounted Cash Flow Analysis........ 37
DNase................................ 63

EBIT................................. 36
Effective Time....................... 10
EPS.................................. 31
Equity Security...................... 57
Exchange............................. 41
Exchange Act......................... iii
Exchange Agent....................... 44
Exchange Fund........................ 45
ESP.................................. 77
Existing Governance Agreement........ ii

Fluor................................ 77
Forward P/E Multiples................ 31
Future Standalone Values............. 32

Genentech............................ cover
Genentech Board...................... 1
Genentech Countries.................. 83
Genentech Products................... 63
Genentech Shares..................... ii
Guaranty............................. 3

HLR.................................. ii
HLR/Roche............................ 82
Hoffmann-LaRoche..................... 81

IBES................................. 32
IDEC................................. 63
IDEC Product......................... 63
Indenture............................ 66
Independent Directors................ 1
In-Licensed Product.................. 10
Insolvency Event..................... 53
Investor Directors................... 58
IRR.................................. 34

Licensing Agreement.................. ii
Liquidating Sale..................... 60
LTM.................................. 36

Merger............................... cover
Merger Agreement..................... cover
Merger Subsidiary.................... cover

Named Executive Officers............. 72
Noninvestor Directors................ 58
NYSE................................. cover
NYSE Excluded Holdings............... 7

Option............................... 10
Option Plans......................... 10
Optout Option........................ 83

Preferred Stock...................... 49
Proposal............................. cover
Proposed Transactions................ ii
Proxy Statement/Prospectus........... cover
PSE.................................. cover
Put Notice........................... 54
Put Notification..................... 54
Put Obligation....................... 42
Put Period........................... 54
Put Price............................ 51
Put Rights........................... cover

Receiving Stockholder................ 41
Record Date.......................... 14
Redeemable Common Stock.............. cover
Redemption Date...................... 50
Registration Statement............... cover
Roche................................ cover
Roche Finance........................ 70
Roche Holding........................ 1
Roche Holding's Voting Interest...... 57
Roche Shares......................... 44
Roche Territory...................... 10
ROW Countries........................ 83

Scios Nova........................... 63
Scios Product........................ 63
Securities Act....................... cover
Small Molecule Products.............. 11
Special Committee.................... ii
Special Common Stock................. cover
Special Meeting...................... cover
Standalone Values.................... 31
Stockholder Meeting.................. 45
Subcommittee......................... 19
Subject Person....................... 54

TNF.................................. 81
Triggering Disposition............... 9
Transaction Agreement................ 26
Trustee.............................. 66

Voting Stock......................... 54

Warrants............................. 66
</TABLE>
<PAGE> 15

SUMMARY AND SPECIAL FACTORS

Set forth below is a summary description of certain significant matters
stockholders should take into account prior to voting on the Proposal. Such
description is not intended to be complete and is qualified in all respects by
reference to the detailed information set forth elsewhere in this Proxy
Statement/Prospectus and the Annexes thereto. Stockholders are urged to read the
Proxy Statement/Prospectus and such Annexes in their entirety.

THE 1990 MERGER

On September 7, 1990, a wholly owned subsidiary ("1990 Merger Subsidiary")
of Roche was merged with and into Genentech (the "1990 Merger") pursuant to an
Agreement and Plan of Merger dated as of February 2, 1990 among Genentech, Roche
and 1990 Merger Subsidiary (the "1990 Merger Agreement"). Roche is a wholly
owned subsidiary of Roche Finance Ltd, a Swiss corporation, which, in turn, is a
wholly owned subsidiary of Roche Holding Ltd, a Swiss corporation ("Roche
Holding"). In the 1990 Merger, Genentech stockholders received, for each share
of Common Stock that they then owned, $18 in cash and one half share of newly
issued Redeemable Common Stock. In the 1990 Merger, Roche, in effect, acquired
one half of the Company's then outstanding Common Stock (42,699,458 shares) from
the stockholders for $1,537.2 million in cash and also acquired 24,433,951 newly
issued shares of Common Stock directly from the Company for $487.3 million. The
67,133,409 shares of Common Stock that Roche acquired in the 1990 Merger
represented approximately 57% of the outstanding voting securities of the
Company as of the Record Date (as hereinafter defined). In addition, from time
to time since the 1990 Merger, Roche has purchased shares of Redeemable Common
Stock in the open market and, as of the Record Date, owned approximately
9,487,600 shares of Redeemable Common Stock, which, together with the Common
Stock held by Roche, represents approximately 65% of the outstanding voting
securities of the Company.

THE EXISTING GOVERNANCE AGREEMENT

On September 7, 1990, pursuant to the 1990 Merger Agreement, Genentech and
Roche entered into the Existing Governance Agreement, which, among other
matters, contains terms relating to the corporate governance of the Company
after the 1990 Merger and limitations on business combinations by the Company
with, and the acquisition and disposition of securities of the Company by, Roche
and its affiliates.

Board of Directors

Pursuant to the Existing Governance Agreement, the Company's Board of
Directors (the "Genentech Board") was increased from eleven to thirteen members,
and the Genentech Board elected two nominees of Roche, Dr. Jurgen Drews and Dr.
Armin Kessler, to serve on the Genentech Board, with two nominees being the only
designees on the Genentech Board to which Roche is entitled prior to July 1,
1995.

The Existing Governance Agreement provides that on and after July 1, 1995,
the Genentech Board will include two nominees designated by Roche and two
officers of Genentech nominated by the nominating or proxy committee of the
Genentech Board. The remainder of the Genentech Board at such time is to be
comprised of "Independent Directors" (defined as individuals who are neither
officers of Genentech nor employees, directors, principal stockholders or
partners of Roche, its affiliates or any entity (other than the Company and its
subsidiaries) that was dependent on Roche or its affiliates for more than 10% of
its revenues or earnings in the most recent fiscal year). The Existing
Governance Agreement provides, in general, that after July 1, 1995, Roche will
be entitled to designate, in addition to its two nominees, as described above, a
portion of the total number of Independent Directors equal to Roche's
proportional voting interest in Genentech's equity securities and that the
Company will, to the extent necessary, increase the size of the Genentech Board
and cause the Board to fill vacancies created by any such increase to achieve
the called-for result. See "The Amended Governance Agreement -- Board of
Directors."

Merger Agreement -- Additional Covenants and Agreements -- Continued
Applicability of the Existing Governance Agreement."

As indicated below, if the Proposal is approved and the Merger is
consummated, the parties will enter into the Amended Governance Agreement, under
which Roche would continue to have the right to designate two directors of
Genentech, and its right to nominate Independent Directors, on the same terms as
would be applicable under the Existing Governance Agreement on and after July 1,
1995, would be postponed until the expiration of the Put Period (as hereinafter
defined). Thus, following the end of the period during which the Put Rights may
be exercised, or if the Proposal is not approved by stockholders (or for any
other reason the Merger is not consummated), Roche, based on its current
holdings of Genentech Shares, will have the right to designate more than a
majority of the members of the Genentech Board, with all but two of such Roche
designees being Independent Directors. See "The Amended Governance
Agreement -- Board of Directors."

Limitations on Business Combinations with and Acquisitions of Additional
Genentech Securities by Roche

Under the Existing Governance Agreement, prior to July 1, 1995, Roche will
not be permitted to propose business combinations (as described in the Company's
Certificate of Incorporation) between the Company and Roche or any affiliate of
Roche unless a majority of the Independent Directors determine that there has
been a sustained, substantial impairment of the business, prospects or financial
viability of Genentech and its subsidiaries, taken as a whole, since September
7, 1990. No such determination has been made by the Independent Directors, and
none is contemplated. Thus, prior to July 1, 1995, in the absence of such a
determination, Roche is effectively precluded from acquiring the entire equity
interest in the Company except by causing the redemption of the Redeemable
Common Stock at the current redemption price of $60.00 per share. Furthermore,
unless such a determination as described in the preceding sentence is made with
respect to the Company, Roche may not propose any such business combination
during the period commencing on July 1, 1995 and terminating on June 30, 1996 at
a price per share to the unaffiliated holders of the Common Stock of less than
$60.00 per share.

Under Genentech's Certificate of Incorporation, any business combination
between Genentech and Roche or any affiliate of Roche (other than by exercise of
the Call Rights), whether or not prior to June 30, 1996, must also be approved
by the affirmative vote of a majority of the Independent Directors and the
holders of a majority of the Company's equity securities not beneficially owned
by Roche or its affiliates. The Existing Governance Agreement prohibits the
Independent Directors from taking into account any possible discount due to the
fact that Genentech is a subsidiary of Roche when considering the fairness of
any such transaction to Genentech's minority stockholders.

The Existing Governance Agreement also prohibits Roche from purchasing
equity securities of the Company if such purchase would result in Roche owning
in the aggregate in excess of 75% of the voting power of the Company's equity
securities on a fully diluted basis.

TERMS OF THE PROPOSED TRANSACTIONS

On May 23, 1995, Genentech, Roche and Merger Subsidiary entered into the
Merger Agreement. Pursuant to the Merger Agreement, among other things (i)
Merger Subsidiary will be merged with and into Genentech, with Genentech being
the surviving corporation, (ii) the Certificate of Incorporation of Genentech
will be amended to authorize the issuance by Genentech of Special Common Stock,
(iii) each outstanding share of Common Stock (other than shares of Common Stock
held by Roche and its affiliates) will be converted into one share of Special
Common Stock, (iv) each outstanding share of Common Stock held by Roche will be
cancelled, and (v) the outstanding common stock of Merger Subsidiary will be
converted into shares of Common Stock representing the same number of shares of
Common Stock held by Roche immediately prior to the Merger. See "The Merger
Agreement."

2
<PAGE> 17

Special Common Stock is to, among other matters, (i) provide for the Call
Rights, which extend by four years the period during which the publicly traded
stock of Genentech is subject to redemption by Genentech at the option of Roche,
with such redemption during such four year period being at specified prices per
share ranging from $61.25 during the quarter ending September 30, 1995 and
increasing quarterly to $82.00 during the quarter ending June 30, 1999, and (ii)
provide for the Put Rights, which afford the holders of Special Common Stock the
right to require Genentech to redeem all or a portion (at the election of the
holder) of their shares of such stock at a price of $60.00 per share in the
event that Roche does not cause the exercise of the Call Rights. The Put Rights
will be exercisable during the 30-business day period following the expiration
of the Call Rights or during a 60-business day period following certain
Insolvency Events of the Company. See "The Charter Amendment; Description of the
Special Common Stock."

If the Merger receives the requisite stockholder approval and if the
Proposed Transactions are effected, the redemption prices applicable under the
Call Rights will be as follows:

<TABLE>
<CAPTION>
PERIOD PRICE
------
<S> <C>
July 1, 1995 to September 30, 1995.................................. $61.25
October 1, 1995 to December 31, 1995................................ $62.50
January 1, 1996 to March 31, 1996................................... $63.75
April 1, 1996 to June 30, 1996...................................... $65.00
July 1, 1996 to September 30, 1996.................................. $66.25
October 1, 1996 to December 31, 1996................................ $67.50
January 1, 1997 to March 31, 1997................................... $68.75
April 1, 1997 to June 30, 1997...................................... $70.00
July 1, 1997 to September 30, 1997.................................. $71.50
October 1, 1997 to December 31, 1997................................ $73.00
January 1, 1998 to March 31, 1998................................... $74.50
April 1, 1998 to June 30, 1998...................................... $76.00
July 1, 1998 to September 30, 1998.................................. $77.50
October 1, 1998 to December 31, 1998................................ $79.00
January 1, 1999 to March 31, 1999................................... $80.50
April 1, 1999 to June 30, 1999...................................... $82.00
</TABLE>

After June 30, 1999, the Call Rights will expire.

Under the Amended Governance Agreement, Roche will be required to, (i) if
the Call Rights are exercised, pay to a depositary sufficient funds to satisfy
the Company's obligations in respect of the Call Rights or (ii) if the Put
Rights become exercisable, contribute to the Company the funds required to
satisfy the Company's obligations under the Put Rights. In lieu of the
contribution to the Company referred to in clause (ii) of the preceding
sentence, the Amended Governance Agreement provides that Roche (or an affiliate
of Roche) may elect to purchase the Special Common Stock directly from
stockholders who elect to exercise their Put Rights. In exchange for the payment
by Roche to Genentech in respect of the Put Rights, Genentech will issue to
Roche (or an affiliate of Roche) a number of shares of Common Stock equal to the
number of shares of Special Common Stock redeemed by Genentech pursuant to
exercises of the Put Rights. The payment obligation of Roche with respect to the
Put Rights is guaranteed by Roche Holding (the "Guaranty"). See "The Amended
Governance Agreement -- Redemption of Special Common Stock;" "-- Capital
Contribution and Assumption of Put Obligations by Roche" and "Guaranty of Roche
Holding."

The Amended Governance Agreement extends and modifies the Existing
Governance Agreement. In particular, under the modified governance arrangements,
the limit on Roche's ability to make open market purchases would be increased
such that Roche could own, following any such purchase, 79.9%, rather than 75%,
of the voting power of the Company's equity securities on a fully diluted basis.
If the Merger is consummated, HLR will enter into the Licensing Agreement with
Genentech pursuant to which HLR will have the right to market certain Genentech
products on an exclusive basis outside of the United States and will have an
option on a product-by-product basis to develop and market on an exclusive basis
outside of the

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<PAGE> 18

United States all other Genentech products which conclude Phase II clinical
trials within the 10 years following execution of the Licensing Agreement. For a
description of the terms of the agreements relating to the Proposed
Transactions, see "The Merger Agreement;" "The Charter Amendment; Description of
the Special Common Stock;" "The Amended Governance Agreement;" "Guaranty of
Roche Holding" and "The Licensing Agreement."

Consideration of the Proposal by stockholders of the Company will not
preclude Roche from exercising its right to cause Genentech to redeem the
Redeemable Common Stock at a price of $60.00 per share by Roche's delivery of a
written request to Genentech at least 10 days prior to the close of business on
June 30, 1995. As indicated above, after June 30, 1995, each outstanding share
of Redeemable Common Stock will automatically be converted into a share of
Common Stock.

GENENTECH'S REASONS FOR THE PROPOSED TRANSACTIONS

The Special Committee, based on the reports, presentations and discussions
described under "The Proposed Transactions -- Background of the Proposed
Transactions," believes that, regardless of whether the Company was willing to
extend Roche's current option to cause the Company to redeem the Redeemable
Common Stock prior to June 30, 1995, Roche was unlikely to exercise its existing
option. Further, on the same basis, the Special Committee concluded that the
market price of the Genentech Shares would decline substantially if Roche's
right to cause the Redeemable Common Stock to be redeemed were to expire
unexercised at June 30, 1995 or if Roche were to publicly announce its intention
not to exercise its right in advance of such date. The Special Committee also
believes that a substantial decline in the value of the Genentech Shares would,
in addition to the immediate resulting diminution of stockholder value, have
material adverse effects on the Company's relations with its employees and on
Genentech's ability to attract and retain talented scientists, which, in turn,
would likely further adversely affect stockholder value. The Special Committee's
conclusion in these latter regards is based on its belief that (i) the failure
by Roche to cause the Company to redeem the Redeemable Common Stock would signal
a lack of confidence by Roche in the Company and (ii) the economic incentive for
the Company's scientists to remain with the Company would be substantially
reduced or eliminated if the value of the Genentech Shares were to decline as
significantly as the analysis done by Lehman Brothers, the Special Committee's
financial advisors, would suggest. See "The Proposed Transactions -- Opinion of
Financial Advisor."

The Special Committee, based on the advice of Lehman Brothers, believes
that the existence of Roche's current right to cause redemption of the
Redeemable Common Stock has had the effect of supporting the price at which the
Redeemable Common Stock has traded and that if the Merger is approved by the
shareholders of Genentech, the potential decline in the price of the Genentech
Shares could be significantly mitigated by the Put Rights and the Call Rights.
If Genentech's future growth and/or market conditions were to warrant a per
share valuation of Genentech prior to June 30, 1999 in excess of the redemption
prices applicable under the Call Rights, however, the existence of the Call
Rights under the Special Common Stock will prevent such stock from trading above
its applicable redemption price. If the Special Common Stock were to be
redeemed, holders of the Special Common Stock would participate in any increased
valuation of Genentech only to the extent permitted by the applicable redemption
price. Holders of Special Common Stock will, however, benefit from the ability
to put their shares of Special Common Stock to the Company at a price of $60.00
per share for 30 business days beginning in July 1999 (unless such right is
accelerated following the occurrence of certain Insolvency Events) if the Call
Rights have not been exercised. The Special Committee believes that the
redemption prices of the Call Rights leave substantial room for future growth of
the Company to be recognized in its stock price and that the "downside
protection" afforded by the Put Rights is a significant advantage to the
Genentech public stockholders which mitigates any "upside limitations" that may
result from the existence of the Call Rights. See "The Proposed
Transactions -- Background of the Proposed Transactions" and "The Proposed
Transactions -- Opinion of Financial Advisor."

The Special Committee also believes that the Existing Governance Agreement
and the Redeemable Common Stock have facilitated, and the Proposed Transactions
will continue to facilitate, achievement of certain objectives the Genentech
Board initially formulated prior to the 1990 Merger. These objectives include:
(a) the contractual preservation of Genentech's existing work environment, which
the Genentech

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<PAGE> 19

Board and senior management view as critical to Genentech's ability to retain
the highly talented scientific and technical staff that is essential to
Genentech's future and (b) the further development of opportunities for
synergistic relations between Genentech and a major participant in the global
pharmaceutical industry, particularly with respect to the marketing of
Genentech's products on a global basis. The Special Committee also believes that
the payment by Roche of 50% of certain of Genentech's development expenses
(including costs previously incurred) pursuant to the Licensing Agreement with
respect to those products that Roche elects to develop and market outside the
United States will allow Genentech to take a larger number of promising research
projects into development, increasing the likelihood that Genentech will have
more medically and commercially significant marketed products over the next
several years. In addition to the benefits to be derived by Genentech from the
royalties and manufacturing margin to be paid by Roche under the Licensing
Agreement, the terms of the Licensing Agreement will also mitigate certain
potential losses of the Company. For example, should Roche elect to exercise its
option under the Licensing Agreement at the conclusion of Phase II trials with
respect to a particular product and should that product then fail during Phase
III, the adverse effects on the Company of such failures would be mitigated
because Roche would generally have been required to pay one half of the
development costs with respect to such product. See " -- Advantages and
Disadvantages of the Proposal to Genentech Stockholders". See also "The Proposed
Transactions -- Background of the Proposed Transactions;" "The Proposed
Transactions -- Purpose and Structure of the Transactions;" "The Proposed
Transactions -- Recommendation of the Board of Directors; Fairness of the
Transaction;" and "The Proposed Transactions -- Opinion of Financial Advisor."

ADVANTAGES AND DISADVANTAGES OF THE PROPOSAL TO GENENTECH STOCKHOLDERS

The Special Committee believes that the principal advantages of the
Proposed Transactions to Genentech's stockholders are that the Proposed
Transactions should significantly mitigate a decline in the market price of the
Redeemable Common Stock that would be expected to occur if Roche elects, as the
Special Committee expects, not to exercise its right to cause such stock to be
redeemed by June 30, 1995. Lehman Brothers has advised the Special Committee
that the escalating redemption prices for the Redeemable Common Stock set forth
in the Company's Certificate of Incorporation have likely had the effect of
helping to support the prices at which the Redeemable Common Stock has traded in
the market. Lehman Brothers has advised the Special Committee that after June
30, 1995 when the Redeemable Common Stock would convert to Common Stock and no
longer be subject to redemption, in the absence of the Proposed Transactions a
significant decline in the trading price of such stock could be expected to
occur. Based on Lehman Brothers' advice, the Special Committee believes that the
potential decline in the stock price upon expiration of Roche's redemption
option could be significantly mitigated by virtue of the inclusion of the Put
Rights in the Special Common Stock. Currently, if Roche does not cause the
Redeemable Common Stock to be redeemed by June 30, 1995, the price that holders
of such stock could receive after such date upon sale of their shares would be
set by market forces without the holder being guaranteed the ability to sell
such shares at a fixed price at a future date and cannot be predicted with any
degree of certainty.

Also based upon Lehman Brothers' advice, the Special Committee believes
that the Call Rights inherent in the Special Common Stock may have a supporting
or elevating effect upon the market price of such stock, although it has been
advised that such supporting effect may not be as significant as is the case
with respect to the redemption right currently applicable to the Redeemable
Common Stock because of the market's possible perception of Roche's
determination not to exercise its existing rights prior to June 30, 1995. See
"The Proposed Transactions -- Background of the Proposed Transactions."
NOTWITHSTANDING THE FOREGOING, HOWEVER, LEHMAN BROTHERS ADVISED THE SPECIAL
COMMITTEE, AND THE SPECIAL COMMITTEE BELIEVES, THAT TRADING PRICES OF SECURITIES
ARE BASED UPON A VARIETY OF FACTORS, MANY OF WHICH ARE BEYOND THE CONTROL OF THE
GENENTECH BOARD AND THE COMPANY. NEITHER LEHMAN BROTHERS NOR THE SPECIAL
COMMITTEE CAN PREDICT THE ACTUAL PRICES AT WHICH THE SPECIAL COMMON STOCK WILL
TRADE, OR THE ACTUAL PRICES AT WHICH THE COMMON STOCK WILL TRADE IF THE PROPOSAL
IS NOT ADOPTED. NOTHING IN THIS PROXY STATEMENT/PROSPECTUS SHOULD BE UNDERSTOOD
TO CONSTITUTE SUCH A PREDICTION OR ASSURANCE OF ACTUAL FUTURE PRICES OR VALUES.

The Special Committee also concluded that, other than exercise by Roche of
the current redemption right, approval and consummation of the Proposed
Transactions would be the most favorable transaction for

5
<PAGE> 20

the employees of Genentech, almost all of whom are stockholders of the Company.
The Special Committee believes that, given the current circumstances, the best
means for Genentech to attract and retain distinguished scientists would be to
enter into the Proposed Transactions. The Special Committee believes that
attracting and retaining scientists is in the Company's and its stockholders'
best interests because the Company's scientific personnel are essential to its
economic success. The extent to which the stockholders of the Company can
participate in increased earnings, if any, of the Company is highly dependent on
the success of the Company's present and future scientific endeavors.

Another advantage of the Proposed Transactions considered by the Special
Committee is the effect of such transactions on the Company's research and
development efforts. If Roche's redemption right were to expire unexercised and
the price of Genentech's stock to decline significantly, the Company could be
forced to reduce research and development spending in order to increase earnings
over the short term. Because ongoing research and development efforts are
essential to the Company's future prospects and such decrease in spending could
have an adverse effect on the Company's development of new products, the Special
Committee concluded that the Proposed Transactions (because they could have the
effect of alleviating pressure on the Company to decrease research and
development spending) were the best available alternative for Genentech and its
stockholders. In fact, as noted above, the terms of the Licensing Agreement
which call for Roche to pay 50% of Genentech's development expenses in certain
circumstances is likely to allow the Company to develop more products than it
otherwise could have.

The Special Committee believes that the principal disadvantage of the
Proposed Transactions to Genentech's stockholders is that, as is currently the
case under the Existing Governance Agreement and the terms of the Redeemable
Common Stock, the Genentech stockholders' ability to realize gains in their
investment will be limited by the Call Rights. Thus, if Genentech's future
growth and/or market conditions were to warrant a per share valuation of
Genentech prior to June 30, 1999 in excess of the redemption prices applicable
under the Call Rights, the existence of the Call Rights will prevent the Special
Common Stock from trading above its applicable redemption price. If the Call
Rights were to be exercised, holders of the Special Common Stock would
participate in such increased valuation only to the extent permitted by the
applicable redemption price.

For information with respect to the reasons for the Proposed Transactions
and the recommendation of the Genentech Board, see "The Proposed
Transactions -- Background of the Proposed Transactions," "The Proposed
Transactions -- Recommendation of the Board of Directors; Fairness of the
Transaction" and "The Proposed Transaction -- Opinion of Financial Advisor."

EFFECTS OF A FAILURE TO APPROVE THE PROPOSAL

BASED UPON THE ADVICE OF ITS FINANCIAL ADVISORS, THE GENENTECH BOARD
BELIEVES THAT IF THE PROPOSAL IS NOT APPROVED BY GENENTECH'S STOCKHOLDERS, THE
MARKET PRICE OF GENENTECH'S PUBLICLY TRADED STOCK COULD BE EXPECTED TO DECLINE
SIGNIFICANTLY. SEE "THE PROPOSED TRANSACTIONS -- RECOMMENDATION OF THE BOARD OF
DIRECTORS; FAIRNESS OF THE TRANSACTION" AND "THE PROPOSED
TRANSACTIONS -- OPINION OF FINANCIAL ADVISOR."

If the Proposal is not approved by the Genentech stockholders at the
Special Meeting, the Common Stock will remain outstanding and will not be
subject to the Call Rights nor have the benefit of the Put Rights. Under the
Existing Governance Agreement, prior to July 1, 1995, Roche will not be
permitted to propose business combinations (as described in the Company's
Certificate of Incorporation) between the Company and Roche or any affiliate of
Roche unless a majority of the Independent Directors determine that there has
been a sustained, substantial impairment of the business, prospects or financial
viability of Genentech and its subsidiaries, taken as a whole, since September
7, 1990. No such determination has been made by the Independent Directors, and
none is contemplated. Thus, prior to July 1, 1995, in the absence of such a
determination, Roche is effectively precluded from acquiring the entire equity
interest in the Company except by causing the redemption of the Redeemable
Common Stock at the current redemption price of $60.00 per share. Furthermore,
unless such a determination as described in the preceding sentence is made with
respect to the Company, under the existing Governance Agreement, Roche may not
propose any such business

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<PAGE> 21

combination during the period commencing on July 1, 1995 and terminating on June
30, 1996 at a price per share to the unaffiliated holders of the Common Stock of
less than $60.00 per share.

Before and after July 1, 1996, Roche's ability to effect business
combinations with Genentech will continue to be subject to the provisions of
Genentech's Certificate of Incorporation, which provides, as indicated above,
that any business combination between Genentech and Roche or any affiliate of
Roche (other than by exercise of the Call Rights), whether or not prior to June
30, 1996, must also be approved by the affirmative vote of a majority of the
Independent Directors and the holders of a majority of the Company's equity
securities not beneficially owned by Roche or its affiliates. The Existing
Governance Agreement prohibits the Genentech Independent Directors from taking
into account any possible discount due to the fact that Genentech is a
subsidiary of Roche when considering the fairness of any such transaction to
Genentech's minority stockholders. As indicated above, if the Proposal is not
approved by stockholders (or if for any other reason the Merger is not
consummated), Roche will be able to designate a majority of the Independent
Directors.

POSSIBLE EFFECTS OF EXERCISE OF PUT RIGHTS ON MARKET FOR SPECIAL COMMON STOCK

If Roche's right to cause redemption of the Special Common Stock pursuant
to the Call Rights expires unexercised, holders of Special Common Stock will, in
accordance with the terms thereof, be permitted to exercise the Put Rights.
Exercise by holders of their Put Rights would, to the extent of such exercises,
have the effect of reducing the number of publicly traded shares of Special
Common Stock. It is not possible to predict at the present time how many shares
of Special Common Stock might be redeemed by the Company pursuant to exercise of
the Put Rights. As of February 24, 1995, there were more than 20,500 holders of
Redeemable Common Stock. If a sufficiently large number of holders of Special
Common Stock were to exercise their Put Rights, it is possible that the Special
Common Stock would cease to meet the listing requirements of the NYSE, would
fail to meet the listing requirements of any other national securities exchange
or the NASDAQ National Market and, consequently, would cease to be listed on any
securities exchange. According to the NYSE's published guidelines, the NYSE
would consider delisting the shares of Special Common Stock if, among other
things, the number of record holders of at least 100 shares of Special Common
Stock should fall below 1,200, the number of publicly-held shares of Special
Common Stock (exclusive of holdings of officers, directors, their immediate
families and other concentrated holdings of 10% or more ("NYSE Excluded
Holdings")) should fall below 600,000 or the aggregate market value of publicly
held shares of Special Common Stock (exclusive of NYSE Excluded Holdings) should
fall below $5,000,000. The market for, and the value of, Genentech's stock could
be adversely affected if such stock ceases to be listed on a national securities
exchange.

In the event that the shares of Special Common Stock were no longer listed
or traded on the NYSE, it is possible that the shares of Special Common Stock
would trade on another securities exchange or in the over-the-counter market and
that price quotations would be reported by such exchange, through the NASDAQ or
other sources. Such trading and the availability of such quotations would,
however, depend upon the number of shareholders and/or the aggregate market
value of the shares of Special Common Stock remaining at such time, the interest
in maintaining a market in the shares of Special Common Stock on the part of
securities firms, the possible termination of registration of the shares of
Special Common Stock under the Exchange Act, as described below, and other
factors.

If delisting occurs, there can be no assurance that a liquid trading market
for such securities would remain. In the event fewer than 300 holders of record
of Special Common Stock were to remain following the exercise of the Put Rights,
Genentech may cease filing periodic reports, proxy statements and other
information with the Commission pursuant to the Exchange Act. Genentech does not
have any current plans to cease filing such reports. A reduction in the number
of publicly traded shares could also adversely affect the

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<PAGE> 22

trading market for and liquidity of such shares, which could in turn have an
adverse effect upon the market value of such securities.

COMPOSITION OF GENENTECH'S BOARD OF DIRECTORS FOLLOWING THE PROPOSED
TRANSACTIONS

Pursuant to the Existing Governance Agreement, in 1990 the Company's Board
of Directors was increased from eleven to thirteen members, and the Genentech
Board elected two nominees of Roche, Dr. Jurgen Drews and Dr. Armin Kessler, to
serve on the Genentech Board, with two nominees being the only designees on the
Genentech Board to which Roche is entitled prior to July 1, 1995.

The Existing Governance Agreement provides that on and after July 1, 1995,
the Genentech Board will include two nominees designated by Roche and two
officers of Genentech nominated by the nominating or proxy committee of the
Genentech Board. The remainder of the Genentech Board at such time is to be
comprised of Independent Directors. The Existing Governance Agreement provides,
in general, that after July 1, 1995, Roche will be entitled to designate, in
addition to its two nominees, as described above, a portion of the total number
of Independent Directors equal to Roche's proportional voting interest in
Genentech's equity securities and that the Company will, to the extent
necessary, increase the size of the Genentech Board and cause the Board to fill
vacancies created by any such increase to achieve the called-for result. See
"The Amended Governance Agreement -- Board of Directors."

Roche has agreed that its right to designate more than two persons on the
Genentech Board pursuant to the Existing Governance Agreement will be postponed
during the pendency of the Proposal. See "The Merger Agreement -- Additional
Covenants and Agreements -- Continued Applicability of the Existing Governance
Agreement."

As indicated below, if the Proposal is approved and the Merger is
consummated, the parties will enter into the Amended Governance Agreement, under
which Roche would continue to have the right to designate two directors of
Genentech, and its right to nominate Independent Directors, on the same terms as
would be applicable under the Existing Governance Agreement on and after July 1,
1995, would be postponed until the expiration of the Put Period. Thus, following
the end of the period during which the Put Rights may be exercised, or if the
Proposal is not approved by stockholders (or for any other reason the Merger is
not consummated), Roche will have the right to designate more than a majority of
the members of the Genentech Board, with all but two of such Roche designees
being Independent Directors. See "The Amended Governance Agreement -- Board of
Directors."

Under both the Existing Governance Agreement and the Amended Governance
Agreement, in any election of directors, Roche is obligated to vote its
Genentech Shares for all nominees to the Genentech Board in proportion to the
votes cast by the other holders of Genentech Shares, with certain exceptions;
provided, however, that Roche may cast all of its votes in favor of any nominee
to the Genentech Board designated by Roche as set forth above.

CERTAIN RIGHTS OF ROCHE FOLLOWING THE PROPOSED TRANSACTIONS

The Amended Governance Agreement, like the Existing Governance Agreement,
provides that Roche will have effective veto power over certain extraordinary
actions involving Genentech, including material acquisitions by Genentech,
dispositions of all or any substantial portion of the business or assets of
Genentech, issuances of equity securities by Genentech (subject to certain
limitations and exceptions), and repurchases of equity securities by Genentech.
Except as provided in the Licensing Agreement, as is the case under the Existing
Governance Agreement, the Amended Governance Agreement also prohibits Genentech
from entering into any material licensing or marketing agreement with respect to
Genentech's products or technology unless Genentech first negotiates in good
faith with Roche with respect thereto for a reasonable period of not less than
three nor more than six months. If Roche chooses not to exercise its options
under the Licensing Agreement, Genentech would be free to enter into marketing
and licensing arrangements with unrelated third parties without first pursuing
such negotiations with Roche. The rights of Roche described in

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<PAGE> 23

the first two sentences of this paragraph, as well as Roche's right to cause
Genentech to exercise the Call Rights, would terminate upon the sale or transfer
of any shares of Common Stock by Roche in an underwritten public offering or a
sale pursuant to Rule 144 of the Securities Act prior to April 30, 2004 (such
offering or sale, a "Triggering Disposition"). See "The Amended Governance
Agreement -- Certain Approval Rights;" "The Amended Governance
Agreement -- Restrictions on Transfers of Common Stock by Roche" and "The
Licensing Agreement."

ROCHE'S REASONS FOR THE PROPOSED TRANSACTIONS

Since the completion of the 1990 Merger, Roche has monitored the
performance and financial and operating results and prospects of Genentech and
has, from time to time, considered whether exercising its right to cause
Genentech to redeem the Redeemable Common Stock would be in the best interests
of Roche.

Although Roche continues to have the opportunity, under the existing
arrangements, to exercise its right to require Genentech to redeem the
outstanding shares of Redeemable Common Stock prior to July 1, 1995, Roche
believes that the extension of the Call Rights will permit Genentech to maintain
independent operations in a climate of entrepreneurial and intellectual
creativity. If Roche decides not to exercise its right to require Genentech to
redeem the outstanding shares of Redeemable Common Stock prior to July 1, 1995,
the extension of the Call Rights will permit Roche to continue to evaluate the
progress of Genentech and its own interests in the biotechnology field in light
of future developments while enabling Genentech to preserve its independence,
entrepreneurial culture and affording other holders of Genentech stock the
opportunity to continue to participate as investors in Genentech. Roche believes
that the terms of the Special Common Stock offer such investors protection from
market and other risks of an investment in Genentech.

As described in detail above under "The Proposed Transaction -- Background
of the Proposed Transaction," representatives of Genentech and Roche began, in
late January 1995, to discuss the possibility of extending Roche's right to
require Genentech to redeem the Redeemable Common Stock because Roche had not
decided whether it would exercise the existing option prior to June 30, 1995.
Roche believed that it would be more beneficial at this time to Roche, Genentech
and Genentech's stockholders if Genentech could continue to maintain its
operations in a climate of entrepreneurial and intellectual creativity as a more
independent company than if Genentech were to become, by virtue of exercise of
the existing option, a wholly-owned subsidiary of Roche at this time. Roche
believed that maintaining a significant number of shares of Genentech
outstanding in the hands of the public would provide more significant
independence for Genentech than would be enjoyed as a wholly-owned subsidiary
and would also provide employees of Genentech, particularly its key scientists,
whose compensation includes options for shares of Genentech stock, important
incentives to improve the current and future operations and performance of
Genentech, which, in turn, would directly benefit the Company and its
stockholders, including Roche. In the view of Roche, if the Proposal is
approved, Genentech and its stockholders will have the opportunity to
participate, subject to the Call Rights, in any increase in the value of
Genentech.

Similarly, Roche agreed to the addition of the Put Rights because the Put
Rights provide additional economic protection for the investment by non-Roche
stockholders in Genentech stock. The effect of the Put Rights will be to create
a "floor" value for the public's Genentech stock and thus afford stockholders a
minimum return on their investment in Genentech over a four-year period.

Roche considered, and after discussion Genentech agreed, that Roche's
ability to purchase Genentech's stock should be increased from the current level
of 75% to 79.9% because Roche believed that the ability of Roche to purchase
additional shares of Genentech stock would permit Roche, by means of open market
purchases, to purchase Genentech stock at attractive prices, mitigating (if
Roche chose to make such purchases) the effect of any declines in the market
price of the stock, to the benefit of all Genentech stockholders.

Roche acquired a 60% equity interest in Genentech in 1990 because Roche
believed that the acquisition presented Roche with an opportunity to expand its
investment in biotechnology with a leading biotechnology
enterprise -- Genentech. It continues to be the view of the board of directors
of Roche that its investment in Genentech, together with the opportunity to
acquire the remaining equity interest in Genentech at set prices

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<PAGE> 24

prior to July 1, 1999, is a worthwhile, long-term investment. The board of
directors of Roche also believes that the Licensing Agreement provides an
opportunity for Roche and Genentech both to benefit from enhanced development
and marketing of Genentech's products outside the United States and that
Genentech's innovative products can increasingly benefit from Roche's global
marketing, development and sales resources.

INTERESTS OF CERTAIN PERSONS IN THE PROPOSED TRANSACTIONS

The Merger Agreement provides, and the Company has agreed to take all
action necessary to ensure that, at the effective time of the Merger (the
"Effective Time"), each outstanding option to purchase shares of Common Stock
(each, an "Option"), issued pursuant to the Company's stock option plans
(collectively, the "Option Plans") (whether or not vested or exercisable) will,
without any action by the holder thereof, constitute an option to acquire, on
the same terms and conditions as were applicable under such Option immediately
prior to the Effective Time, that number of shares of Special Common Stock equal
to the number of shares of Common Stock subject to such Option immediately prior
to the Effective Time, at the price or prices per share in effect pursuant to
the terms of such Option immediately prior to the Effective Time. Holders of
Options include officers and directors of the Company who were involved in the
negotiation, and approval by the Genentech Board and the Special Committee, of
the Proposed Transactions. To the extent that the Proposed Transactions would
have a positive effect upon the trading price of the shares underlying such
Options or would, as a result of the Put Rights, place a "floor" on the value of
such underlying shares, holders of such Options, as is the case with the
underlying shares held by stockholders of the Company, would receive those same
benefits.

GUARANTY OF ROCHE HOLDING

Roche Holding, which has undertaken to guarantee Roche's payment
obligations under the Amended Governance Agreement relating to Roche's
obligations to provide Genentech with funds to satisfy payments in connection
with the Put Rights, had (together with its subsidiaries) approximately 14.3
billion Swiss Francs ($10.9 billion converted at a rate of Sfr 1.31 per
U.S.$1.00 as of December 31, 1994) in cash and marketable securities as of
December 31, 1994. See "Guaranty of Roche Holding." For further information
concerning Roche and Roche Holding see "Certain Information Concerning Roche and
Roche Holding."

LICENSING AGREEMENT

Licenses, Options, Know-how and Trademarks

Pursuant to the Licensing Agreement, at the Effective Time Genentech will
agree to grant to Roche an exclusive patent, know-how and trademark license to
use, sell and, under certain conditions, make various products of Genentech in
Canada and Pulmozyme outside the United States (the "Roche Territory").
Genentech has also agreed to grant to Roche an option for an exclusive patent,
know-how and trademark license in the Roche Territory, on a product-by-product
basis, to use, sell and under certain conditions, make other Genentech products
for which Genentech had rights as of April 12, 1995 or for which Genentech
subsequently acquires rights. For certain products in-licensed from (x) Scios
Nova Inc. and (y) IDEC Pharmaceuticals Corporation, Genentech will also grant to
Roche an option for an exclusive patent and know-how license outside the United
States and Canada on a product-by-product basis to use, sell and, under certain
conditions, make such products. For other human pharmaceutical products for
which Genentech acquires rights in the Roche Territory by means of a patent
and/or know-how license from a third party ("In-Licensed Product"), subject to
the terms and conditions of the relevant license agreements relating to such
products and Roche's acceptance of those terms and conditions, Genentech will
grant to Roche an option for an exclusive patent and know-how license in the
Roche Territory on a product-by-product basis to use, sell and, under certain
circumstances, make such In-Licensed Products. See "The Licensing
Agreement -- Licenses, Options, Know-how and Trademarks."

Prior to the completion of the first Phase II trial for a particular
product, Genentech retains authority to discontinue sole development of a
product and, subject to the Amended Governance Agreement, to license such
product to a third party. See "The Amended Governance Agreement -- Affiliation
Arrangements."

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Upon the completion of Phase II for a product, Roche must either exercise or
waive its option to be granted an exclusive license in the Roche Territory for
such product. See "Licensing Agreement -- Licenses, Options, Know-how and
Trademarks." If Roche waives its option, Genentech is free to develop and sell
the product itself or with another party. If Genentech and Roche mutually agree,
the options granted in the Licensing Agreement can be exercised prior to the
completion of Phase II.

The options granted in the Licensing Agreement expire ten years after the
Effective Date. Any option exercised by Roche during the ten-year term remains
in effect for the full term of the license (generally from the date the product
is first licensed to Roche until the later, in each country, of the expiration
of Genentech patents or 25 years from first commercial introduction) and any
unexercised option at the end of the ten-year period terminates. See "The
Licensing Agreement -- Royalties and Other Payments" and "-- Term and
Termination."

Under the Licensing Agreement with respect to the current Genentech and
Roche collaborations on IIbIIIa antagonists and ras farnesyltransferase
inhibitors, Genentech has the sole right in the United States, and Roche has the
sole right in the Roche Territory, to use and sell such products. All research
efforts on these products will continue to be shared in an equal manner, and no
royalties on sales shall be due from either party to the other. See "Certain
Relationships and Related Transactions."

Development and Marketing

Under the Licensing Agreement, Genentech will have sole responsibility and
full autonomy for the development and marketing of its products in the United
States, and also in the Roche Territory with respect to products for which Roche
does not exercise its option for a license. Roche will have sole responsibility
for the development and marketing of products in the Roche Territory for which
it has been granted an exclusive license or exercised its option for a license.

Under the Licensing Agreement, Roche will, in general, reimburse Genentech
for 50%, except in connection with certain products for which Roche is granted a
license with respect to Canada, for which reimbursement is 10%, of Genentech's
development costs incurred in connection with a product for which Roche has been
granted a license or for which Roche has exercised its option for a license, and
for IIbIIIa antagonists and ras farnesyltransferase inhibitors.

Production and Supply

Pursuant to the Licensing Agreement, Genentech will manufacture and supply
to Roche clinical requirements of Genentech products at cost and commercial
requirements at cost plus a margin of 20% on such cost. Roche will manufacture
and supply to Genentech clinical requirements of synthetic molecules other than
peptides or proteins ("Small Molecule Products") at cost and commercial
requirements at cost plus a margin of 20% on such cost. In-Licensed Products
will be manufactured and supplied to Roche in a manner consistent with the
license agreement for that product. Roche will pay 50% of Genentech's costs
associated with developing a manufacturing process for products licensed by
Roche. Genentech will pay that proportion of Roche's costs associated with
developing a manufacturing process for a Small Molecule Product licensed by
Roche that Genentech's expected revenues for sales of that product in the United
States bears to expected worldwide sales of that product.

Royalties and Other Payments

Genentech will receive various royalties on product sales from Roche,
ranging, in general, from 12.5% to 20% on such sales. See "The Licensing
Agreement -- Royalties and Other Payments."

Transition Provisions

The operations of Genentech Canada, Inc., Genentech Europe Limited and
Genentech Ltd. (Japan) will be transferred to Roche as soon as possible
following consummation of the Merger but no later than January 1,

11
<PAGE> 26

1996. Roche will assume any real property leases of those organizations as well
as any other liabilities that have arisen in the normal course of business. See
"The Licensing Agreement -- Transition Provisions."

Term and Termination

The Licensing Agreement expires with respect to any individual product when
royalties are no longer payable by Roche to Genentech on sales of such product.
Other termination provisions include the following: (1) Roche has the right to
terminate a license for a product upon six-months notice if it has completed at
least one Phase III clinical trial and the results of that trial are unable to
support the registration of that product, or the results of other trials
establish that further development would not provide data sufficient to support
registration, and, in such case, all rights to the product revert to Genentech;
(2) if Roche fails to use its best efforts to commercialize a product in a
country and fails to take adequate remedial measures, Genentech may (i)
terminate the agreement with respect to that product in that country if a
registration has not been initiated or (ii) convert the exclusive license for
that product in that country to a nonexclusive one if registration has been
initiated; (3) Genentech may terminate its development or commercialization at
any time for any product which has been licensed to Roche, and such product
shall then be subject to the provisions of the Amended Governance Agreement,
provided that if such termination is for reasons other than safety concerns,
Genentech will have an obligation for up to two years to provide Roche's
clinical and commercial requirements; (4) either party may terminate the
Licensing Agreement for the breach of a material obligation of the other; and
(5) Genentech may terminate Roche's option for a license for products if Roche's
equity ownership in Genentech is less than 50% at any time. See "Licensing
Agreement -- Term and Termination."

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

For United States Federal income tax purposes, each share of Common Stock
held by a stockholder prior to the Effective Time will be considered to have
been exchanged with the Company for a share of Special Common Stock. Although
the issue is not free from doubt, a stockholder whose shares of Common Stock are
exchanged for Special Common Stock by virtue of the Merger should not recognize
gain or loss with respect to each share so exchanged.

If the Special Common Stock were treated as preferred stock for purposes of
Section 305 of the Internal Revenue Code of 1986, as amended (the "Code"), a
holder of Special Common Stock would be required, during the period starting at
the Effective Time and ending at the conclusion of the Put Period, to include
currently in gross income, to the extent of the Company's applicable earnings
and profits, for each share of Special Common Stock, a portion (determined by
analogy to the original issue discount rules for debt instruments) of the excess
of the Put Price (as hereinafter defined) over the fair market value of such
share at issuance. While there is no authority directly on point and the issue
is not free from doubt, counsel to the Company believes that the Special Common
Stock should not be recharacterized as preferred stock for this purpose, and the
Company intends to treat it accordingly. See "Certain Federal Income Tax
Consequences."

STOCKHOLDER LITIGATION

12
<PAGE> 27

was negotiating the terms of the Proposed Transactions with Roche. As relief,
the complaints seek, among other things, a preliminary and permanent injunction
against the vote to be held at the Special Meeting; a preliminary and permanent
injunction against consummation of the Proposed Transactions, including against
any exercise by Roche of its right to cause redemption and against any exercise
by the holders of Special Common Stock of the Put Rights; an order voiding the
Proposed Transactions in the event it is approved by the vote of the
stockholders; and damages in an unspecified amount. The defendants believe that
the plaintiffs' allegations are without merit and intend to defend themselves
vigorously. The Court of Chancery has scheduled a hearing on plaintiffs'
application for a preliminary injunction for July 18, 1995.

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<PAGE> 28

GENERAL INFORMATION

This Proxy Statement/Prospectus is furnished to stockholders of Genentech
in connection with the solicitation of proxies by and on behalf of the Genentech
Board for use at the Special Meeting to be held on [day], July , 1995, at
[10:00] a.m., local time, at the [location] and any adjournment or postponement
thereof. This Proxy Statement/Prospectus and the related form of proxy are first
being mailed to stockholders of Genentech on or about July , 1995.

PURPOSE OF SPECIAL MEETING

At the Special Meeting, the stockholders of Genentech will be asked to
consider and vote upon the Proposal.

RECORD DATE; VOTING RIGHTS; PROXIES

The Genentech Board has fixed the close of business on July , 1995 (the
"Record Date") for determining holders of outstanding shares of capital stock of
Genentech entitled to notice of and to vote at the Special Meeting. Only holders
of record of Common Stock on the records of Genentech at the close of business
on the Record Date will be entitled to notice of and to vote at the Special
Meeting or any adjournments or postponements thereof. As of the Record Date,
there were shares of Common Stock issued and outstanding, each of
which entitles the holder thereof to one vote. All shares of Common Stock
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated in
such proxies. As of February 24, 1995, there were 20,524 holders of Redeemable
Common Stock. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES WILL BE VOTED FOR
APPROVAL OF THE PROPOSAL AND IN THE DISCRETION OF THE PROXY HOLDER AS TO OTHER
MATTERS, IF ANY, INCIDENTAL TO THE CONDUCT OF THE SPECIAL MEETING. A stockholder
who has given a proxy may revoke it at any time prior to its exercise by giving
written notice thereof to the Secretary of Genentech, by signing and returning a
later dated proxy or by voting in person at the Special Meeting; however, mere
attendance at the Special Meeting will not itself have the effect of revoking
the proxy.

SOLICITATION OF PROXIES

Genentech will bear the cost of solicitation of proxies on behalf of the
Genentech Board. In addition to soliciting proxies by mail, directors, officers
and employees of Genentech, without receiving additional compensation therefor,
may solicit proxies by telephone, by telegram or in person. Arrangements will
also be made with brokerage firms and other custodians, nominees and fiduciaries
for the forwarding of solicitation materials to the beneficial owners of
Genentech Shares held of record by such persons. Genentech will reimburse such
brokerage firms, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection therewith. Genentech has
retained D.F. King & Co., Inc. to aid in the solicitation of proxies. It is
estimated that the fee for D.F. King & Co. will not exceed plus out-of-
pocket costs and expenses.

QUORUM

The presence at the Special Meeting, in person or by properly executed
proxy, of holders of a majority of the outstanding shares of the Common Stock is
necessary to constitute a quorum. Because Roche owns a majority of the
outstanding shares of Common Stock and will be present at the meeting, a quorum
is assured.

REQUIRED VOTE

Under Genentech's Certificate of Incorporation, approval of the Proposal
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock held by persons other than Roche or any of
its affiliates. ACCORDINGLY, THE PROPOSAL WILL NOT BE APPROVED UNLESS THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK HELD BY PERSONS
OTHER THAN ROCHE AND ITS AFFILIATES VOTE IN FAVOR OF THE PROPOSAL. Thus, the
failure to submit a proxy (or vote in person at the Special Meeting) or the
abstention from voting by a stockholder will have the same effect as a vote
"Against" the Proposal.

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<PAGE> 29

Under Delaware Law, approval of the Proposal will also require the
affirmative vote of holders of a majority of the shares of Common Stock
outstanding and entitled to vote. Such vote is assured because Roche has agreed
to vote all shares of Common Stock owned by it or any of its affiliates in favor
of the Proposal.

As of the Record Date, shares of Common Stock (representing approximately
% of the outstanding shares of Common Stock) will be beneficially owned by
directors and executive officers of Genentech (excluding options and warrants to
purchase Genentech Shares in the future and shares owned by Roche). As of May
31, 1995, Roche owned 67,133,409 shares of Common Stock, representing 100% of
the then outstanding Common Stock, and 9,487,600 shares of Redeemable Common
Stock, representing approximately 18.8% of the then outstanding Redeemable
Common Stock. At the close of business on June 30, 1995, all outstanding shares
of Redeemable Common Stock (including those held by Roche) will automatically
convert into shares of Common Stock. Thus, as of the Record Date, Roche, based
on its present ownership of Genentech Shares, will own 76,621,009 shares of
Common Stock, representing approximately 65% of the outstanding Common Stock.
THE DIRECTORS OF GENENTECH HAVE INDICATED TO GENENTECH THAT THEY INTEND TO VOTE
ANY SHARES THEY OWN FOR APPROVAL OF THE PROPOSAL.

NO APPRAISAL RIGHTS

Holders of Genentech Shares who do not vote in favor of the Proposed
Transaction will not be entitled to exercise any appraisal or dissenters' rights
in connection with the Proposed Transactions.

THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF GENENTECH. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ
AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.

BUSINESS OF GENENTECH

Genentech is a leading biotechnology company focusing on the development,
manufacture and marketing of human pharmaceuticals produced by recombinant DNA
technology. Genentech was organized in 1976 as a California corporation, and
changed its state of incorporation to Delaware in 1987. The principal executive
offices of Genentech are located at 460 Point San Bruno Boulevard, South San
Francisco, California 94080 and its telephone number at that address is (415)
225-1000. In 1994, the Company had revenues of $795.4 million and earnings of
$124.4 million or $1.04 per share. Genentech currently markets five products:
Activase(R), a tissue plasminogen activator; Protropin(R) and Nutropin(R), human
growth hormones; Pulmozyme(R), DNase; and Actimmune(R), interferon gamma-lb.

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<PAGE> 30

MARKET PRICES OF AND DIVIDENDS
ON THE REDEEMABLE COMMON STOCK

The Redeemable Common Stock is listed and traded on the NYSE and the PSE
under the symbol "GNE." Following conversion of the Redeemable Common Stock into
Common Stock after June 30, 1995, such Common Stock will also be listed on the
NYSE and the PSE under the symbol "GNE." As of the date hereof, all of the
outstanding shares of Common Stock are owned by Roche and are not now traded
publicly. The following table provides certain information as to the quarterly
high and low closing prices of the Redeemable Common Stock for the calendar
quarters indicated.

<TABLE>
<CAPTION>
HIGH LOW
-----
<S> <C> <C>
1993:
First Quarter...................................... $39 3/4 $31 7/8
Second Quarter..................................... 44 31 1/4
Third Quarter...................................... 44 7/8 40 1/2
Fourth Quarter..................................... 50 1/2 42 5/8

1994:
First Quarter...................................... 51 3/8 41 3/4
Second Quarter..................................... 51 5/8 43 1/4
Third Quarter...................................... 52 1/2 48 1/8
Fourth Quarter..................................... 53 1/2 42 1/8

1995:
First Quarter...................................... 51 44 1/2
Second Quarter (through June 1, 1995).............. 51 7/8 46 7/8
</TABLE>

No dividends have been paid on the Common Stock or Redeemable Common Stock.
On April 28, 1995, the last full trading day prior to the announcement that the
Transaction Agreement (as hereinafter defined) had been executed, the closing
price per share of Redeemable Common Stock, as reported on the NYSE Composite
Tape, was $50 3/8. On June 1, 1995, the last full trading day for which
quotations were available at the time of printing of this Proxy
Statement/Prospectus, the closing sale price per share of Redeemable Common
Stock, as reported on the NYSE Composite Tape, was $48 7/8. STOCKHOLDERS ARE
URGED TO OBTAIN CURRENT QUOTATIONS FOR THE REDEEMABLE COMMON STOCK or (after
July 1, 1995) Common Stock. See "Summary and Special Factors -- Possible Effects
of Put Rights on Market for Special Common Stock." For a description of the
analysis by the financial advisors to the Special Committee of the effects of
the provisions of the Redeemable Common Stock (and the Special Common Stock) on
its trading, and potentially expected trading, price, see "The Proposed
Transactions -- Opinion of Financial Advisor."

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<PAGE> 31

SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth selected historical consolidated financial
data for Genentech for each of the fiscal years ended December 31, 1992, 1993
and 1994 and for the quarters ended March 31, 1994 and 1995. The selected
historical consolidated financial data for Genentech for the three years shown
below have been derived from the audited consolidated financial statements and
for the quarterly periods have been derived from the unaudited quarterly
information of Genentech. The historical data are not necessarily indicative of
results to be expected in the future and should be read in conjunction with the
consolidated financial statements and notes thereto of Genentech incorporated
herein by reference.

GENENTECH SELECTED HISTORICAL, CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------
1995 1994 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Product sales................ $ 162,067 $ 147,798 $ 601,064 $ 457,360 $ 390,975
Royalty income............... 47,149 33,679 126,022 112,872 91,682
Other revenues............... 29,751 17,393 68,304 79,517 61,608
---------- ---------- ---------- ---------- ----------
Total revenues..... 238,967 198,870 795,390 649,749 544,265
Costs and Expenses:
Cost of sales................ 26,750 22,131 95,829 70,514 66,824
Research and development..... 94,959 74,376 314,322 299,396 278,615
Marketing, general and
administrative............. 64,323 60,111 248,604 214,410 172,486
Interest expense............. 1,871 1,778 7,058 6,527 4,406
---------- ---------- ---------- ---------- ----------
Total costs and
expenses
(including cost
of sales)........ 187,903 158,396 665,813 590,847 522,331
---------- ---------- ---------- ---------- ----------
Income before taxes.......... 51,064 40,474 129,577 58,902 21,934
Income taxes................. 7,660 1,619 5,183 -- 1,097
---------- ---------- ---------- ---------- ----------
Net income................... $ 43,404 $ 38,855 $ 124,394 $ 58,902 $ 20,837
========= ========= ========= ========= =========
Net income per share......... $0.36 $0.33 $1.04 $0.50 $0.18
========= ========= ========= ========= =========
Weighted average number of
shares used in computing
per share amounts:......... 120,493 118,806 119,465 117,106 113,992
BALANCE SHEET DATA:
Current assets............... $1,016,203 $ 916,136 $ 997,116 $ 885,337 $ 580,499
Total assets................. 1,806,846 1,525,279 1,745,124 1,468,800 1,305,131
Current liabilities.......... 205,802 186,092 220,499 190,748 133,543
Total liabilities............ 404,600 349,107 396,340 351,995 297,810
Stockholders' equity......... 1,402,246 1,176,172 1,348,784 1,116,805 1,007,321
</TABLE>

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<PAGE> 32

THE PROPOSED TRANSACTIONS

BACKGROUND OF THE PROPOSED TRANSACTIONS

In late 1994, an analyst's report published by a Swiss bank raised the
subject of the expiration on June 30, 1995 of the redemption period applicable
to the Redeemable Common Stock and analyzed various alternatives, including
exercise, extension and expiration of the redemption rights currently applicable
to the Redeemable Common Stock. The Company's management became aware that such
report had come to the attention of Dr. Henri B. Meier, the Chief Financial
Officer of Roche Holding.

On January 30, 1995, Dr. Meier and Frederick Frank of Lehman Brothers, a
financial advisor to the Company, discussed the subject of extending Roche's
right to cause Genentech to redeem the Redeemable Common Stock. Dr. Meier
indicated at that time that Roche had not decided whether it would exercise its
right to cause such redemption. Mr. Frank indicated to Dr. Meier that a decision
not to exercise the redemption right could have a material adverse effect on the
market price of the Redeemable Common Stock and thus on the Company's ability to
motivate and retain its highly talented technical and scientific staff, and
urged Roche to consider exercising its existing redemption rights. Dr. Meier
indicated that, if the Company was prepared to do so, Roche would be willing to
discuss the terms upon which an extension of Roche's option might be agreed. At
a meeting requested by the Company's Senior Vice President and Chief Financial
Officer, Louis J. Lavigne, Jr., and held in Basel, Switzerland on February 1,
1995, Dr. Meier discussed with Mr. Lavigne the alternatives set forth in the
Swiss bank report, including an extension of Roche's redemption right. At that
meeting, Dr. Meier stated that Roche would be willing to discuss the parameters
of an extension of the option and that it had not made a decision as to whether
it would exercise the existing option prior to June 30, 1995.

During the first week of February 1995, there were additional conversations
between Mr. Frank and Dr. Meier and between G. Kirk Raab, the Company's
President and Chief Executive Officer, and Fritz Gerber, Chairman of the Board
of Directors of Roche Holding, concerning the matters previously raised by Dr.
Meier. Mr. Raab and Dr. Meier spoke on February 3, 1995, and, as a result of
that conversation, Mr. Raab requested that Mr. Frank travel to Switzerland to
meet with Dr. Meier.

At a meeting on February 5, 1995 in Basel between Mr. Frank, on behalf of
the Company, and Dr. Meier, Dr. Meier and Mr. Frank discussed an extension of
the redemption option applicable to the Redeemable Common Stock for a period of
three and one-half years at increasing prices of $1.25 per share for the first
eight quarters, $1.50 per share for the next four quarters and $2.00 per share
for the last two quarters, with an ending price of $80 per share in December
1998. Dr. Meier proposed that the limit on Roche's ability to purchase
Genentech's stock be increased from the current level of 75% to 80% to permit
Roche, if it so chose, to mitigate the effect of any declines in the market
prices of Genentech stock.

On February 9, 1995, the Genentech Board met to consider the issues
relating to Roche's option to cause the Redeemable Common Stock to be redeemed,
the possibility of Roche's effecting or not effecting redemption, and issues
relating to the possibility of entering into arrangements with Roche to extend
such option. At that meeting, the Genentech Board resolved to form the Special
Committee consisting of all of the directors of Genentech, except the two
designees of Roche, Drs. Kessler and Drews. After Drs. Kessler and Drews excused
themselves from the meeting, the Special Committee resolved to retain Lehman
Brothers as the Special Committee's financial advisor and to retain Wachtell,
Lipton, Rosen & Katz as its legal counsel. At the February 9th meeting, the
Special Committee discussed the terms of the Existing Governance Agreement
between Genentech and Roche and reviewed the matters that had been discussed
among Messrs. Raab, Frank, Lavigne and Gerber and Dr. Meier during the preceding
weeks.

At the February 9th meeting, Lehman Brothers advised the Special Committee
that the Redeemable Common Stock had traded in the market at prices
substantially higher than those that are implied by applying a comparable
company price earnings multiple to Genentech's historical and projected earnings
and that, based on the foregoing, (1) the existence of the Roche option had a
substantial buttressing effect on the price of the Redeemable Common Stock and
that, absent such option, the Redeemable Common Stock would be expected to have
traded in the market at significantly lower prices, (2) the price of the
Redeemable Common

18
<PAGE> 33

Stock would be expected to decline significantly if Roche were to decide not to
exercise its existing option and (3) extension of the option would significantly
mitigate this decline. The Special Committee was also advised by Lehman Brothers
that the supporting effect of an extension of Roche's redemption option might
not be as significant as has been the case with respect to the redemption right
currently applicable to the Redeemable Common Stock because of the market's
possible perception of the reasons for a determination by Roche not to exercise
its existing rights prior to June 30, 1995, and the corresponding lack of market
conviction that Roche would exercise an extended option. The analysis presented
by Lehman Brothers at the February 9th meeting was substantially similar to the
comparable analysis presented by Lehman Brothers at the meetings of the
Genentech Board and the Special Committee held on April 29 and 30, 1995. See
"--Opinion of Financial Advisor" below. The Special Committee also considered
Lehman Brothers' advice that a primary reason to consider an extension of the
Roche redemption right was that such an extension, assuming acceptable terms
could be arrived at, would be more favorable to the Company and its stockholders
than expiration of the right on June 30, 1995. The Special Committee therefore
concluded that the preferable approach to take in the Company's discussions with
Roche would be first to urge exercise of the existing redemption right by Roche,
but also to pursue a contingency plan of extending the redemption right
(assuming acceptable terms could be agreed) in order to minimize the adverse
impact on the Company and its stockholders which it believed would arise as a
result of expiration of the redemption right.

Also at the February 9th meeting, the Special Committee appointed a
subcommittee (the "Subcommittee") consisting of Mr. Raab and two other members
of the Genentech Board, Messrs. J. Richard Munro and Thomas Perkins, to urge
Roche to exercise its existing redemption option. As an alternative, should
Roche be unwilling to cause the Redeemable Common Stock to be redeemed, the
Subcommittee was to explore a possible extension of Roche's redemption option on
terms beneficial to Genentech and its stockholders. In adopting this strategy,
the Special Committee was aware that informing Roche of its willingness to
consider an extension of the redemption right could affect Roche's decision with
respect to its exercise of the right, but it concluded that the benefits to the
Company and its stockholders of such a strategy outweighed the possible
detriments thereof.

The Subcommittee met with Mr. Gerber on February 22, 1995. The Subcommittee
expressed to Mr. Gerber the Special Committee's desire that Roche exercise its
existing option with respect to the Redeemable Common Stock. Messrs. Raab,
Perkins and Munro presented Mr. Gerber with the financial and operational
rationales which, in Genentech's view, supported a decision by Roche to cause
Genentech to redeem the Redeemable Common Stock. In addition, the members of the
Subcommittee expressed to Mr. Gerber their view that the continuing uncertainty
with respect to Roche's decision whether or not to exercise its option would
pose operational problems for Genentech in the development of its international
infrastructure. Such problems also related to the possible effect of the
uncertainty on whether key employees of Genentech would remain with the Company.
Mr. Raab indicated to Mr. Gerber that it was his belief that the culture and
productivity of Genentech could be preserved if Roche exercised its current
redemption right so long as Roche took certain steps to maintain the
independence of Genentech, particularly with respect to research and
development. Mr. Gerber expressed concern about maintaining Genentech's
productivity and culture in the event that Roche exercised its current
redemption right.

During the course of the February 22nd meeting, the members of the
Subcommittee suggested to Mr. Gerber that if Roche was not going to exercise its
current right of redemption, the Subcommittee was prepared to consider two
possible alternatives. The first alternative was a one-year extension of the
redemption option at increasing prices with a commitment by Roche to cause
redemption of the remainder of the outstanding Redeemable Common Stock during
the period of the extension. The second alternative was a three-year extension
of the redemption right with increasing prices and a commitment by Roche to
purchase additional Genentech shares in the open market in order to bring its
ownership interest from 75% up to 79% of the Genentech Shares. The Subcommittee
further suggested that if Roche did not exercise its option to redeem the
outstanding Redeemable Common Stock by the end of the three-year extension, then
Roche would lose certain approval and negotiation rights under the Existing
Governance Agreement. Under either alternative, Roche's right to nominate
additional representatives to the Genentech Board pursuant to the Existing
Governance Agreement would be suspended for the period of the extension.

19
<PAGE> 34

At the conclusion of the February 22nd meeting, Mr. Gerber advised the
members of the Subcommittee that he wanted to consider their points, that he had
serious concerns with the alternatives discussed, that he wanted to discuss the
matter with his associates, and that he would call Mr. Raab on March 13, 1995.
Mr. Gerber also asked to meet with Dr. Arthur A. Levinson, a Senior Vice
President of Genentech, to discuss with Dr. Levinson how scientists at Genentech
might react and be affected if Roche exercised, or received an extension of, its
right to cause the Company to redeem the Redeemable Common Stock.

On February 23, 1995, Mr. Raab met again with Mr. Gerber. Mr. Gerber
reiterated to Mr. Raab his concerns with respect to the alternatives discussed
the previous day.

On February 27, 1995, the Special Committee held a telephonic meeting at
which Messrs. Raab, Munro and Perkins informed the Special Committee of the
details of the meeting with Mr. Gerber held on February 22nd. The Subcommittee
reported that Roche had expressed an unwillingness to decide whether it should
exercise its right to cause the Redeemable Common Stock to be redeemed prior to
June 30, 1995. At the conclusion of the Special Committee's discussion of the
contacts with Roche, the Special Committee decided to meet again telephonically
on March 13, 1995.

On March 8 and 9, 1995, Dr. Levinson met with Mr. Gerber and Dr. Meier in
Basel. At those meetings Mr. Gerber and Dr. Meier solicited Dr. Levinson's views
on the question of exercising or extending the redemption right and on the
potential reaction of the scientists at Genentech to such redemption or
extension. Dr. Levinson indicated that he believed the preferable course of
action from the standpoint of the Company's ability to attract and retain
distinguished scientists was for Roche to cause the Redeemable Common Stock to
be redeemed and to maintain the independence of Genentech as an operating
matter. He expressed his concerns that an extension of the redemption right,
although preferable to non-exercise of the right without extension, would not be
the best solution to the issues that had been discussed between the Company and
Roche. Mr. Gerber and Dr. Meier expressed their view that the Company should
consider an extension of the redemption period along the lines previously
proposed by Roche.

On March 13, 1995, the Special Committee held a telephonic meeting at which
Dr. Levinson reported his conversations with Mr. Gerber and Dr. Meier. In
addition, Mr. Raab reported that he had not yet received a call from Mr. Gerber
informing him of Roche's intentions with respect to the exercise of the
redemption right. Mr. Raab indicated that the members of the Subcommittee were
of the view that an extension of the redemption right on the terms proposed by
the Subcommittee on February 22nd was not under active consideration by Roche.
At the March 13th meeting, Mr. Perkins informed the Special Committee that he
would be resigning effective immediately as a director of the Company (and,
accordingly, of the Subcommittee).

Following the March 13th meeting of the Special Committee, Dr. Meier called
Mr. Raab in the afternoon on March 13th to indicate that there had been a
misunderstanding between Messrs. Raab and Gerber and that no decision would be
made by Roche at that time concerning exercise or non-exercise of the redemption
right. Later, in the evening on March 13th, Mr. Raab and Mr. Gerber discussed
having another meeting between Roche and Genentech concerning the exercise or
extension of the redemption right. A meeting was scheduled for Zurich,
Switzerland on April 3, 1995.

On March 16 and 17, Dr. Franz Humer, currently a member of the executive
committee and head of the Pharmaceuticals Division of Roche Holding, visited
Genentech. At the end of that visit, Mr. Raab related to Dr. Humer the history
of discussions with Roche to date and suggested that the best course for Roche
was to exercise its current right of redemption and to maintain Genentech's
operational independence.

Prior to the April 3, 1995 meeting, Mr. Frank, of Lehman Brothers,
described to Dr. Meier in a telephone call several of the concepts expected to
be considered at the meeting including the concept of a stockholder put. Also in
advance of the April 3, 1995 meeting, a "charter" describing future
relationships between Genentech and Roche in the event that Roche exercised its
right to cause a redemption of the Redeemable Common Stock was sent by Mr. Raab
to Mr. Gerber and Dr. Humer. In general, the charter proposed that Genentech
maintain its operational independence with respect to research and development,
manufacturing and sales and marketing in the United States and collaborate with
Roche on the development and

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<PAGE> 35

commercialization of Genentech products outside the United States. On April 3,
1995, Messrs. Raab and Frank met in Zurich with Mr. Gerber and Drs. Humer and
Meier, who indicated that they were interested in the framework reflected in the
"charter". Messrs. Raab and Frank and the Roche representatives discussed the
benefits and the risks of the redemption and expiration scenarios, and the terms
that any possible extension of the redemption right might take.

At the April 3 meeting, two extension proposals were discussed. The first,
considered only for a short period of time, was a three and a half year
extension of the redemption right at increasing prices ending at $80 per share
with an increase in Roche's limit on open market purchases of Genentech Shares
from 75% to 79.5%. Under this approach, Roche would commit to purchase such
number of Genentech Shares as would bring its ownership level up to 75% of the
outstanding Genentech Shares. Also, Roche's right to nominate additional members
of the Genentech Board would be postponed until after the expiration of the
extended redemption period. Most of the meeting was spent discussing the second
alternative, under which there would also be a three and half year extension of
the redemption right at increasing prices ending at $80 per share and an
increase in Roche's limit on purchases to 79.5%, but there would be no
requirement for Roche to purchase 75% of the outstanding Genentech Shares. In
this latter scenario, Roche would offer a put option to Genentech stockholders
at $65 per share exercisable at the end of the redemption period, Roche would be
granted certain rights to develop and commercialize on an exclusive basis
Genentech's existing products outside the United States, and an option, on a
product-by-product basis, to develop and commercialize products developed by
Genentech in the future outside the United States on an exclusive basis, in
return for payment by Roche of 50% of Genentech's development expenses with
respect to new indications for those products it markets or those products it
exercises the right to develop and market and the payment by Roche of a 15-20%
royalty on sales of such products. As in the first alternative, Roche's right to
nominate additional Board members would be postponed until the end of the put
period.

Roche rejected the proposed put price of $65 per share as being too high.
By the end of the April 3rd meeting, the parties were focusing on three
alternatives: (1) Roche would redeem the remainder of Genentech's stock by June
30, 1995; (2) Roche would not cause redemption of the rest of Genentech's stock
by June 30, 1995 and its right to do so would expire; or (3) a three and one
half year extension of the option at increasing prices ending at $80 per share
would be effected; an increase in Roche's limit on open market purchases of
Genentech stock to 79.5% would be permitted; a put for Genentech stockholders,
at a price per share then still under discussion by the parties, exercisable at
the end of the redemption period would be granted; Roche would be granted rights
to develop and commercialize on an exclusive basis Genentech's existing products
outside the United States, and an option, on a product-by-product basis, to
develop and commercialize products developed by Genentech in the future outside
the United States on an exclusive basis, in return for paying 50% of Genentech's
development expenses with respect to new indications for those products it
markets or those products it exercises the right to develop and market and would
be obligated to pay a royalty of 15%, with a higher royalty to be negotiated on
the sales of currently marketed products outside the United States; a Genentech
obligation to supply products to Roche would be agreed, and a postponement of
Roche's right to nominate additional Board members until the end of the put
period would be added to the current governance arrangements between the
companies.

At the conclusion of the April 3rd meeting, Mr. Gerber indicated that he
wished to consider the matter and submit it to Roche's board of directors for
approval and would call Mr. Raab to advise him of Roche's decision on April 28,
1995. Mr. Raab stated to Mr. Gerber that while the "buy" and "no-buy"
alternatives were solely within Roche's control, the third alternative approach
would be subject to approval by the Special Committee and, ultimately, by the
stockholders of Genentech not affiliated with Roche.

Later on that same day, Mr. Raab met with Dr. Humer to discuss additional
details relating to the Licensing Agreement. They developed a framework under
which Roche would have an option to acquire a license for rights to Genentech's
products outside the United States in return for payment of 50% of Genentech's
development expenses and royalties on product sales ranging from 12.5% to 20%.
They discussed the concept that Roche would be required to exercise this option
by the end of Phase II trials and that, if exercised, the reimbursement for
expenses would include those already incurred. Mr. Raab and Dr. Humer

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<PAGE> 36

also discussed possible royalty rates for various types of products and
acknowledged that additional discussion was needed to deal with the appropriate
royalty rates for currently marketed products.

On April 6, 1995, Dr. Meier advised Mr. Frank, and then Mr. Lavigne, that
Roche believed that a $60 per share price for the put, which had been proposed
by Genentech, was too high. Correspondence was exchanged between Messrs. Frank
and Meier and among Messrs. Raab, Gerber and Frank during the period of April
6-11, 1995 concerning potential extensions of the Roche redemption right.

In a fax of April 7, 1995, Mr. Gerber suggested to Mr. Raab that four
extension alternatives, described below, were acceptable to Roche and solicited
Genentech's response as to which appeared most attractive to Genentech. The four
extension alternatives suggested in Roche's fax were: (1) a three and one half
year extension of the redemption right at increasing prices ending at $80 per
share, an increase in the limit on Roche's open market purchases of Genentech's
outstanding stock to 79.5% and a postponement of Roche's right to nominate
additional Genentech Board members (such three elements being referred to herein
as the "Base Terms"); (2) the Base Terms, plus a right on the part of the
Genentech stockholders to put their stock at $51 per share exercisable at the
end of the redemption period, and a grant of rights to Roche to develop and
commercialize Genentech's products outside the United States in exchange for
Roche's payment of 50% of Genentech's development expenses and a 15% royalty on
such sales; (3) the Base Terms, except that there would be a four year (rather
than a three and one half year) extension of the redemption right at increasing
prices up to $82 (rather than $80) per share, plus a right on the part of
Genentech's stockholders to put their stock at $55 (rather than $51 as in
alternative (2) above) per share exercisable at the end of the redemption
period, and (as in alternative (2) above) a grant of rights to Roche to develop
and commercialize Genentech's products outside the United States in exchange for
Roche's payment of 50% of Genentech's development expenses and a 15% royalty on
such sales; or (4) the Base Terms, except that there would be a five year
extension of the redemption right at increasing prices ending at $85 per share,
plus a right on the part of Genentech's stockholders to put their stock at $60
per share exercisable at the end of the redemption period, and a grant of rights
to Roche to develop and commercialize Genentech's products outside the United
States in exchange for Roche's payment of 50% of Genentech's development
expenses and a 15% royalty on such sales. It continued to be the strong view of
Roche that a put price in excess of $55 at the end of a four-year extension
would be too high.

On April 9, 1995, Mr. Raab sent a fax to Mr. Gerber emphasizing that it was
important to have a common understanding of the terms of any proposal to extend
the redemption right before the upcoming meeting of the Special Committee and
the Genentech Board, that the rights to Genentech's products outside the United
States were worth more than the value that Roche was apparently ascribing to
them, and that Roche should have a clear understanding of the obligation of the
Genentech Board in evaluating offers from Roche to purchase the remainder of
Genentech after June 30, 1995. In his April 9 letter, Mr. Raab stated that he
believed "that the soundest decision continues to be for you to exercise your
option and the riskiest is not to exercise. The extension offers good potential
for a compromise and the inclusion of the put under appropriate conditions the
most effective way to do it."

On April 10, 1995, Mr. Raab sent another fax to Mr. Gerber defining the
term "development costs" (of which Roche would reimburse 50% in the event that
Roche exercised its option for a license under the proposed Licensing
Agreement), proposing a 20% royalty on sales of the currently marketed products
in Canada and expressing a desire for Roche to share some of the costs of
acquiring Boehringer Ingelheim's rights to TPA in Canada. Mr. Raab also proposed
a 15-20% royalty on sales of DNase (as defined below) in Europe depending on the
approved indications and suggested that Genentech would supply products to Roche
for which Roche exercised its option at fully burdened manufacturing costs plus
a margin to be negotiated. During this period, Roche continued to reserve its
decision on whether to exercise the existing option or negotiate an extension.
Moreover, Roche continued to emphasize its view that a put price in excess of
$55 at the end of the four-year term could not be justified.

On April 12, 1995, Mr. Gerber sent a letter to Mr. Raab proposing the
following terms: (a) a four year extension of the redemption right at increasing
prices ending at $82 per share; (b) an increase in the limit on Roche's open
market purchases of Genentech's outstanding stock to 79.5%; (c) a stockholder
put at $60 per share exercisable beginning at the end of the redemption period
for thirty days; (d) Roche's absorption of

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<PAGE> 37

Genentech Canada and payment of a 20% royalty on sales of HGH, TPA and DNase in
Canada; (e) Roche's absorption of Genentech Europe and payment of a 20% royalty
on sales of DNase for cystic fibrosis and a 15% royalty on sales of DNase in
Europe when it is approved for chronic obstructive pulmonary disease; (f) a
grant of an option to Roche for rights to other products outside the United
States which would have to be exercised by the end of Phase II trials and for
which Roche would pay 50% of Genentech's development expenses, including
reimbursement for incurred expenses, a royalty of 12.5% on aggregate sales up to
$100 million and a 15% royalty on aggregate sales above $100 million; and (g) a
Genentech obligation to supply Roche at cost plus a margin to be negotiated.

On April 12 and 13, 1995, the Special Committee met to consider, among
other matters, the discussions that had taken place between Roche and the
Company. Mr. Raab described the events that had transpired since the March 13th
meeting and described Mr. Gerber's most recent proposal. The Special Committee
discussed the apparent likelihood that Roche would not exercise its current
right to cause redemption of the Redeemable Common Stock prior to June 30, 1995,
at which time such right would expire, and expressed concern with respect to the
adverse effects that a decision by Roche not to exercise the redemption right
would have on the market price of the Redeemable Common Stock. The Special
Committee's conclusion with respect to Roche's apparent unwillingness to
exercise the current redemption right was based in part upon the Subcommittee's
and Mr. Frank's reports of their discussions with Roche and upon Roche's stated
reluctance to cause the Company to redeem the Redeemable Common Stock prior to
June 30, 1995. Based on the advice of Lehman Brothers, the Special Committee
concluded that a public announcement on or about April 28th concerning
non-exercise of the redemption right by Roche would have the same effect on the
market price of Redeemable Common Stock as would expiration of the right on June
30, 1995. Based on the foregoing, the Special Committee continued to consider
the terms of, and to pursue, the extension of the redemption right as a
contingency plan should Roche decide not to exercise its existing right.

The Special Committee also discussed the advantages and disadvantages of
extending the redemption right; the proposed redemption prices; the term of the
proposed extension of the redemption right; the effects of the terms of the
stockholder put, including the timing of the stockholder put and the exercise
price of the stockholder put; the value of Genentech's product rights outside
the United States; the reasonableness of the terms for the development and
commercialization of Genentech's products outside the United States; the ability
of Roche to commercialize effectively those rights and the benefits and
detriments of sharing development expenses with Roche in return for a royalty;
and the risks and benefits of an expansion by Genentech of its international
operations to develop and commercialize these products itself.

At that meeting, Mr. Frank reviewed his conversations with Dr. Meier. Mr.
Frank, on behalf of Lehman Brothers, also discussed various financial analyses,
including: the relative values of the put and the extended redemption option
under a Black-Scholes option valuation model; whether, based upon a number of
factors, including assumed levels of Genentech's earnings and the multiples of
earnings at which comparable stocks would be expected to trade, Roche would have
an incentive to redeem or shareholders would have an incentive to put their
shares; the term of the extended option; the term of the put; the price of the
extended option; the price of the put; and the value of rights to Genentech's
products outside the United States as well as the terms of that proposed grant
of rights to Roche. Lehman Brothers' discussion was substantially similar to the
comparable analysis presented by Lehman Brothers at the meetings of the
Genentech Board and the Special Committee held on April 29 and 30, 1995. See
"Opinion of Financial Advisor" below.

The Special Committee also discussed Mr. Frank's and Mr. Raab's stated
views that Roche was not likely to cause the Company to redeem the Redeemable
Common Stock under its current option. Lehman Brothers expressed its view that
if the option were allowed to expire unexercised on June 30, 1995 (or if a
public announcement of Roche's decision not to exercise were made prior to that
date), the decline in the market price of the Redeemable Common Stock would
likely be significant. Messrs. Raab and Frank also indicated to the Special
Committee that negotiations with Roche had been difficult and that, based on
their extensive discussions with Roche, they did not believe that the Company
could negotiate better terms with Roche than those that were currently under
consideration by both parties.

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<PAGE> 38

Members of the Special Committee expressed concern as to whether Genentech
would have to decrease spending on research and development efforts to increase
earnings over the short term if Roche's redemption right expired unexercised and
the price of Genentech's stock declined significantly. Members of the Special
Committee also expressed concern that motivating employees might be difficult in
such circumstances and that such difficulties could affect the scientific
excellence and productivity of the Company to the detriment of its stockholders.

At the conclusion of the April 12-13 meeting, the Special Committee
authorized the management of Genentech and its financial and legal advisors to
explore further and refine Roche's most recent proposals.

In its correspondence with Genentech during the period following the April
12-13 meeting, Roche indicated that the Roche Board of Directors would
deliberate on the terms of the proposed transaction at a meeting of its Board to
be held on April 27th. Roche indicated that the following terms would be
discussed: (a) a four year extension of the redemption right at increasing
prices ending at $82 per share; (b) a stockholder put at $60 per share
exercisable beginning at the end of the redemption period for thirty days; (c) a
grant by Genentech to Roche of worldwide commercial product rights outside the
United States along the lines described above; and (d) an increase in the limit
on Roche's open market purchases of Genentech's outstanding stock to 79.9%.
Roche's correspondence to Genentech during this period also indicated that Roche
would notify Genentech on April 28th either that (i) it would exercise the
redemption rights then applicable to the Redeemable Common Stock or (ii) it
would not exercise its right to cause the Company to redeem such stock, in which
case it would discuss with Genentech the terms of the proposal outlined above.

On April 25, John P. McLaughlin, Senior Vice President and Secretary of
Genentech, sent a letter to Dr. Meier expressing Genentech's concern that,
because of the time required to seek stockholder approval, the transactions
might not be completed prior to June 30, 1995, the date on which the existing
Redeemable Common Stock would expire. Mr. McLaughlin suggested that, assuming
the Genentech Board decided to proceed with the proposed transaction, the
parties agree to a mechanism pursuant to which the same transactions could be
effected even after the June 30th conversion date had passed. During the course
of the next two days, Genentech, Roche and their respective legal advisors
agreed on the mechanics of an alternative structure which provided that the
Proposed Transactions could be completed after June 30, 1995 through a merger.
On April 26, Mr. Raab contacted Dr. Meier to discuss and agree that the merger
format would be used after June 30, 1995 if the matter was approved by the
Genentech Board.

On April 27, Dr. Humer contacted Mr. Raab to suggest several changes to the
draft Licensing Agreement. Later on April 27, representatives of Genentech met
with representatives of Roche via video-conference to discuss issues relating to
the Licensing Agreement.

On the evening of April 28, 1995 (Pacific Time), Mr. Gerber called Mr. Raab
to inform him that Roche did not then intend to exercise its existing right to
cause Genentech to redeem the Redeemable Common Stock. Mr. Gerber informed Mr.
Raab that the Roche Board of Directors had authorized Roche to proceed with the
extension transaction as discussed over the previous two weeks. Mr. Raab
reiterated that the transaction would be subject to approval by the Special
Committee, the Genentech Board and, ultimately, by the stockholders of Genentech
not affiliated with Roche.

On April 29, 1995, the Special Committee and the Genentech Board (excluding
the Roche designees) held a joint meeting to discuss the Proposed Transactions
with its legal and financial advisors. As indicated above, the Special Committee
consists of all Genentech Board members other than the two Roche designees.
Legal counsel made presentations concerning the duties of directors and the
terms of the agreements, including the Merger Agreement, pursuant to which the
Proposed Transactions would be effected. Mr. Lavigne made a presentation
regarding the Company's operations and certain projected financial information
described under "Certain Projections of Future Operations and Other
Information." Following Mr. Lavigne's presentation, Lehman Brothers delivered
the presentation regarding the terms of the Proposed Transactions described
under "The Proposed Transactions -- Opinion of Financial Advisor." Throughout
each of these presentations there were questions to the presenters by, and
discussion among, the members of the Special Committee. Among other matters,
members of the Special Committee asked whether, if Genentech were unwilling to
extend the redemption rights, Messrs. Frank and Raab believed that Roche would
not exercise its

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<PAGE> 39

existing right to cause the Redeemable Common Stock to be redeemed. Messrs.
Frank and Raab indicated that it continued to be their strong view, based on,
among other things, the discussion they had with senior officers of Roche, that
Roche would not exercise. In his presentation and in response to questions from
members of the Special Committee, Mr. Frank indicated that if the current option
were permitted to lapse without exercise of the Roche call right and without the
proposed extension of the call (and the grant of the related put), the market
price of the Redeemable Common Stock would, in Lehman Brothers' view, be
expected to decline significantly below its current market value. Mr. Frank
repeated that it was Lehman Brothers' view that, based on comparable company
analyses, the Redeemable Common Stock was currently trading at a price that
significantly exceeded the price at which the shares would have been expected to
trade had the existing redemption option not been in effect. See "The Proposed
Transactions -- Recommendation of the Board of Directors; Fairness of the
Transaction" and " -- Opinion of Financial Advisor -- Future Stand-Alone
Values."

Members of the Genentech Board also asked for Lehman Brothers' view as to
the merits of declining to enter into the Proposed Transactions in an effort to
pressure Roche to exercise its call right on or prior to June 30, 1995. Mr.
Frank stated that, in his view, the Proposed Transactions were the best
alternative then available to the Company. He stated that, given the belief as
to Roche's unwillingness to exercise its current option, declining to enter into
the Proposed Transaction posed substantial risks for Genentech and its
stockholders. He advised that once the Redeemable Common Stock had been
converted into Common Stock on June 30, 1995 (or once a public announcement of
Roche's intention not to exercise had been made), the Company would be in a
substantially less advantageous position vis-a-vis Roche to negotiate a
transaction on terms as favorable to Genentech and its stockholders as those
contemplated by the Proposed Transactions then before the Special Committee. In
response to questions from the Special Committee, Mr. Frank indicated that it
was his view that the Company should not jeopardize the currently proposed
transaction by attempting to force Roche's hand in exercising its current call
right.

In response to questions concerning the terms of the Proposed Transactions,
Mr. Frank stated that it was Lehman Brothers' view that the limitation on the
upper end of the range at which the Special Common Stock would trade following
consummation of the Proposed Transactions was mitigated by the assurance that
the price of such stock would not fall below the present value of the $60 Put
Price payable in July 1999. Mr. Frank also indicated that he believed the
commercial arrangements that formed an integral part of the Proposed
Transactions were favorable to the Company given the difficulty, expense and
uncertainty associated with building an infrastructure in Europe. He noted that
royalties, unlike the profits from wholly owned but newly created or expanded
entities, result in immediate revenues for the Company. He also pointed out the
significant risks associated with product development and commercialization in
Europe. Mr. Raab noted the risks associated with the development and
commercialization of drugs in Japan.

In response to questions from members of the Special Committee, Messrs.
Raab and Frank also indicated that, in their view, other than exercise by Roche
of the current redemption right, approval and consummation of the Proposed
Transactions would be the most favorable then available alternative for the
employees of Genentech. Mr. Raab indicated that he believed that, given the
current circumstances, the best means for Genentech to attract and retain
talented scientists would be to enter into the Proposed Transactions. The joint
meeting of the Special Committee and the Genentech Board concluded in the
evening on April 29th, with the members of the Special Committee and the
Genentech Board suggesting that the meeting be reconvened on April 30th to
further consider the issues that had been raised in their deliberations to date.

On April 30, 1995, the Special Committee and the Genentech Board again met
jointly to discuss the Proposed Transactions and to ask questions of Genentech's
management, Lehman Brothers and legal counsel. Following a discussion of the
issues that had been raised the previous day, the Special Committee received the
oral opinion (which Mr. Frank said would be followed by a written opinion to the
same effect and dated April 30th) of Lehman Brothers described under "The
Proposed Transactions -- Opinion of Financial Advisor" and resolved to recommend
that the Genentech Board approve the Proposed Transactions. The written opinion
of Lehman Brothers is set forth in Annex B hereto and is described under "The
Proposed Transactions -- Opinion of Financial Advisor."

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<PAGE> 40

Immediately after having received the opinion of Lehman Brothers, the
Genentech Board (with Messrs. Drews and Kessler, the Roche designees, not
present) approved the Proposed Transactions and authorized the Company to submit
the Charter Amendment to a vote of the Genentech stockholders.

On May 1, 1995, Roche and Genentech publicly announced that they had
entered into a Transaction Agreement (the "Transaction Agreement"). Under the
Transaction Agreement, the substance of the Proposed Transactions was to be
accomplished through an amendment to Genentech's Certificate of Incorporation.
The Transaction Agreement provided that if, as of the close of business on June
5, 1995, (1) a definitive copy of a proxy statement had not been mailed to the
Company's stockholders or (2) the Special Meeting had not been scheduled to
occur on or prior to June 30, 1995, the Transaction Agreement would be
terminated. However, the Company and Roche also agreed that concurrently with
the termination of such agreement, the Company and Roche would enter into the
Merger Agreement. The purpose of the Merger Agreement was to enable the Company
and Roche to consummate the Proposed Transactions after June 30, 1995 -- the
date after which the Redeemable Common Stock would convert automatically to
Common Stock.

On May 23, 1995, Genentech and Roche agreed to terminate the Transaction
Agreement, and they simultaneously entered into the Merger Agreement. They did
so (i) because they did not believe that there was a reasonable likelihood that
the transactions contemplated by the Transaction Agreement could be consummated
prior to June 30, 1995 and (ii) to avoid any confusion among the stockholders of
the Company which might arise as a result of preliminary circulation of a proxy
statement addressing approval of the Charter Amendment contemplated by the
Transaction Agreement and a subsequent proxy statement which addressed the
Merger.

The effect of the Merger Agreement is substantially the same to the Company
and its stockholders as the Charter Amendment contemplated by the Transaction
Agreement. Under the Merger Agreement, all of the Proposed Transactions would be
effected in a manner that would put the Company, Roche and the holders of
Redeemable Common Stock in the same position as they would have held if the
Proposed Transactions had been consummated pursuant to the Transaction
Agreement.

Those members of the Genentech Board designated by Roche were not present
for the meetings held on April 29 and 30, 1995 or otherwise with respect to the
Proposed Transactions, did not participate in the deliberations of the Genentech
Board with respect to the Proposed Transactions, and consequently, did not cast
any votes with respect thereto.

PURPOSE AND STRUCTURE OF THE TRANSACTIONS

On May 23, 1995, in order to effect the substance of the transactions
provided for in the Transaction Agreement, Genentech, Roche and Merger
Subsidiary entered into the Merger Agreement. Pursuant to the Merger Agreement,
among other things, (i) Merger Subsidiary will be merged with and into
Genentech, with Genentech being the surviving corporation, (ii) the Certificate
of Incorporation of Genentech will be amended to authorize the issuance by
Genentech of Special Common Stock, (iii) each outstanding share of Common Stock
(other than shares of Common Stock held by Roche and its affiliates) will be
converted into one share of Special Common Stock, (iv) each outstanding share of
Common Stock held by Roche will be cancelled, and (v) the outstanding common
stock of Merger Subsidiary will be converted into shares of Common Stock
representing the same number of shares of Common Stock held by Roche immediately
prior to the Merger.

Pursuant to the current Genentech Certificate of Incorporation, at the
close of business on June 30, 1995, each outstanding share of Redeemable Common
Stock will automatically be converted into one share of Common Stock. As noted
above, in the Merger, such Common Stock (other than Common Stock held by Roche
and its affiliates) would then be converted into Special Common Stock. The
purpose of the Merger and of the resulting conversion of Common Stock into
Special Common Stock is to, among other matters, (i) provide for the Call
Rights, which extend by four years the period during which the publicly traded
stock of Genentech is subject to redemption by Genentech at the option of Roche,
with such redemption during such four-year period being at certain specified
prices per share ranging from $61.25 during the quarter ending September 30,
1995 and increasing quarterly to $82.00 during the quarter ending June 30, 1999,
and (ii) provide for the Put Rights, which afford the holders of Special Common
Stock the right to require Genentech

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<PAGE> 41

to redeem all or a portion (at the election of the holder) of their shares of
such stock at a price of $60.00 per share in the event that Roche does not cause
the exercise of the Call Rights. The Put Rights will be exercisable during the
30-business day period following the expiration of the Call Rights or during a
60-business day period following certain Insolvency Events of the Company.

Under the Amended Governance Agreement, Roche will be required to, (i) if
the Call Rights are exercised, pay to a depositary sufficient funds to satisfy
the Company's obligations in respect of the Call Rights or (ii) if the Put
Rights become exercisable, contribute to the Company the funds required to
satisfy the Company's obligations under the Put Rights. In lieu of the
contribution to the Company referred to in clause (ii) of the preceding
sentence, the Amended Governance Agreement provides that Roche (or an affiliate
of Roche) may elect to purchase the Special Common Stock directly from
stockholders who elect to exercise their Put Rights. In exchange for the payment
by Roche to Genentech in respect of the Put Rights, Genentech will issue to
Roche (or an affiliate of Roche) a number of shares of Common Stock equal to the
number of shares of Special Common Stock redeemed by Genentech pursuant to
exercises of the Put Rights. See "The Amended Governance Agreement -- Redemption
of Special Common Stock" and " -- Capital Contribution and Assumption of Put
Obligations by Roche." The payment obligation of Roche with respect to the Put
Rights is guaranteed by Roche Holding. See "The Merger Agreement;" "The Amended
Governance Agreement;" "The Licensing Agreement;" and "Guaranty of Roche
Holding."

Each share of Special Common Stock outstanding following the close of
business on the last day of the Put Period will, unless previously called for
redemption on or prior to such date, automatically be converted into one share
of Common Stock. See "The Charter Amendment; Description of the Special Common
Stock -- Conversion."

For information regarding the specific redemption prices applicable during
each quarterly period during the four years when the Call Rights will be in
effect and for the historical redemption prices applicable under the Redeemable
Common Stock, see "The Charter Amendment; Description of the Special Common
Stock -- Call Rights."

Holders of the Redeemable Common Stock currently do not have any rights
comparable to the Put Rights and, consequently, do not have the right to require
the Company to purchase their shares of Redeemable Common Stock.

The Amended Governance Agreement extends and modifies the Existing
Governance Agreement. In particular, under the modified governance arrangements,
the limit on Roche's ability to make open market purchases would be increased
such that Roche could own, following any such purchase 79.9%, rather than 75%,
of the voting power of the Company's equity securities on a fully diluted basis.
The Licensing Agreement provides for, among other matters, the grant by the
Company to HLR of (i) the exclusive right to market certain Genentech products
outside of the United States and (ii) an option on a product-by-product basis to
develop and market on an exclusive basis outside the United States all other
Genentech products which conclude Phase II trials within 10 years following
execution of the Licensing Agreement.

For further information with respect to the Genentech Board's and the
Special Committee's reasons for supporting the Proposed Transactions and
recommending the same to stockholders, see "Summary and Special
Factors -- Genentech's Reasons for the Proposed Transactions;" " -- Advantages
and Disadvantages of the Proposal to Genentech's Stockholders," " -- Effects of
a Failure to Approve the Proposal;" "The Proposed Transactions -- Background of
the Proposed Transactions;" " -- Recommendation of the Board of Directors;
Fairness of the Transaction;" and " -- Opinion of Financial Advisor."

RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE TRANSACTION

By unanimous vote, the Genentech Board (with the two Roche designees not
present) and the Special Committee (which, as indicated above, consists of all
directors other than the two Roche designees) have approved the Proposed
Transactions and determined that such transactions are fair to and in the best
interests of Genentech and its stockholders (other than Roche). Each member of
the Genentech Board has indicated that he or she intends to vote all shares of
Redeemable Common Stock that he or she owns in favor of the Proposal. THE
GENENTECH BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL.

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At the meetings on April 29 and 30, 1995, the Genentech Board and the
Special Committee reviewed and considered the presentation of Lehman Brothers as
to the fairness of the Proposed Transactions to holders of the Redeemable Common
Stock (other than Roche), as well as the status of negotiations between the
Company and Roche. In reaching the determination described in the immediately
preceding paragraph, the Genentech Board and the Special Committee gave careful
consideration, without assigning relative weights, to a number of factors,
including the following:

(i) The conclusion, based on the reports, presentations and
discussions described under "The Proposed Transactions -- Background of the
Proposed Transactions," that, regardless of whether the Company was willing
to extend Roche's current option to cause the Company to redeem the
Redeemable Common Stock prior to June 30, 1995, Roche was unlikely to
exercise such option;

(ii) Based on the advice of Lehman Brothers, the conclusion that the
market price of the publicly traded Genentech stock would be expected to
decline significantly if Roche's right to cause the Redeemable Common Stock
to be redeemed were to expire unexercised at June 30, 1995 or if Roche were
to publicly announce its intention not to exercise that right in advance of
such date;

(iii) The belief that a substantial decline in the market value of the
publicly traded Genentech stock would, in addition to immediate diminution
in stockholder value, have material adverse effects on Genentech's
relations with its employees and on Genentech's ability to attract and
retain talented scientists, which, in turn, would likely further adversely
affect stockholder value;

(iv) The belief, based on the advice of Lehman Brothers, that the
existence of Roche's current right to cause redemption of the Redeemable
Common Stock has had the effect of supporting the price at which the
Redeemable Common Stock trades;

(v) Lehman Brothers' advice that, if the Merger is approved by the
stockholders of Genentech, (x) the potential decline in the price of the
publicly traded Genentech stock could be significantly mitigated by the Put
Rights and (y) the Call Rights will have a supporting or elevating effect
on the market price of the Special Common Stock, although the Special
Committee has been advised that such supporting effect may not be as
significant as has been the case with the current redemption right because
of the market's possible perception of the reasons for a determination by
Roche not to exercise its existing rights prior to June 30, 1995, and the
corresponding lack of market conviction that Roche would exercise an
extended option;

(vi) The presentation of Lehman Brothers, and Lehman Brothers'
opinion, to the effect that the Proposed Transactions are fair to the
holders of shares of Redeemable Common Stock (other than Roche), from a
financial point of view, including Lehman Brothers' detailed analysis of
the market behavior of the Redeemable Common Stock, the likely impact of
the expiration of Roche's redemption option upon the trading prices of such
stock, and Lehman Brothers' views as to the potential effects upon future
trading prices of the stock of extending such option, as contemplated by
the Call Rights inherent in the Special Common Stock. The Special Committee
recognized, however, in considering such analysis that the trading price of
such stock is a product of a variety of factors, many of which are beyond
the control of the Company, and that it is not possible to predict the
actual prices at which the Special Common Stock will trade, or the actual
prices at which the Common Stock will trade if the Proposal is not adopted;

(vii) The advice of Lehman Brothers that the trading price of the
Special Common Stock would be afforded "downside" protection" and that such
price would take into account the benefits to the Genentech stockholders of
the assurance of being able to "put" their shares to the Company at the $60
price payable in July 1999, and the fact that Roche had agreed to
contribute to the Company the funds required to satisfy the Company's
obligations under the Put Rights in exchange for the issuance by the
Company of a number of shares of Common Stock equal to the number of shares
acquired by the Company upon exercise of the Put Rights, or to purchase
Special Common Stock directly from stockholders who exercise their Put
Rights (with such obligations of Roche being guaranteed by Roche Holding,
as described herein under "Guaranty of Roche Holding");

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<PAGE> 43

(viii) The fact that if Genentech's future growth and/or market
conditions were to warrant a per share valuation of Genentech prior to June
30, 1999 in excess of the redemption prices applicable under the Call
Rights, such redemption prices would place a cap on the price at which the
Special Common Stock will trade and, thus, will limit the return holders of
Special Common Stock can realize from such securities;

(ix) The fact that, as a result of the Call Rights, if Genentech's
future growth and/or market conditions were to warrant a valuation of
Genentech prior to June 30, 1999 in excess of the redemption prices of the
Special Common Stock under the Call Rights and if the Special Common Stock
were to be redeemed, holders of the Special Common Stock would participate
in such increased valuation only to the extent permitted by the applicable
redemption price under the Call Rights;

(x) The belief that the redemption prices of the Call Rights leave
substantial room for future growth of the Company to be recognized in its
stock price and that the "downside protection" afforded by the Put Rights
is a significant advantage to the Genentech public stockholders which
mitigates any "upside limitations" that may result from the existence of
the Call Rights;

(xi) The disadvantageous negotiating position that the Company and its
stockholders would have held vis-a-vis Roche had the redemption right
expired unexercised on June 30, 1995 or had Roche made a public
announcement of its intention not to exercise the current redemption rights
in advance of June 30, 1995;

(xii) The projections of Genentech's future operations described
herein under "Certain Projections of Future Operations and Other
Information" and the experience of the Genentech Board with respect to the
business of the Company;

(xiii) The potential adverse effect upon the Company, its scientists
and other employees and its Redeemable Common Stock of continuing
uncertainty as to exercise or non-exercise of the existing redemption
rights by Roche and as to the course of action that would be taken with
respect to future relations with Roche;

(xiv) The fact that the Proposed Transactions would, in general, keep
in place current governance arrangements between Roche and the Company,
which the Genentech Board believes have formed the basis for a mutually
beneficial relationship;

(xv) The belief that the payment by Roche of 50% of certain of
Genentech's development expenses under the Licensing Agreement will allow
Genentech to take a larger number of promising research projects into
development, increasing the likelihood that Genentech will have more
medically and commercially significant marketed products over the next
several years;

(xvi) The fact that the terms of the Licensing Agreement will serve to
mitigate certain potential losses of the Company, because, if Roche elects
to exercise its option under the Licensing Agreement at the conclusion of
Phase II trials with respect to a particular product, and should that
product then fail during Phase III trials, the adverse effect on the
Company of such failures would be mitigated because Roche would generally
have been required to pay one half of the development costs with respect to
such product; and

(xvii) The fact that in accordance with the Company's Certificate of
Incorporation and the Existing Governance Agreement, the Proposal could
only be approved by a majority of the holders of Redeemable Common Stock
unaffiliated with Roche.

See "The Proposed Transactions -- Background of the Proposed Transactions"
and " -- Interests of Certain Persons in the Proposed Transactions."

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<PAGE> 44

OPINION OF FINANCIAL ADVISOR

As indicated above, the Special Committee engaged Lehman Brothers to act as
its financial advisor in connection with the Proposed Transactions and to render
an opinion with respect to the fairness, from a financial point of view, to the
holders of the Redeemable Common Stock (other than Roche) of the consideration
to be received by such holders and Genentech in connection with the Proposed
Transactions.

In connection with the Genentech Board's and the Special Committee's
consideration of the Proposed Transactions, Lehman Brothers made a presentation
to the joint meeting of the Genentech Board and the Special Committee held on
April 29 and 30, 1995 and provided the Special Committee with its oral opinion,
subsequently confirmed in a written opinion dated April 30, 1995, to the effect
that, as of the date of such opinion, the consideration to be received by the
holders of the Redeemable Common Stock (other than Roche) and Genentech in
connection with the Proposed Transactions was fair, from a financial point of
view, to such holders.

The full text of the written opinion of Lehman Brothers, dated April 30,
1995, which sets forth assumptions made, factors considered and limitations on
the review undertaken by Lehman Brothers, is attached as Annex B to this Proxy
Statement/Prospectus and is incorporated hereby by reference. Genentech's
shareholders are urged to read such opinion carefully in its entirety.

No limitations were imposed by Genentech on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. In rendering its opinion, Lehman Brothers did not express an
opinion as to the actual prices at which shares of Special Common Stock will
trade following consummation of the Proposed Transactions.

The opinion of Lehman Brothers was requested by, and was provided for the
use and benefit of, the Special Committee. The Opinion was not intended to be,
and does not constitute, a recommendation to any holder of Genentech stock as to
how such holder should vote with respect to the Proposal.

In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
Transaction Agreement and all of the Exhibits attached thereto (including,
without limitation, the Merger Agreement), (2) the Certificate of Incorporation
and By-Laws of Genentech, (3) the Merger Agreement dated February 2, 1990
between Roche and Genentech, (4) the existing governance arrangements between
Genentech and Roche, (5) publicly available information concerning the Company
which Lehman Brothers believed to be relevant to its inquiry, including, but not
limited to, the latest annual report on Form 10-K of Genentech for the year
ended December 31, 1994 and the draft of the latest quarterly report on Form
10-Q of Genentech for the quarter ended March 31, 1995, (6) financial and
operating information with respect to the business, operations and prospects of
Genentech furnished to Lehman Brothers by Genentech, (7) a trading history of
Genentech's Redeemable Common Stock from 1991 to the time of rendering its
opinion and a comparison of that trading history with those of other companies
which Lehman Brothers deemed relevant, (8) a comparison of the historical
financial results and present financial condition of Genentech with those of
other companies which Lehman Brothers deemed relevant, (9) the financial terms
of certain other recent transactions which Lehman Brothers deemed relevant, (10)
reports of research analysts with respect to Genentech and the potential effect
of the expiration of Roche's current option on the price of the Redeemable
Common Stock, (11) valuations of the Redeemable Common Stock using various
methodologies, (12) the financial terms of certain other commercial arrangements
between biotechnology and pharmaceutical companies which Lehman Brothers deemed
relevant, and (13) analyses of potential pro forma effects on Genentech of the
commercial arrangements contemplated by the Licensing Agreement. In addition,
Lehman Brothers held discussions with the management of Genentech concerning its
business, operations, assets, financial condition and prospects and undertook
such other studies, analyses and investigations as Lehman Brothers deemed
appropriate.

In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of the management of
Genentech that they were not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial projections of
Genentech, upon advice of Genentech, Lehman Brothers assumed that such

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<PAGE> 45

projections were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Genentech as to the
future financial performance of Genentech and that Genentech would perform
substantially in accordance with such projections. In arriving at its opinion,
Lehman Brothers did not make or obtain any evaluations or appraisals of the
assets or liabilities of Genentech. Lehman Brothers' opinion was necessarily
based upon market, economic and other conditions as they existed on, and could
be evaluated as of, the date of the opinion.

In connection with its presentation to the Genentech Board and the Special
Committee on April 29, 1995 and in advising the Genentech Board and the Special
Committee of its opinion on April 30, 1995, Lehman Brothers performed certain
financial and comparative analyses, as summarized below. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial and comparative analysis and the application of
those methods to the particular circumstances, and therefore such an opinion is
not readily susceptible to summary description. Furthermore, in arriving at its
opinion and making its presentation to the Genentech Board and the Special
Committee, Lehman Brothers did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portions of such analyses and of the factors considered, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying its opinion. In its analyses, Lehman Brothers
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control
of Genentech. Any estimates contained in those analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which businesses actually may be sold.

The following sections are summaries of certain analyses performed by
Lehman Brothers and reviewed by Lehman Brothers with the Special Committee and
the Genentech Board.

HISTORICAL STOCK PRICE ANALYSIS

Introduction

As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers noted the historical trading prices for the Redeemable Common
Stock and compared those prices to a range (derived as set forth below) of
estimated prices at which the stock could have been expected to trade had the
redemption option applicable to the Redeemable Common Stock not existed (the
"Standalone Values").

The Standalone Values were determined for each of the periods by applying
the average forward price to earnings multiples ("Forward P/E Multiples") for
the companies in the Comparable Universe (as defined below) to Genentech's
actual earnings per share ("EPS") and to analysts' estimates of Genentech's EPS
as of February in each of the relevant years (except 1995, for which April
estimates were used), as discussed below. The analysis yielded Standalone Values
per share of $14.04-$23.40, $6.92-$11.42, $12.40-$19.10, $14.76-$18.72 and
$41.86-$44.15 for 1991, 1992, 1993, 1994 and 1995, respectively, compared to
actual trading price ranges for the Redeemable Common Stock in the first quarter
of the corresponding years of $21.00-$28.50, $26.50-$31.88, $32.25-$39.50,
$44.00-$50.88 and $44.50-$51.00, respectively.

Lehman Brothers noted that, as indicated above, the actual trading price
ranges of the Redeemable Common Stock significantly exceeded the estimated
Standalone Values, and concluded that the redemption rights applicable to the
Redeemable Common Stock had therefore maintained Genentech's stock price at a
level substantially higher than that which would have been expected had the
Redeemable Common Stock not been subject to redemption. Lehman Brothers also
expressed the view that the correlation of the historical price performance of
the Redeemable Common Stock to the applicable redemption price under the
Redeemable Common Stock had allowed Genentech to spend considerably more on
research and development than it might have otherwise spent had the price
performance of the Redeemable Common Stock been more closely correlated to
Genentech's earnings results. Hence, Lehman Brothers noted that because
Genentech may have been permitted to spend more on research and development, it
has had the opportunity

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to develop more products than might have been the case if the price of the
Redeemable Common Stock had not been supported by the market's assessment of the
possibility that Roche might exercise its redemption option in respect of the
Redeemable Common Stock.

Discussion

The Standalone Values were derived by applying historical valuation
benchmarks for a selected group of publicly traded United States biotechnology
companies that Lehman Brothers considered to be appropriate (the "Comparable
Universe") to Genentech's actual results, and to analysts' estimates of
Genentech's results, for the corresponding period. The Comparable Universe was
comprised of Amgen Inc., Chiron Corporation and Genzyme Corporation. For each of
the periods, Lehman Brothers calculated the Forward P/E Multiple for the
Comparable Universe based on historical stock prices for the Redeemable Common
Stock and historical mean earnings estimates as of February in each of the
relevant years (except 1995, for which April estimates were used) as prepared by
Institutional Brokerage Estimate Systems ("IBES"). The Forward P/E Multiple was
then applied to the historical IBES mean EPS estimate and the actual EPS of
Genentech for the corresponding years to determine the Standalone Values. For
purposes of analysis, Lehman Brothers calculated the Standalone Values using
historical data as of February for 1991, 1992, 1993 and 1994 and data as of
April for 1995 and compared such values to the high and low closing price of the
Redeemable Common Stock for the first quarter of the corresponding year.

Based on the Standalone Values and actual trading ranges noted above,
Lehman Brothers calculated the average percentage difference between the actual
trading price ranges and the Standalone Values for each period. The average
premium of the actual trading price ranges over the Standalone Values was 32.2%,
218.3%, 127.8%, 183.4% and 11.0% for 1991, 1992, 1993, 1994 and 1995,
respectively. Lehman Brothers observed that the actual price at which the
Redeemable Common Stock had traded was above the Standalone Values for each
quarterly period since the Redeemable Common Stock began trading in September
1990 and that the average premium of the actual trading prices over the
Standalone Values for the periods analyzed was 114.5%.

Lehman Brothers further noted that the historical price performance of the
Redeemable Common Stock showed stronger correlation with the redemption prices
applicable from time to time to such stock than with Genentech's actual and
projected earnings results. Lehman Brothers also expressed the view that the
correlation of the historical price performance of the Redeemable Common Stock
to the applicable redemption price under the Redeemable Common Stock had allowed
Genentech to spend considerably more on research and development than it might
have otherwise spent had the price performance of the Redeemable Common Stock
been more closely correlated to Genentech's earnings results. Hence, Lehman
Brothers noted that because Genentech may have been permitted to spend more on
research and development, it has had the opportunity to develop more products
than might have been the case if the price of the Redeemable Common Stock had
not been supported by the market's perception that Roche might exercise its
redemption option in respect of the Redeemable Common Stock. See "Market Prices
of and Dividends on the Redeemable Common Stock" and "The Charter Amendment;
Description of the Special Common Stock -- Call Rights." Genentech spent 47.4%,
55.8%, 49.2% and 41.8% of revenues, before interest income, on research and
development in 1991, 1992, 1993 and 1994, respectively. The average amount spent
on research and development by Genentech for the years 1991, 1992, 1993 and 1994
was 48.5% of revenues, before interest income, as compared to average research
and development spending by companies in the Comparable Universe of 28.6% of
revenues, before interest income, over the corresponding periods.

STANDALONE FUTURE STOCK PRICE ANALYSIS

Introduction

As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers analyzed estimated future trading values of Genentech's stock
assuming that no redemption options were applicable to such stock (the "Future
Standalone Values"). For this purpose, Lehman Brothers assumed that Roche did
not exercise its existing option to cause the Redeemable Common Stock to be
redeemed, and its analysis did

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not give effect to the Proposed Transactions. Lehman Brothers also reviewed
reports of research analysts with respect to Genentech and with respect to the
potential effect of the expiration of Roche's current option to cause redemption
of the Redeemable Common Stock on the price of Genentech's publicly traded
Common Stock.

The Future Standalone Values were determined by taking the average of two
valuation benchmarks derived from the Comparable Universe as applied to
projections prepared by management of Genentech, excluding the impact of the
Licensing Agreement, for the years 1995 to 1999. See "Certain Projections of
Future Operations and Other Information." As discussed further below, the
valuation benchmarks utilized by Lehman Brothers were the average Forward P/E
Multiple and Comparable P/E to Growth Rate Multiple (as defined below) for the
Comparable Universe calculated as of April 25, 1995. This analysis resulted in
Future Standalone Values per share of $31.68, $36.52, $41.59, $54.72 and $71.45
for the years 1995, 1996, 1997, 1998 and 1999, respectively.

The foregoing analysis by Lehman Brothers indicated a Future Standalone
Value as of June 1995 of $31.68 per share. Lehman Brothers compared this with a
range of research analysts' estimates for the Redeemable Common Stock, in the
event that Roche did not exercise its current option to cause the Redeemable
Common Stock to be redeemed, of $35 to $60 per share, noting that approximately
60% of the estimates were in the range of $35 to $45 per share. Lehman Brothers
further noted that research analysts' estimates reflected earnings expectations
by such analysts that were generally higher than the projections prepared by
management of Genentech. See "Certain Projections of Future Operations and Other
Information." Based on Lehman Brothers' analysis of, and conclusions with
respect to, Future Standalone Values and research analysts' estimates, Lehman
Brothers indicated to the Genentech Board and the Special Committee a range of
$30 to $40 per share, as of June 1995, as a likely trading range for the
Redeemable Common Stock in the event that Roche did not exercise its current
option to cause redemption of the Redeemable Common Stock. Lehman Brothers noted
that this range was significantly lower than the then current trading price for
the Redeemable Common Stock in the absence of the Proposed Transactions.

Lehman Brothers noted, as discussed further below, that the Future
Standalone Values were significantly lower through 1998 than the values derived
by taking into consideration the Proposed Transactions. See " -- Special Common
Stock Future Stock Price Analysis."

Discussion

In developing the Future Standalone Values, Lehman Brothers derived
estimated trading values based on Forward P/E Multiples and Comparable P/E to
Growth Rate Multiples for the Comparable Universe as applied to projections
prepared by management of Genentech, excluding the impact of the Licensing
Agreement. See "Certain Projections of Future Operations and Other Information."
The average Forward P/E Multiple for the Comparable Universe was 32.7 times 1995
estimated EPS and was based on the closing stock prices of the companies
constituting the Comparable Universe and on EPS estimates for 1995 as provided
by the First Call Corporation as of April 25, 1995. The Comparable P/E to Growth
Rate Multiple was 0.75 times the long term growth rate, as calculated by taking
the ratio of the Forward P/E Multiple to the estimated three-year EPS growth
rate as provided by the First Call Corporation (the "Comparable P/E to Growth
Rate Multiple"). Lehman Brothers noted that the Comparable P/E to Growth Rate
Multiple equates a company's Forward P/E Multiple to its long term growth rate
and is a commonly used valuation methodology for growth companies.

SPECIAL COMMON STOCK FUTURE STOCK PRICE ANALYSIS

Introduction

As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers developed a model to calculate an estimated trading value for
the Special Common Stock taking into consideration the potential effects of the
Call Rights and the Put Rights on the value of such stock. The model calculated
an estimated trading value for the Special Common Stock based on the historical
relationship of the Redeemable Common Stock market values to the redemption
prices applicable from time to time to the Redeemable

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Common Stock and compared those values to the estimated present value of the Put
Rights as of the end of June for each of the years from 1995 to 1999. See
"Market Prices of Dividends on the Redeemable Common Stock"; "The Charter
Amendment; Description of the Special Common Stock -- Call Rights" and "-- Put
Rights."

In calculating an estimated trading price for the Special Common Stock
based on the redemption prices applicable to the Special Common Stock under the
Call Rights, Lehman Brothers applied certain formulas derived from an analysis
of the historical trading relationship of the Redeemable Common Stock to the
redemption prices applicable from time to time to the Redeemable Common Stock,
as discussed below. This analysis resulted in estimated trading values per share
for the Special Common Stock of $39.36, $45.75, $58.53 and $67.73 for 1995,
1996, 1997 and 1998, respectively.

Lehman Brothers then calculated the present value of the Put Rights by
discounting the $60 per share redemption price applicable under the Put Rights
to the relevant period by applying a discount rate of 7%, which Lehman Brothers
considered appropriate given the term of the Put Rights and the credit quality
of Roche Holding, which has guaranteed Roche's obligations in respect of the Put
Rights. See "Guaranty of Roche Holding." This calculation resulted in present
values for the Put Rights of $45.77, $48.98, $52.41, $56.07 and $60.00 for 1995,
1996, 1997, 1998 and 1999.

Lehman Brothers observed that the Special Common Stock would be expected to
trade in a range bounded by the present value of the Put Rights and a discount
to the then prevailing redemption price applicable to the Special Common Stock
under the Call Rights, with the present value of the Put Rights representing a
lower bound for the estimated trading price of the Special Common Stock. Lehman
Brothers also noted that the present value of the Put Rights exceeded the Future
Standalone Values from 1995 through the third quarter of 1998 and that, based on
the historical volatility of biotechnology stocks as well as the general risks
associated with the business of biotechnology companies, the Put Rights
represented significant "downside protection" to investors. See "Summary and
Special Factors -- Genentech's Reasons for the Proposed Transactions" and "The
Proposed Transactions -- Recommendation of the Board of Directors; Fairness of
the Transaction."

In calculating estimated trading prices for the Special Common Stock based
on the redemption prices applicable to the Special Common Stock under the Call
Rights, Lehman Brothers analyzed the historical relationship of the trading
prices of the Redeemable Common Stock to the redemption prices applicable from
time to time to the Redeemable Common Stock. Lehman Brothers' analysis was based
on calculations of the historical discount of the trading price of the
Redeemable Common Stock to the near-term redemption price applicable to such
stock and the historical implied internal rate of return ("IRR") of the initial
trading price of the Redeemable Common Stock to the final redemption price
applicable to such stock in June 1995 of $60 per share.

The historical discount of the trading price of the Redeemable Common Stock
to the near-term redemption price for 1991 to 1994 was calculated by taking the
ratio of the trading price of the Redeemable Common Stock as of the end of June
to the redemption price for the quarter ending June 30 for each of the years.
The discounts were 31.3%, 29.4%, 12.0% and 10.5%, for 1991, 1992, 1993 and 1994,
respectively. Lehman Brothers applied these discounts to the redemption prices
applicable to the Special Common Stock under the Call Rights for the quarters
ended June 30, 1995, 1996, 1997 and 1998 to arrive at estimated values per share
of Special Common Stock of $41.22, $45.89, $61.60 and $68.02 for each of the
years. Lehman Brothers also noted that the supporting effect of the Call Rights
under the Special Common Stock may not be as significant as has been the case
with respect to the redemption right currently applicable to the Redeemable
Common Stock because of the market's possible perception of the reasons for a
determination by Roche not to exercise its existing rights prior to June 30,
1995, and the corresponding lack of market conviction that Roche would exercise
an extended option.

The historical IRR from the actual trading price of the Redeemable Common
Stock to the final redemption price of $60 applicable to the Redeemable Common
Stock was calculated from the initial trading price of the Redeemable Common
Stock on September 10, 1990, the first trading day for the Redeemable Common
Stock to the final redemption price applicable to the Redeemable Common Stock of
$60 per share

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at June 30, 1995. The resulting IRR, 21.6%, was then used to discount the final
redemption price applicable to the Special Common Stock under the Call Rights of
$82 per share to the appropriate period. These calculations resulted in
estimated per share values for the Special Common Stock of $37.50, $45.61,
$55.46 and $67.43 for the quarters ended June 30, 1995, 1996, 1997 and 1998,
respectively. Lehman Brothers also noted that a perception by the market that
Roche would cause Genentech to exercise the Call Rights prior to July 1999 might
result in a higher market value for the Special Common Stock than those noted
above.

Lehman Brothers then calculated the average of the two sets of values,
which resulted in estimated per share trading values for the Special Common
Stock of $39.36, $45.75, $58.53 and $67.63 for the quarters ending June 30,
1995, 1996, 1997 and 1998, respectively.

INTERNAL RATE OF RETURN ANALYSIS OF THE EXTENSION

Introduction

As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers compared the redemption prices applicable to the Special Common
Stock pursuant to the Call Rights to the redemption prices applicable to the
Redeemable Common Stock. The redemption prices were compared by calculating the
compound growth rate of the redemption prices under the Call Rights to the
compound growth rate applicable to the redemption prices under the Redeemable
Common Stock, measured, in each case, from the initial redemption price to the
final redemption price. See "The Charter Amendment; Description of the Special
Common Stock -- Call Rights."

Lehman Brothers noted that this analysis yielded a compound annual growth
rate of 8.1% for the redemption prices under the Call Rights, as compared to a
10.7% compound annual growth rate for the redemption prices under the Redeemable
Common Stock, as discussed below. Lehman Brothers further noted that although
the compound growth rate for the redemption prices under the Call Rights was
lower than for the redemption prices under the Redeemable Common Stock, this
difference reflected, among other factors, the differing growth characteristics
of recent projections prepared by management of Genentech as compared to
projections prepared at the time the 1990 Merger Agreement was entered into, as
well as reductions in overall valuation multiples for biotechnology and
pharmaceutical companies during this period. See "Certain Projections of Future
Operations and Other Information."

Lehman Brothers further noted, as discussed below, that the implied rate of
return to investors of the then current trading price per share for the
Redeemable Common Stock to the final redemption price applicable to the Special
Common Stock under the Call Rights of $82 per share was 13.1%. Lehman Brothers
noted that this rate of return was significantly lower than the historical
implied rate of return of the Redeemable Common Stock as measured by the
internal rate of return from initial trading price of the Redeemable Common
Stock of $23.875 to the final redemption price applicable under the Redeemable
Common Stock of $60 per share at June 30, 1995, which was 21.1%. Lehman Brothers
noted that the "downside protection" afforded by the Put Rights is a significant
advantage to Genentech's public stockholders which mitigates any "upside
limitations" that may result from the existence of the Call Rights.

Discussion

Lehman Brothers analyzed the implied rates of return of the redemption
prices applicable pursuant to the Call Rights for the period from July 1, 1995
to June 30, 1999 and compared implied rates of return to the implied rates of
return of the redemption option currently applicable to the Redeemable Common
Stock. Lehman Brothers noted that the redemption prices applicable pursuant to
the Call Rights imply a compound annual growth rate in such prices of 8.1%, from
$60 per share at June 30, 1995 to $82 per share at June 30, 1999. Lehman
Brothers compared this growth rate to a compound annual growth rate of 10.7%,
derived from the increase from $38 per share at December 31, 1990 to $60 per
share at June 30, 1995 for the redemption prices applicable to the Redeemable
Common Stock.

Lehman Brothers analyzed the implied returns to the holders of Genentech's
publicly traded common stock in the event that Roche were to cause Genentech to
exercise the Call Rights on June 30, 1996, 1997,

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1998 and 1999 based on a current trading price as of April 25, 1995 of $50.125
per share. Based on the trading price of $50.125 per share as of April 25, 1995,
the annualized internal rate of return, assuming that Roche caused Genentech to
exercise the Call Rights on June 30, 1996, 1997, 1998 and 1999, would be 29.7%,
18.2%, 14.9% and 13.1%, respectively.

Lehman Brothers also analyzed the implied returns to the holders of
Genentech's publicly traded common stock in the event that Roche were to cause
Genentech to exercise the Call Rights on June 30, 1996, 1997, 1998 and 1999
based on Standalone Values of $30 to $40 per share, as discussed above. See
"Special Common Stock -- Future Stock Price Analysis." Lehman Brothers noted
that, at a Standalone Value of $40 per share, the implied returns would be
62.5%, 32.3%, 23.9% and 19.7%, if Roche were to cause Genentech to exercise the
Call Rights on June 30, 1996, 1997, 1998 and 1999, respectively. The implied
returns for a Standalone Value of $30 per share would be 116.7%, 52.8%, 36.3%
and 28.6%, respectively, for the same periods.

COMPARABLE TRANSACTION ANALYSIS

Introduction

As part of its presentation to the Genentech Board and the Special
Committee, Lehman Brothers analyzed the implied control valuation for Genentech
based on the final redemption price of $82 per share applicable pursuant to the
Call Rights and compared this value to the implied control valuation for
Genentech based on the final redemption price applicable to the Redeemable
Common Stock of $60 per share and the control valuations for four selected
acquisitions of pharmaceutical companies that Lehman Brothers considered
appropriate (the "Comparable Transactions").

In particular, Lehman Brothers calculated certain median Benchmark
Multiples (as defined below) for the Comparable Transactions including total
equity transaction value plus net debt as a multiple of latest twelve months
("LTM") revenues and LTM earnings before interest and taxes ("EBIT"), which were
2.49 times and 14.2 times, respectively (the "Benchmark Multiples"). In
calculating the multiples for Genentech, Lehman Brothers based such multiples on
reported revenues and EBIT (in each case, excluding interest income) of
Genentech. For the period ended December 31, 1994 such LTM revenues were $753
million and such LTM EBIT was $85 million. Lehman Brothers compared the
Benchmark Multiples to similar implied multiples derived for Genentech based on
an acquisition value of $82 per share as of June 1999, (the final redemption
price applicable pursuant to the Call Rights), and projected financial results
prepared by management of Genentech for 1998, as well as an acquisition value of
$60 per share as of June 1995, (the final redemption price applicable pursuant
to the terms of the Redeemable Common Stock) and Genentech's actual 1994
financial results. See "Selected Historical Financial Data" and "Certain
Projections of Future Operations and Other Information." At an $82 per share
valuation as of June 1999, the analysis indicated implied multiples of LTM
revenues and LTM EBIT of 7.00 times and 25.6 times, respectively. At a $60 per
share valuation as of June 1995, the analysis indicated implied multiples of LTM
revenues and LTM EBIT of 8.71 times and 77.1 times, respectively.

Lehman Brothers noted that the implied valuation multiples for Genentech
assuming acquisition prices of $82 per share as of June 1999 and $60 per share
as of June 1995 compared favorably to the Benchmark Multiples. Lehman Brothers
also noted that the implied valuation multiple for Genentech, based on the
present value of the Put Rights as of June 1995 of approximately $46 per share
compared favorably to the Benchmark Multiples.

Discussion

The Comparable Transactions analyzed by Lehman Brothers were: Hoechst AG's
acquisition of Marion Merrell Dow Inc.; Glaxo plc's acquisition of Wellcome plc;
American Home Products Corporation's acquisition of American Cyanamid Company;
and Roche Holding's acquisition of Syntex Corporation. Lehman Brothers
considered these transactions appropriate comparisons based on the respective
acquired companies' strong financial results, research-driven business focus and
limited product breadth. Using publicly available information, Lehman Brothers
compared selected financial data, including total equity transaction

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value plus net debt as a multiple of LTM revenues and LTM EBIT for each of the
Comparable Transactions. The average LTM revenue multiple was 2.49 times, and
the average LTM EBIT multiple was 14.2 times.

Lehman Brothers indicated that, based on an acquisition price for Genentech
of $82 per share, the implied transaction value (the acquisition price times the
number of fully diluted shares outstanding of approximately 133.7 million as of
March 31, 1995) plus net debt (based on projected net debt adjusted for option
proceeds) was $8,951.9 million for Genentech in 1999. Based on projected results
prepared by management of Genentech for 1998, Lehman Brothers calculated implied
LTM revenue and LTM EBIT multiples of 7.00 times and 25.6 times, respectively.
See "Certain Projections of Future Operations and Other Information." Based on
an acquisition price of $60 per share, the implied transaction value (the
acquisition price times the number of fully diluted shares outstanding of
approximately 133.7 million as of March 31, 1995) plus net debt (based on net
debt as of December 31, 1994 adjusted for option proceeds) was $6,556.4 million
for Genentech in 1995. Based on actual 1994 results, Lehman Brothers calculated
implied LTM revenue and LTM EBIT multiples of 8.71 times and 77.1 times,
respectively. See "Selected Historical Financial Data."

Lehman Brothers noted, however, that circumstances surrounding each of the
transactions analyzed were specific to each transaction and, because of the
inherent differences between the business, operations and prospects of the
selected acquired companies analyzed, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the analysis. Accordingly, Lehman Brothers also made qualitative judgments
concerning differences between the characteristics of these transactions and the
Proposed Transactions that would affect the acquisition value of Genentech and
such acquired companies.

DISCOUNTED CASH FLOW ANALYSIS

Introduction

As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers calculated the present value of the future streams of after-tax
cash flows that Genentech could be expected to produce in the future (the
"Discounted Cash Flow Analysis"). The Discounted Cash Flow Analysis was based on
projections for Genentech prepared by management for the period from 1995
through 1999, which exclude the impact of the Licensing Agreement, and utilized
a range of assumptions for the appropriate discount rate and terminal multiple
to be applied to management's projections, as discussed below. See "Certain
Projections of Future Operations and Other Information." Based on these
assumptions, the analysis yielded a range of values as of June 1995 of $17.59 to
$27.59 per share of Genentech stock.

In connection with its presentation, Lehman Brothers also calculated the
present value of the incremental future streams of after-tax cash flows expected
to result from the Licensing Agreement. Lehman Brothers noted that the assumed
impact of the Licensing Agreement was to increase after-tax earnings and cash
flow from 1995 through 1999, the net positive effect resulting primarily from
Roche's funding of certain research and development projects. Lehman Brothers
also noted that the assumed effect of the Licensing Agreement was to decrease
after-tax earnings and cash flow after 1999, reflecting the relatively greater
impact on Genentech's results of Roche's ownership of product rights to develop
and market Genentech's products outside the United States. Lehman Brothers'
analysis indicated that, at a discount rate of approximately 30% and EBIT
terminal multiples of 11.0 times to 12.0 times, the incremental contribution to
Genentech's results of the Licensing Agreement was approximately neutral.

Lehman Brothers noted that the Discounted Cash Flow Analysis performed by
it yielded total values for Genentech that were significantly below the current
trading price of the Redeemable Common Stock. Lehman Brothers also noted,
however, the limitations of the Discounted Cash Flow Analysis, which typically
measures the "intrinsic" value of a business and is not necessarily reflective
of "achievable" values, which may be higher or lower depending on the specific
circumstances.

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Discussion

For the purpose of the discounted cash flow analysis, Lehman Brothers used
projections prepared by management of Genentech, which exclude the effect of the
Licensing Agreement, before giving effect to the resulting capital structure of
Genentech. After-tax cash flows were calculated as the after-tax earnings of
Genentech, plus amortization and depreciation, less net changes in non-cash
working capital and capital expenditures. Lehman Brothers calculated terminal
values for Genentech by applying to projected 1999 EBIT of Genentech a range of
multiples from 10.0 times to 14.0 times. See "Certain Projections of Future
Operations and Other Information." These multiples were based on current trading
multiples for comparable companies that Lehman Brothers deemed appropriate and
on Lehman Brothers' experience in mergers and acquisitions. The cash-flow
streams and terminal values were then discounted to present values using a range
of discount rates, which were chosen based on several assumptions regarding
factors such as the inflation rate, interest rates, the inherent business risk
of Genentech and the cost of capital. The discount rates utilized ranged from
25% to 40%. The resulting aggregate net present values were adjusted for net
debt and option proceeds and divided by the fully diluted shares outstanding as
of December 31, 1994. The analysis indicated a range of values as of June 1995
of $17.59 to $27.59 per share of Genentech stock.

In addition, Lehman Brothers analyzed the financial impact of the Licensing
Agreement by calculating the net present value of the incremental cash flows
projected by management to result from the Licensing Agreement. In calculating
the net present value, Lehman Brothers used the same methodologies and
assumptions described above. The analysis indicated a range of aggregate values
of negative ($57.2 million) to $38.3 million as of June 1995. Lehman Brothers'
noted that, at a discount rate of approximately 30% and EBIT terminal multiples
of 11.0 times to 12.0 times, the incremental contribution to Genentech's results
of the Licensing Agreement was approximately neutral.

BLACK-SCHOLES VALUATION OF THE CALL RIGHTS AND PUT RIGHTS

Introduction

As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers calculated a range of reference values for the Call Rights and
Put Rights based on the Black-Scholes option pricing model. The Black-Scholes
model is an analytical tool commonly used in the financial industry to value
options based on a number of factors including the volatility of a security's
return, the level of interest rates, the relationship of the underlying stock
price to the "strike price" of the option and the time remaining until the
option expires.

Lehman Brothers applied a range of assumptions to the Black-Scholes model,
as discussed below, to determine a range of reference values for the Call Rights
and the Put Rights. The analysis yielded a range of reference values for the
Call Rights of $2.56 to $17.99 per share. The analysis also yielded a range of
reference values for the Put Right of $7.14 to $12.48 per share.

Lehman Brothers noted that the Black-Scholes option pricing model is one of
several valuation methodologies currently used in option valuation. Although the
Black-Scholes model is among the most widely accepted methods of valuing
options, it is subject to certain limitations, particularly with regard to the
valuation of options with an exercise period of greater than one year, and is
highly sensitive to the assumptions used, which are subject to varying
interpretations. Lehman Brothers therefore ascribed limited relevance to this
aspect of its overall analysis.

Discussion

Based on the final redemption price applicable pursuant to the Call Rights
of $82 per share, a four-year maturity, a risk-free rate of 7%, and using a
range of volatilities from 25% to 40% and a range of possible spot prices for
the Special Common Stock of $60, $48 and $40, Lehman Brothers estimated a range
of reference values for the Call Rights using the Black-Scholes option valuation
model. The analysis yielded a range of reference values for the Call Rights of
$2.56 to $17.99 per share. Lehman Brothers also calculated the total value of
the Call Rights by multiplying per share option values by 57.225 million, which
represents the number

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of shares of Redeemable Common Stock owned as of April 25, 1995 by stockholders
other than Roche. This analysis yielded a range of aggregate values for the Call
Rights of $146.8 million to $1,029 million.

In addition, Lehman Brothers estimated a range of reference values
attributable to the Put Rights using the Black-Scholes option valuation model.
Assuming the strike price of $60, a risk-free rate of 7%, a four-year maturity,
a spot price of $50.38 and a range of volatilities from 15% to 40%, the analysis
yielded a range of reference values for the Put Rights of $7.14 to $12.48 per
share. Applying the calculated per share values of the Put Rights to the 57.225
million shares of Redeemable Common Stock owned as of April 25, 1995 by
stockholders other than Roche yielded a range of aggregate values for the Put
Rights of $408.5 million to $714.4 million.

ENGAGEMENT OF LEHMAN BROTHERS

Lehman Brothers is an investment banking firm engaged in, among other
things, the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements, and
valuations for corporate, estate and other purposes. The Special Committee
selected Lehman Brothers to act as its financial advisor because of its
expertise, reputation and familiarity with the health care industry in general
and because its investment banking professionals have substantial experience in
matters described above.

Genentech has agreed to pay Lehman Brothers a fee of $500,000, which became
due upon delivery of the opinion rendered at the April 30, 1995 meeting of the
Genentech Board and the Special Committee. Lehman Brothers will also receive a
fee of $2.5 million upon consummation of the Merger.

Pursuant to an engagement letter entered into in connection with the 1990
Merger (which letter remains in effect), Lehman Brothers will be entitled to an
additional fee of $3 million if, following Roche's exercise of its rights,
Genentech effects the redemption of the Redeemable Common Stock or the
redemption of the Special Common Stock pursuant to the Call Rights.

In connection with the Proposed Transactions, Genentech has also agreed to
reimburse Lehman Brothers for reasonable expenses and to indemnify Lehman
Brothers for certain liabilities. Lehman Brothers has provided investment
banking services to Genentech in the past, including, among other things, acting
as an advisor to Genentech in connection with the 1990 Merger. In the ordinary
course of its business, Lehman Brothers actively trades in the Redeemable Common
Stock and the debt and equity securities of Roche for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.

INTERESTS OF CERTAIN PERSONS IN THE PROPOSED TRANSACTIONS

DIRECTORS AND OFFICERS. There will be no immediate change in Genentech's
directors or officers in the United States as a result of the Proposed
Transactions.

The Amended Governance Agreement will provide (as the Existing Governance
Agreement currently provides) that in any election of directors, Roche will
continue to vote its shares of Common Stock and shares of Special Common Stock
for all nominees in proportion to the votes cast by the other holders of Special
Common Stock (excluding, at Roche's option, any votes cast by any person that
beneficially owns at least 12% of the Equity Securities (as defined below under
"The Amended Governance Agreement -- Further Acquisitions of Securities by
Roche") not beneficially owned by Roche Holding); provided that Roche may cast
all of its votes in favor of any nominee designated by it pursuant to the
Amended Governance Agreement. See "The Amended Governance Agreement -- Certain
Agreements of Roche as to Voting."

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securities and that the Company will, to the extent necessary, increase the size
of the Genentech Board and cause the Board to fill vacancies created by any such
increase to achieve the called-for result. See "The Amended Governance
Agreement -- Board of Directors."

If the Proposal is approved and the Merger is consummated, the parties will
enter into the Amended Governance Agreement, under which Roche would continue to
have the right to designate two directors of Genentech, and its right to
nominate Independent Directors, on the same terms as would be applicable under
the Existing Governance Agreement on and after July 1, 1995, would be postponed
until the expiration of the Put Period. Thus, following the end of the period
during which the Put Rights may be exercised, or if the Proposal is not approved
by stockholders (or for any other reason the Merger is not consummated), Roche,
based on its current holdings of Genentech Shares, will have the right to
designate more than a majority of the members of the Genentech Board, with all
but two of such Roche designees being Independent Directors. See "The Amended
Governance Agreement -- Board of Directors."

OWNERSHIP OF REDEEMABLE COMMON STOCK BY OFFICERS AND DIRECTORS. For
information as to Redeemable Common Stock and securities exercisable for or
convertible into Redeemable Common Stock owned by officers and directors of
Genentech, see "Security Ownership of Management."

TREATMENT OF EMPLOYEE STOCK OPTIONS. The Merger Agreement provides that
the Company will take all action necessary to ensure that, at the Effective
Time, each outstanding Option issued pursuant to the Option Plans (whether or
not vested or exercisable) will, without any action by the holder thereof,
constitute an option to acquire, on the same terms and conditions as were
applicable under such Option immediately prior to the Effective Time, that
number of shares of Special Common Stock equal to the number of Common Shares
subject to such Option immediately prior to the Effective Time, at the price or
prices per share in effect pursuant to the terms of such Option immediately
prior to the Effective Time. Holders of Options include officers and directors
of the Company who were involved in the negotiation of the Proposed
Transactions. To the extent that the Proposed Transactions would have a positive
effect upon the trading price of the shares underlying such Options or would, as
a result of the Put Rights, place a "floor" on the value of such underlying
shares, such Options, as is the case with the underlying shares held by
stockholders of the Company, would receive those same benefits.

SOURCE OF FUNDS; EXPENSES

Until such time, if any, as either the Call Rights or the Put Rights are
exercised, Genentech will not be obligated to pay any funds in connection with
the exercise of such Rights. Based on the 57,198,521 Genentech Shares of
outstanding and issuable pursuant to securities outstanding on April 30, 1995
and held by persons other than Roche and its affiliates, exercise of the Call
Rights during the quarter ending June 30, 1999 would require the payment of
approximately $4.7 billion, and, if the Call Rights were not exercised, complete
exercise by Genentech's stockholders of the Put Rights would require the payment
of approximately $3.4 billion.

Under the Amended Governance Agreement, Roche will, (i) if the Call Rights
are exercised, pay to a depositary sufficient funds to satisfy the Company's
obligations in respect of the Call Rights or (ii) if the Put Rights become
exercisable, contribute to the Company the funds required to satisfy the
Company's obligations under the Put Rights. In lieu of the contribution to the
Company referred to in clause (ii) of the preceding sentence, the Amended
Governance Agreement provides that Roche (or an affiliate of Roche) may elect to
purchase the Special Common Stock directly from stockholders who elect to
exercise their Put Rights. In exchange for the payment by Roche to Genentech in
respect of the Put Rights, Genentech will issue to Roche (or an affiliate of
Roche) a number of shares of Common Stock equal to the number of shares of
Special Common Stock redeemed by Genentech pursuant to exercises of the Put
Rights. See "The Amended Governance Agreement -- Redemption of Special Common
Stock"; "-- Capital Contribution and Assumption of Put Obligations by Roche" and
"Guaranty of Roche Holding."

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Genentech expects to incur certain near-term expenses in connection with
the negotiation of the Proposed Transactions, the preparation of this Proxy
Statement/Prospectus and the payment of applicable filing fees. Such expenses
are estimated to be $ (legal), $ (accounting), $ (printing),
$ (solicitation) and $ (filing). At such time, if any, as the Call
Rights and Put Rights are exercised, the Company is likely to incur additional
expenses related to printing costs and filing fees, and possibly, legal and
accounting expenses. See "The Proposed Transactions -- Opinion of Financial
Advisor" for a summary of the fees to be paid by the Company to Lehman Brothers,
the Special Committee's financial advisor.

STOCKHOLDER LITIGATION

In connection with the Proposed Transactions, the Company, its directors,
and Roche have been named as defendants in thirteen actions commenced in the
Court of Chancery, County of New Castle, Delaware. All such actions have been
consolidated under the caption "In re Genentech, Inc. Shareholders Litigation,"
C.A. No. 14265 (Cons.). The claims in the actions are brought by certain
purported stockholders on behalf of a purported class of persons consisting of
all stockholders of the Company except Roche, its affiliates and the defendants.
The claims asserted in the consolidated action, on behalf of such class of
stockholders and, in some cases, derivatively on behalf of the Company, include
the claims that: the terms of the Proposed Transactions are unfair, and were
imposed by Roche for Roche's own benefit; the prices at which Roche would be
able to cause redemption of the Special Common Stock are unfairly low, and that
the trading price of such shares would be higher if the trading prices were not
"capped" by the existence of the amended Roche option; that the directors of the
Company breached their fiduciary duties by negotiating and agreeing to the
Proposed Transactions; and that the election of directors at the Company's
regular Annual Meeting on April 13, 1995 was void because the disclosures in
connection with such meeting did not disclose that the Genentech Board was
negotiating the terms of the Proposed Transactions with Roche. As relief, the
complaints seek, among other things, a preliminary and permanent injunction
against the vote to be held at the Special Meeting; a preliminary and permanent
injunction against consummation of the Proposed Transactions, including against
any exercise by Roche of its right to cause redemption and against any exercise
by the holders of Special Common Stock of the Put Rights; an order voiding the
Proposed Transactions in the event it is approved by the vote of the
stockholders; and damages in an unspecified amount. The defendants believe that
the plaintiffs' allegations are without merit and intend to defend themselves
vigorously. The Court of Chancery has scheduled a hearing on plaintiffs'
application for a preliminary injunction for July 18, 1995.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Wachtell, Lipton, Rosen & Katz, special counsel to the Company, are of the
opinion that the following are the material United States federal income tax
consequences, under currently applicable law, of the Merger as well as of the
ownership of the Special Common Stock, to the holders of shares of Common Stock
who are United States citizens or resident individuals and who hold such shares
as capital assets and will hold Special Common Stock as a capital asset. It
should be noted that an opinion of counsel is not binding on the Internal
Revenue Service and that no ruling will be requested from the Internal Revenue
Service on these or any other issues. The following discussion may not be
applicable with respect to other categories of stockholders, including corporate
and foreign stockholders and stockholders who acquired their shares of Common
Stock pursuant to the exercise of employee stock options or otherwise as
compensation. Such discussion does not address the tax consequences of the
Merger to holders of Options.

The Merger. Each share of Common Stock held by a stockholder prior to the
effective time of the Merger will be considered to have been exchanged with the
Company for the Special Common Stock (the "Exchange"). Although the issue is not
free from doubt, except as described below, a stockholder whose shares of Common
Stock are exchanged for Special Common Stock by virtue of the Merger (a
"Receiving Stockholder") should not recognize gain or loss with respect to each
share so exchanged, and the Receiving Stockholder's basis for the Special Common
Stock should be equal to such stockholder's basis in the shares of

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Common Stock exchanged by virtue of the Merger for Special Common Stock. The
holding period of the Special Common Stock received in the Exchange will include
the period during which the stock surrendered in the Exchange was held by the
Receiving Stockholder.

In connection with the Proposed Transactions, Roche and Roche Holding have
undertaken certain obligations to the Company with respect to the stockholders'
rights to put the Special Common Stock to the Company (the "Put Obligation").
See "The Charter Amendment; Description of the Special Common Stock -- Put
Rights." Counsel believes that the Put Obligation should be treated as an
integral and incidental part of the Special Common Stock and should not cause
the Special Common Stock to be characterized as anything other than stock of the
Company for federal income tax purposes. These issues are not free from doubt,
however. If the Put Obligation were to be considered a property right separate
from the Special Common Stock, it could be treated as additional taxable
consideration received by the Receiving Stockholders in the Exchange.

The Special Common Stock. Distributions, if any, paid with respect to the
Special Common Stock will be taxable dividends to the extent of the Company's
applicable earnings and profits. To the extent that distributions of the Special
Common Stock exceed the Company's applicable earnings and profits, the amount
distributed will be applied to reduce the tax basis in such Special Common Stock
and, to the extent that any such amount distributed exceeds such tax basis, will
constitute long-term or short-term capital gain depending on the holding period
for such Special Common Stock.

Because of the Call Rights and Put Rights to which the Special Common Stock
is subject, the Special Common Stock could be viewed, for federal income tax
purposes, as not "participating in corporate growth to any significant extent,"
in which case it would be treated as preferred stock for purposes of Section 305
of the Code. In that event, a holder of Special Common Stock would be required,
during the period starting at the Effective Time of the Merger and ending during
the Put Period, to include currently in gross income, to the extent of the
Company's applicable earnings and profits, for each share of Special Common
Stock a portion (determined by analogy to the original issue discount rules for
debt instruments) of the excess of (x) the per share price paid to holders upon
exercise of the Put Rights over (y) the fair market value of such share at
issuance. While there is no authority directly on point and the issue is not
free from doubt, counsel believes that the Special Common Stock should not be
recharacterized as preferred stock for this purpose and the Company intends to
treat it accordingly.

Gain or loss on the sale of Special Common Stock (including a redemption
pursuant to the terms of the Special Common Stock, or the exercise of Put Rights
by the stockholder of all the Special Common Stock a person holds or is
considered to hold through the application of certain ownership attribution
rules) should be long- or short-term capital gain or loss depending on such
stockholder's holding period. The redemption of the Special Common Stock
pursuant to the exercise of Put Rights by a stockholder of less than all the
Special Common Stock such stockholder holds or is considered to hold through the
application of certain ownership attribution rules will be subject to the stock
redemption rules of Section 302 of the Code. Under those rules, the entire cash
proceeds received will be treated as a distribution taxable as a dividend (to
the extent of the Company's available earnings and profits), unless the
redemption is "substantially disproportionate" with respect to the stockholder
or is "not essentially equivalent to a dividend" with respect to the
stockholder.

The Special Common Stock should not be "Section 306 stock" within the
meaning of Section 306(c) of the Code nor should it constitute a "conversion
transaction" within the meaning of Section 1258(c) of the Code. Consequently,
the provisions of Sections 306 and 1258 of the Code, which, generally, would
increase the amount of ordinary income and decrease the amount of capital gain
recognized by a stockholder as a result of holding or disposing of the Special
Common Stock, should not be applicable to the Special Common Stock.

Backup Withholding. Under certain circumstances, a holder of Common Stock
or Special Common Stock may be subject to "backup withholding." This withholding
applies only if the holder, among other things, (i) has failed to furnish the
Company with his or her taxpayer identification number, (ii) has furnished the
Company with an incorrect taxpayer identification number, (iii) has failed
properly to report interest or dividends, or (iv) under certain circumstances
fails to provide the Company or his or her securities broker with a certified
statement, under penalty of perjury, that he or she is not subject to
withholding. The backup withholding rate is 31% of "reportable payments."
Reports will be furnished to the holders of Redeemable

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Common Stock and Special Common Stock and the Internal Revenue Service for each
calendar year stating the amount of reportable payments paid during such year
and the amount of tax withheld, if any, with respect thereto.

THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR STOCKHOLDER IN LIGHT OF SUCH
HOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. STOCKHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF
THE MERGER AND THE OWNERSHIP, EXCHANGE, REDEMPTION OR SALE OF THE SPECIAL COMMON
STOCK INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS AND
POSSIBLE FUTURE CHANGES IN FEDERAL TAX LAWS.

ACCOUNTING TREATMENT

There will be no change in the total stockholders' equity of the Company as
a result of the exchange of Common Stock for Special Common Stock.

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<PAGE> 58

THE MERGER AGREEMENT

GENERAL

THE FOLLOWING DESCRIPTION OF THE MERGER AGREEMENT DOES NOT PURPORT TO BE
COMPLETE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT OF THE
MERGER AGREEMENT, WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX
A AND IS INCORPORATED HEREIN BY REFERENCE.

THE MERGER

The Merger Agreement provides that, subject to the approval and adoption of
the Merger Agreement by the stockholders of Genentech and the satisfaction or
waiver of the other conditions to the Merger, Merger Subsidiary will be merged
with and into Genentech in accordance with the Delaware Law, whereupon the
separate existence of Merger Subsidiary will cease, and Genentech will be the
surviving corporation. At the Effective Time, the conversion of Genentech
Shares, and the conversion of shares of Merger Subsidiary Common Stock pursuant
thereto, will be effected as described in "Conversion and Exchange of Genentech
Shares and Merger Subsidiary Common Stock" below.

EFFECTIVE TIME

Following the adoption of the Merger Agreement and subject to satisfaction
or waiver of certain terms and conditions, including conditions to closing,
contained in the Merger Agreement, the Merger will become effective at such time
as the Certificate of Merger is duly filed with the Secretary of State of
Delaware or at such later date and time as is specified in the Certificate of
Merger. It is currently anticipated that the filing of the Certificate of Merger
will be made as soon as practicable after all conditions contemplated by the
Merger Agreement have been satisfied or waived and that the Effective Time will
occur on the date of the Special Meeting, or as soon thereafter as practicable,
assuming the conditions set forth in the Merger Agreement are fully satisfied or
waived. See "-- Conditions to Consummation of the Merger."

CONVERSION AND EXCHANGE OF GENENTECH SHARES AND MERGER SUBSIDIARY COMMON STOCK

At the Effective Time:

(a) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares of Common Stock held by
Roche or its affiliates (the "Roche Shares"), which shares of Common Stock
will be cancelled, and thereupon the holders thereof will cease to have
rights with respect thereto, and other than shares held in the treasury of
Genentech) will be converted into one share of Special Common Stock.

(b) The common stock, par value $.02 per share, of Merger Subsidiary
issued and outstanding immediately prior to the Effective Time will be
converted into a number of shares of Common Stock equal to, in the
aggregate, the number of Roche Shares.

(c) Each outstanding Option issued pursuant to the Option Plans
(whether or not vested or exercisable) will, without any action by the
holder thereof, constitute an option to acquire, on the same terms and
conditions as were applicable under such Option immediately prior to the
Effective Time, that number of shares of Special Common Stock equal to the
number of shares of Common Stock subject to such Option immediately prior
to the Effective Time, at the price or prices per share in effect pursuant
to the terms of such Option immediately prior to the Effective Time.

EXCHANGE OF STOCK CERTIFICATES

The Merger Agreement provides that, at the Effective Time, Genentech shall
make available to an exchange agent selected by it (the "Exchange Agent"), for
the benefit of holders of Genentech Shares, a sufficient number of certificates
representing shares of Special Common Stock required to effect the delivery of
the aggregate number of shares of Special Common Stock required to be issued
pursuant to the Merger

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<PAGE> 59

Agreement (the certificates representing such shares of Special Common Stock
being referred to herein as the "Exchange Fund").

Promptly after the Effective Time, the Exchange Agent will mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Common Stock (which may be
certificates that formerly represented shares of Redeemable Common Stock which
were automatically converted into Common Stock after June 30, 1995) (the
"Certificates") (i) a form of letter of transmittal (which will specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates for
exchange. Upon surrender of Certificates to the Exchange Agent, together with
such letter of transmittal duly executed and any other required documents, the
holder of such Certificates will be entitled to receive for the shares of Common
Stock represented by such Certificates a like number of shares of Special Common
Stock and the Certificates so surrendered will be canceled.

Until so surrendered, Certificates will represent solely the right to
receive shares of Special Common Stock. No dividends or other distributions, if
any, that are declared after the Effective Time on the Special Common Stock and
payable after the Effective Time will be paid to persons entitled by reason of
the Merger to receive shares of Special Common Stock until such persons
surrender their Certificates. Upon such surrender, there will be paid to the
person in whose name the shares of Special Common Stock are issued any dividends
or other distributions having a record date after the Effective Time and payable
with respect to such Special Common Stock between the Effective Time and the
time of such surrender. After such surrender there will be paid to the person in
whose name the shares of Special Common Stock are issued any dividends or other
distributions on such Special Common Stock which have a record date after the
Effective Time and prior to such surrender and a payment date after such
surrender; such payment will be made on such payment date. In no event will the
persons entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions. If any certificate
representing Special Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such Special Common
Stock in a name other than that of the registered holder of the Certificate
surrendered, or will establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable.

The Exchange Agent will not be entitled to vote or exercise any rights of
ownership with respect to the Special Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such Special Common Stock for
the account of the persons entitled thereto.

Any portion of the Exchange Fund which remains unclaimed by the former
holders of shares of Common Stock for one year after the Effective Time will be
delivered to Genentech and any former holders of Common Stock will thereafter
have the right to look only to Genentech for payment of their claim for the
Special Common Stock issuable to them.

NO TRANSFERS OF COMMON STOCK WILL BE MADE ON THE STOCK TRANSFER BOOKS OF
GENENTECH AFTER THE CLOSE OF BUSINESS ON THE DAY PRIOR TO THE DATE OF THE
EFFECTIVE TIME.

STOCKHOLDERS OF GENENTECH SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR
SHARES TO GENENTECH OR TO THE EXCHANGE AGENT PRIOR TO RECEIPT OF THE LETTER OF
TRANSMITTAL.

ADDITIONAL COVENANTS AND AGREEMENTS

Pursuant to the Merger Agreement, the Company, Roche and Merger Subsidiary
have also agreed as follows:

Stockholder Meeting. The Company has agreed to cause a meeting of its
stockholders (the "Stockholder Meeting") to be duly called and held as soon as
reasonably practicable for the purpose of voting on the

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<PAGE> 60

approval and adoption of the Merger Agreement and the Merger (including the
amendments to the Certificate of Incorporation of the Company to be effected by
the Merger), and the directors of the Company have agreed, subject to their
fiduciary duties, to recommend approval and adoption of the Merger Agreement and
the Merger (including such amendments) by the Company's stockholders. In
connection with such meeting, the Company has agreed (i) to prepare promptly and
file with the Commission, to use all reasonable efforts to have cleared by the
Commission and to thereafter mail to its stockholders as promptly as practicable
this Proxy Statement/Prospectus, a registration statement and all other
documents which may be required to be filed or mailed in connection with such
meeting and the consummation of the Proposed Transactions, (ii) to, subject to
the fiduciary duties of the Genentech Board, use all reasonable efforts to
obtain the necessary approvals by its stockholders of Merger Agreement and the
Proposed Transactions and (iii) to otherwise comply with all legal requirements
applicable to such meeting.

Registration Statement. Genentech has agreed to prepare promptly and file
with the Commission the Registration Statement with respect to the Special
Common Stock and has agreed to use all reasonable efforts to cause the
Registration Statement to be declared effective as promptly as practicable.
Genentech has also agreed to take any action required to be taken under foreign
or state securities or Blue Sky laws in connection with the issuance of Special
Common Stock in the Merger.

Reasonable Efforts. The Company and Roche have agreed to, and to use all
reasonable efforts to, cause their respective subsidiaries to: (i) promptly make
all filings and seek to obtain all authorizations required under all applicable
laws with respect to the Merger and the Proposed Transactions and to cooperate
with each other with respect thereto; (ii) use all reasonable efforts to
promptly take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary, proper or appropriate to satisfy the
conditions set forth in the Merger Agreement and to consummate and make
effective the Proposed Transactions as soon as practicable (including seeking to
remove promptly any injunction or other legal barrier that may prevent such
consummation); and (iii) not take any action which might reasonably be expected
to impair the ability of the parties to consummate the Merger at the earliest
possible time (regardless of whether such action would otherwise be permitted or
not prohibited under the Merger Agreement).

Continued Applicability of the Existing Governance Agreement. The Company
and Roche have agreed, from and after July 1, 1995, that the current
arrangements between the Company and Roche under the Existing Governance
Agreement will continue to bind the parties and that the time periods therein
expiring on June 30, 1995 would be extended from June 30, 1995 until the earlier
of termination of the Merger Agreement or the consummation of the transactions
contemplated by the Merger Agreement.

Compliance with Securities Laws. The Company and Roche have agreed to
take, and to cause their respective affiliates to take, all actions necessary to
comply with the Securities Act and the Exchange Act and the rules and
regulations promulgated under such statutes in connection with the Merger and
the Proposed Transactions.

Option Plans. Genentech has agreed (i) to take all action necessary to
ensure that Options outstanding immediately prior to the Effective Time will
represent, at and after the Effective Time, Options to acquire shares of Special
Common Stock on the same terms as in effect immediately prior to the Effective
Time pursuant to such Options (and the related Option Plans) with respect to
shares of Common Stock; (ii) to reserve for issuance a sufficient number of
shares of Special Common Stock for delivery upon exercise of the Options; and
(iii) to file a registration statement on Form S-8 (or any successor form) or
another appropriate form, effective as of the Effective Time, with respect to
the Special Common Stock subject to such Options and to use all reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements for so long as such Options remain outstanding.

Additional Agreements. The Company and Roche have agreed to execute each
of the Amended Governance Agreement and the Licensing Agreement in the forms
attached as exhibits to the Merger Agreement, immediately prior to the Effective
Time.

Voting. Roche has agreed to vote all shares of Common Stock owned by it or
any of its affiliates in favor of the Proposal.

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<PAGE> 61

Certain Proceedings. Genentech and Roche have also agreed to cooperate and
use their respective reasonable efforts to vigorously defend against and respond
to any action, suit, proceeding or investigation relating to the Merger
Agreement or to the Proposed Transactions.

CONDITIONS TO CONSUMMATION OF THE MERGER

CONDITIONS TO THE OBLIGATIONS OF BOTH PARTIES. The respective obligations
of each of the Company and Roche to consummate the transactions contemplated by
the Merger Agreement are subject to the fulfillment at or prior to the Effective
Time of each of the following conditions, any or all of which may be waived in
whole or in part by the party being benefitted thereby, to the extent permitted
by applicable law:

Stockholder Approval. The Merger Agreement shall have been duly approved
or ratified by the requisite vote of holders of Genentech Shares in accordance
with applicable law, the Genentech Certificate of Incorporation and By-Laws and
the Existing Governance Agreement.

Additional Agreements. The Amended Governance Agreement and the Licensing
Agreement shall have been executed in substantially the forms attached as
exhibits to the Merger Agreement, and shall be in full force and effect.

Amendment of Certificate of Incorporation. The amendment of Article Third
of the Genentech Certificate of Incorporation shall have been effected.

No Injunction. No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Merger.

Registration Statement. The Registration Statement shall have been
declared effective and shall be effective at the Effective Time, and no stop
order suspending effectiveness shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals under
state securities laws or the Securities Act or Exchange Act relating to the
issuance or trading of the Special Common Stock shall have been received.

Listing of Special Common Shares on NYSE. The Special Common Stock to be
issued pursuant to the Merger Agreement shall have been approved for listing on
the NYSE, subject only to official notice of issuance.

Third Party Consents. All required authorizations, consents or approvals
of any third party, the failure to obtain which would have a material adverse
effect on the Company and its subsidiaries taken as a whole, shall have been
obtained.

CONDITION TO OBLIGATIONS OF ROCHE AND MERGER SUBSIDIARY. The respective
obligations of Roche and Merger Subsidiary to consummate the transactions
contemplated by the Merger Agreement are subject to the fulfillment at or prior
to the Effective Time of the condition, which may be waived in whole or part by
Roche and Merger Subsidiary, as the case may be, to the extent permitted by
applicable law, that the Company shall have performed or complied in all
material respects with all agreements and conditions contained in the Merger
Agreement required to be performed or complied with by it prior to or at the
time of the Closing.

CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the Company
to consummate the transactions contemplated by the Merger Agreement are subject
to the fulfillment at or prior to the Effective Time of the following
conditions, which may be waived in whole or in part by the Company to the extent
permitted by applicable law:

(a) Roche shall have performed or complied in all material respects with
all agreements and conditions contained therein required to be performed
or complied with by it prior to or at the time of the Closing; and

(b) the Guaranty shall have been executed in substantially the form
attached as an exhibit to the Merger Agreement and will be in full force
and effect.

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<PAGE> 62

TERMINATION OF THE MERGER AGREEMENT

The Merger Agreement provides that it may be terminated and the Merger may
be abandoned at any time:

(a) prior to the Effective Time, before or after the approval by holders of
Common Stock or Redeemable Common Stock, by the mutual written consent
of Roche and the Company;

(b) by either the Company or Roche, upon written notice to the other
parties hereto, if the stockholder approval described above under
"-- Conditions to Consummation of the Merger -- Conditions to the
Obligations of Both Parties" is not obtained by the Company at the
Special Meeting; or

ADDITIONAL PROVISIONS OF THE MERGER AGREEMENT

The Merger Agreement provides that each party thereto will bear its own
expenses, including the fees and expenses of any attorneys, accountants,
investment bankers, brokers, finders or other intermediaries or other persons
engaged by it, incurred in connection with such agreement and the transactions
contemplated thereby.

The Merger Agreement provides that the rights and obligations of the
parties under the Merger Agreement may not be assigned or delegated without
prior written consent of the other party. The Merger Agreement also provides
that such agreement is not intended to be for the benefit of and will not be
enforceable by any person or entity who or which is not a party thereto.

THE CHARTER AMENDMENT; DESCRIPTION OF THE
SPECIAL COMMON STOCK

Pursuant to the Merger Agreement and effective upon consummation of the
Merger, the Certificate of Incorporation of Genentech will be amended by
operation of the Merger to, among other things, authorize the issuance by
Genentech of Special Common Stock.

Under Article Third of the Certificate of Incorporation ("Article Third"),
as proposed to be amended in connection with the Merger ("Amended Article
Third"), the rights, preferences, privileges and restrictions of the Special
Common Stock and the Common Stock will be identical in all respects, except as
specifically set forth in Article Third. Set forth below is a description of the
terms of the Special Common Stock, including (i) the differences between such
terms and the terms of the Common Stock as set forth in Article Third and (ii)
the differences between the Special Common Stock and the Redeemable Common
Stock. THE FOLLOWING DESCRIPTION OF THE TERMS OF THE SPECIAL COMMON STOCK DOES
NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
TEXT OF SUCH AMENDMENT TO ARTICLE THIRD OF THE CERTIFICATE OF INCORPORATION,
WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS EXHIBIT C TO ANNEX A AND
IS INCORPORATED HEREIN BY REFERENCE.

As indicated above, Amended Article Third sets forth the terms of and the
rights and preferences with respect to the Special Common Stock. In addition, as
is the case in Article Third, it provides that Preferred Stock (as hereinafter
defined) may be issued from time to time in one or more series. The Genentech
Board is authorized to fix or alter the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences of any wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, or any of them;
and to increase or decrease the number of shares of any series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series. Were Roche not to own its current position in Genentech,
the authorized but unissued shares of Preferred Stock could be used by the
Genentech Board to make a change in control of Genentech more difficult, or to
discourage an attempt to acquire control of Genentech. For example, the

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<PAGE> 63

Genentech Board could, subject to certain limitations, authorize and issue a
class of Preferred Stock which is entitled to vote as a class with respect to
mergers or other extraordinary transactions. The Genentech Board has no current
intention of using the authorized and unissued shares of Preferred Stock for any
such purposes.

AUTHORIZED SHARES

Article Third of the Certificate of Incorporation authorizes the issuance
of 100,000,000 shares of preferred stock ("Preferred Stock"), 100,000,000 shares
of Redeemable Common Stock and 200,000,000 shares of Common Stock. Amended
Article Third would not change the number of authorized shares of capital stock
of the Company, but would replace the Redeemable Common Stock with the Special
Common Stock and would amend the terms thereof as described below.

VOTING RIGHTS

As is the case in Article Third, Amended Article Third provides that the
holders of Special Common Stock (or Redeemable Common Stock, in the case of
Article Third) and Common Stock are, on all matters submitted to a vote of the
stockholders, entitled to one vote per share, voting together as a single class
unless otherwise provided for in the Certificate of Incorporation or required by
applicable law.

DIVIDENDS; RECLASSIFICATIONS; MERGERS

Holders of Special Common Stock and Common Stock are entitled to receive
such dividends and other distributions in cash or property as may be declared
thereon by the Genentech Board from time to time out of assets or funds of
Genentech legally available therefor, and shall share equally on a per share
basis in all such dividends and other distributions. In the case of dividends or
other distributions payable in stock of Genentech other than Preferred Stock,
including distributions pursuant to stock splits or divisions of stock of
Genentech other than Preferred Stock, only shares of Common Stock shall be paid
or distributed with respect to shares of Common Stock and only shares of Special
Common Stock in an amount per share equal to the amount per share paid or
distributed with respect to shares of Common Stock shall be paid or distributed
with respect to Special Common Stock. In the case of any combination or
reclassification of the Special Common Stock or the Common Stock, the Special
Common Stock or the Common Stock as the case may be, shall also be combined or
reclassified so that the number of shares of Common Stock outstanding
immediately following such combination or reclassification shall bear the same
relationship to the number of shares of Common Stock outstanding immediately
prior to such combination or reclassification as the number of shares of Special
Common Stock outstanding immediately following such combination or
reclassification bears to the number of shares of Special Common Stock
outstanding immediately prior to such combination or reclassification. Amended
Article Third would not effect any substantive amendments to this provision.

In the event Genentech enters into any consolidation, merger, combination
or other transaction in which the Common Stock is exchanged for or changed into
other stock or securities, cash and/or any other property, then in any such case
each share of Special Common Stock shall at the same time be similarly exchanged
or changed into an amount per share, equal to the aggregate amount of stock or
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged;
provided that any such stock may be made redeemable on terms no less favorable
to the holder thereof than the terms upon which the Special Common Stock is
redeemable pursuant to the Call Rights; and provided, further, that any such
stock shall be subject to a right on the part of the holder to put such stock on
terms no less favorable to the holder thereof than the terms upon which the
Special Common Stock is required to be redeemed by the Company pursuant to the
Put Rights. Except for such requirements with respect to the Put Rights, Amended
Article Third would not effect any substantive amendments to this provision.

LIQUIDATION

As is the case in Article Third, Amended Article Third provides that upon
any liquidation, dissolution or winding up of Genentech, no distribution shall
be made (1) to the holders of shares of Common Stock unless,

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<PAGE> 64

prior thereto, the holders of shares of Special Common Stock (Redeemable Common
Stock in the case of Article Third) shall have received $.01 per share, plus an
amount equal to declared and unpaid dividends and distributions thereon to the
date of such payment; provided that the holders of shares of Special Common
Stock shall be entitled to receive an aggregate amount per share equal to the
aggregate amount to be distributed per share to holders of shares of Common
Stock, or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Special
Common Stock, except distributions made ratably on the Special Common Stock and
all such other parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up.

CALL RIGHTS

As is the case with the Redeemable Common Stock, the Special Common Stock
may be redeemed, in whole but not in part, at the option of Genentech, during
certain periods, at certain prices and upon certain terms and conditions.
Amended Article Third provides that the redemption price for any date of
redemption (the "Redemption Date") during the periods set forth below shall be
the price set forth opposite such period in the following table, adjusted if
necessary as described below:

<TABLE>
<CAPTION>
PRICE PERIOD
----- ------
<S> <C>
July 1, 1995 to September 30, 1995................................ $61.25
October 1, 1995 to December 31, 1995.............................. $62.50
January 1, 1996 to March 31, 1996................................. $63.75
April 1, 1996 to June 30, 1996.................................... $65.00
July 1, 1996 to September 30, 1996................................ $66.25
October 1, 1996 to December 31, 1996.............................. $67.50
January 1, 1997 to March 31, 1997................................. $68.75
April 1, 1997 to June 30, 1997.................................... $70.00
July 1, 1997 to September 30, 1997................................ $71.50
October 1, 1997 to December 31, 1997.............................. $73.00
January 1, 1998 to March 31, 1998................................. $74.50
April 1, 1998 to June 30, 1998.................................... $76.00
July 1, 1998 to September 30, 1998................................ $77.50
October 1, 1998 to December 31, 1998.............................. $79.00
January 1, 1999 to March 31, 1999................................. $80.50
April 1, 1999 to June 30, 1999.................................... $82.00
</TABLE>

The redemption prices for the Redeemable Common Stock from September 1990
through June 30, 1995 were and are as follows:

<TABLE>
<CAPTION>
PRICE PERIOD
----- ------
<S> <C>
Prior to December 31, 1990.......................................... $38.00
January 1, to March 31, 1991........................................ $39.00
April 1, 1991 to June 30, 1991...................................... $40.00
July 1, 1991 to September 30, 1991.................................. $41.25
October 1, 1991 to December 31, 1991................................ $42.50
January 1, 1992 to March 31, 1992................................... $43.75
April 1, 1992 to June 30, 1992...................................... $45.00
July 1, 1992 to September 30, 1992.................................. $46.25
October 1, 1992 to December 31, 1992................................ $47.50
January 1, 1993 to March 31, 1993................................... $48.75
April 1, 1993 to June 30, 1993...................................... $50.00
July 1, 1993 to September 30, 1993.................................. $51.25
</TABLE>

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<TABLE>
<CAPTION>
PRICE PERIOD
----- ------
<S> <C>
October 1, 1993 to December 31, 1993................................ $52.50
January 1, 1994 to March 31, 1994................................... $53.75
April 1, 1994 to June 30, 1994...................................... $55.00
July 1, 1994 to September 30, 1994.................................. $56.25
October 1, 1994 to December 31, 1994................................ $57.50
January 1, 1995 to March 31, 1995................................... $58.75
April 1, 1995 to June 30, 1995...................................... $60.00
</TABLE>

Notice of any proposed redemption of the Special Common Stock will be given
by mailing a copy of such notice (the "Call Notification") to the holders of
record of the shares of Special Common Stock, not more than 30 or less than 10
days prior to the date fixed for redemption.

As is the case under the Existing Governance Agreement, the Amended
Governance Agreement provides that Genentech will effect the redemption of the
special Common Stock upon the request of Roche, and will not effect such
redemption absent such request. See "The Amended Governance
Agreement -- Redemption of Special Common Stock."

PUT RIGHTS

Amended Article Third will provide that unless the Call Rights have been
previously exercised, during the Put Period, each holder of the Special Common
Stock will have the option pursuant to the Put Rights to require the Company to
redeem all or part of the Special Common Stock held by such holder. Holders of
the Redeemable Common Stock currently do not have any rights comparable to the
Put Rights and, consequently, do not have the right to require the Company to
purchase their shares of Redeemable Common Stock.

In connection with the exercise of the Put Rights by any holder of Special
Common Stock, the Company will redeem each share of Special Common Stock subject
to the Put Rights at a redemption price of $60 per share (the "Put Price"),
subject to adjustments described below. The holders of Special Common Stock will
have the right to require the Company to redeem all or some of the shares of
Special Common Stock held by such holder by delivery of the Put Notice (as
hereinafter defined) during the Put Period to the Company or the Depositary (as
hereinafter defined).

At least 10 and not more than 30 days prior to the beginning of the Put
Period or, in the event of an acceleration of the Put Rights described below, as
soon as practicable following the date of the occurrence of the Insolvency Event
giving rise to such acceleration (but in no event later than the tenth day
following such date), the Company will mail the Put Notification (as hereinafter
defined) to each holder of Special Common Stock. To facilitate the giving of the
Put Notification to the holders of Special Common Stock, the Genentech Board may
fix a record date for determination of holders of Special Common Stock entitled
to be given the Put Notification, which record date may not be more than five
days prior to the date the Put Notification is given pursuant to Amended Article
Third.

ADJUSTMENTS

The redemption prices pursuant to the Call Rights and the Put Rights are
subject to appropriate adjustment in the case of any dividend payable in shares
of Special Common Stock, or any subdivision or combination of the Special Common
Stock and, subject to certain exceptions, in the event of certain other
extraordinary dividends payable in respect of the Special Common Stock.

PAYMENT

CALL RIGHTS. Under Amended Article Third, on or prior to the date any Call
Notification is first sent or given, the Company will deposit the aggregate of
the Redemption Price (together with accrued and unpaid dividends to such date)
of the shares to be redeemed with the Depositary, in trust for payment to the
holders of the Special Common Stock, and deliver irrevocable written
instructions authorizing the Depositary to apply such deposit solely to the
redemption of the shares to be redeemed. The amount of funds required to be

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deposited in connection with the Call Rights pursuant to the foregoing sentence
will be reduced by the aggregate redemption price of any shares of Special
Common Stock deposited by Roche in lieu of such funds. In the case of the
exercise of the Call Rights, each holder of shares of Special Common Stock will
be paid within three business days following the surrender of the certificate or
certificates representing such shares to the Depositary, together with a
properly executed letter of transmittal covering such shares of stock, the
Redemption Price for such shares. The Company's written instructions to the
Depositary may provide that any of such deposit remaining unclaimed at the
expiration of two years after the date fixed for redemption pursuant to the Call
Rights by the holder of any of such shares be returned to the Company and revert
to the general funds of the Company, after which return such holder will have no
claim against the Depositary but will have a claim as an unsecured creditor
against the Company for the redemption price together with accrued and unpaid
dividends to such redemption date, without interest. The Call Notification
having been duly given, or the Depositary having been irrevocably authorized by
the Company to give said notice, and the Redemption Price (together with accrued
and unpaid dividends to such redemption date) of the shares to be redeemed
having been deposited, all as aforesaid, then all shares of Special Common Stock
with respect to which such deposit will have been made pursuant to exercise of
the Call Rights will forthwith, whether or not the date fixed for such
redemption shall have occurred or the certificates for such shares shall have
been surrendered for cancellation, and all rights with respect to such shares
will thereupon cease and terminate, except the right of the holders of such
shares to receive, out of such deposit in trust, on the redemption date the
Redemption Price (together with accrued and unpaid dividends to such redemption
date) to which they are entitled, without interest.

PUT RIGHTS. Under the terms of Amended Article Third, promptly following
the end of the Put Period, the Company will deposit or cause to be deposited
with the Depositary funds in an amount sufficient to pay the Put Price for all
shares of Special Common Stock with respect to which the Put Rights have been
properly exercised. Each holder of shares of Special Common Stock who has
properly exercised the Put Rights, and who has surrendered the shares of Special
Common Stock with respect to which the Put Rights have been exercised, will be
paid promptly following the end of the Put Period. In the event the Put Period
is accelerated as described below, the Company will deposit or cause to be
deposited the Put Price for all shares of Special Common Stock with respect to
which the Put has been properly exercised and for which certificates
representing such shares, together with a properly executed Put Notice, have
been surrendered to the Depositary, (x) promptly following the 30th day of the
Put Period, with respect to shares of Special Common Stock surrendered on or
prior to the 30th day of the Put Period, and (y) promptly following the end of
the Put Period with respect to all shares of Special Common Stock surrendered
thereafter. In the event of such acceleration, each holder of shares of Special
Common Stock who has properly exercised the Put Rights and surrendered the
shares of Special Common Stock with respect to which the Put Rights have been
exercised, together with a properly executed Put Notice, (i) on or prior to the
30th day of the Put Period, will be paid promptly following the thirtieth day of
the Put Period and (ii) prior to the end of the Put Period, will be paid
promptly following the end of the Put Period. In the event of the exercise of
the Put Rights for less than all of the shares of Special Common Stock
represented by a certificate, a new certificate representing the shares of
Special Common Stock not redeemed pursuant to the exercise of the Put Rights
will be issued to the holder of such shares.

DEFAULT AND ACCELERATION OF PUT RIGHTS.

Unless the Call Rights have been previously exercised, if, prior to the
last day of the Put Period, (i) the Company files a voluntary petition in
bankruptcy or seeks reorganization in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
(the "Bankruptcy Code"), or under any state or federal law granting relief to
debtors, or (ii) any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against the Company and the same is not dismissed within 30 days, or the Company
files an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition, or (iii) the Company is adjudicated a
bankrupt, or an order for relief is entered by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy,

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reorganization or other relief for debtors, then, and upon the occurrence of
such event (an "Insolvency Event"), without notice of any kind whatsoever, the
right of the holders of the Special Common Stock to exercise the Put Rights will
accelerate, and the Put will be exercisable immediately upon the occurrence of
such event and until the end of the Put Period.

CONVERSION

Each share of Special Common Stock outstanding following the close of
business on the last day of the Put Period (the "Conversion Date") will, unless
previously called for redemption on or prior to such date, automatically be
converted into one share of Common Stock.

Notice of the Conversion Date will be given by mail to the holders of
record of the shares of Special Common Stock, not more than 30 nor less than 10
days prior to the Conversion Date. Upon request of any holder, Genentech will
issue and deliver to the holder as promptly as practicable after the Conversion
Date a replacement certificate for the number of Shares issuable upon conversion
of such Special Common Stock. No shares of Special Common Stock will be issued
after the Conversion Date.

Genentech will provide, free from preemptive rights, out of its authorized
but unissued shares of Common Stock, or out of shares of Common Stock held in
its treasury, sufficient shares of Common Stock to provide for the conversion of
the Special Common Stock of all issued and outstanding shares of Special Common
Stock on the Conversion Date. Amended Article Third will provide that all shares
of Common Stock which may be issued upon conversion of Special Common Stock will
upon issue be fully paid and non-assessable by Genentech and free from all
taxes, liens and charges with respect to the issue thereof. Amended Article
Third will further provide that, if on the Conversion Date the Special Common
Stock shall be listed on the NYSE or on any other national securities exchange
or the NASDAQ National Market, Genentech will, if permitted by the rules of such
exchange, seek to list on each such exchange or the NASDAQ National Market, as
the case may be, all shares of Common Stock issuable upon conversion of the
Special Common Stock.

LEGEND

Each certificate representing shares of Special Common Stock will bear the
following legend:

"The shares of Special Common Stock represented hereby are subject to
(i) redemption at the option of the corporation during the periods, at the
prices and on the terms and conditions specified in the corporation's
certificate of incorporation, (ii) an option on the part of the holder,
under certain circumstances, to require the corporation to redeem such
shares of Special Common Stock, at the price and on the terms and
conditions specified in the corporation's certificate of incorporation and
(iii) conversion into Common Stock, par value $.02, of the corporation on
the date specified, and upon the terms and conditions set forth in, such
certificate of incorporation. After redemption the shares represented by
this certificate shall cease to be outstanding for all purposes and the
holder hereof shall be entitled to receive only the redemption price of
such shares, without interest. After conversion this certificate shall
represent the shares of Common Stock into which the shares of Special
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 Genentech
Certificate of Incorporation, any amendment of the provisions of Article Third
requires the affirmative vote of the holders of a majority of the shares of
Common Stock entitled to vote and of the holders of a majority of the shares of
Special Common Stock entitled to vote, each voting separately as a class. See
"The Amended Governance Agreement -- Certain Agreements of Roche as to Voting."

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CERTAIN DEFINITIONS

For purposes of the foregoing discussion of Amended Article Third, the
following terms will have the following meaning:

"Depositary" will mean the bank or trust company in the Borough of
Manhattan, the City and State of New York, having combined capital, surplus
and undivided profits of at least $500 million which is appointed by the
Company to serve as agent for the purpose of receiving certificates
representing shares of the Special Common Stock upon exercise of the Put
Rights or Call Rights, as the case may be, and distributing the Redemption
Price or the Put Price therefor, as the case may be.

"Put Notice" will mean a written notice electing to have shares of
Special Common Stock redeemed by the Company pursuant to the exercise of
the Put Rights.

"Put Notification" will mean a written notice from the Company to the
holders of the Special Common Stock and the holders of options to purchase
shares of the Special Common Stock informing each such holder of (A) the
rights of such holder to cause the Company to redeem shares of Special
Common Stock during the Put Period, (B) the date of the commencement and
termination of the Put Period, (C) the Put Price, (D) the identity and
address of the Depositary and (E) instructions as to how to exercise the
Put Rights. The Put Notification will, in all respects, comply with the
requirements of the Exchange Act.

"Put Period" will mean, subject to acceleration upon the occurrence of
certain Insolvency Events, the period commencing on July 1, 1999 and ending
on the close of business on the thirtieth business day thereafter or such
later date as may be required under the Exchange Act; provided that, in the
event of acceleration of the Put Period following the occurrence of an
Insolvency Event, the Put Period will be the period commencing as soon as
practicable following the date of the occurrence of the Insolvency Event
giving rise to such acceleration (but in no event later than ten days
following such date) and ending on the close of business on the 60th
business day thereafter or such later date as may be required under the
Exchange Act.

ARTICLE ELEVENTH OF THE
CERTIFICATE OF INCORPORATION

Article Eleventh of the Genentech Certificate of Incorporation ("Article
Eleventh") will remain unchanged in the Merger.

Article Eleventh will continue to provide that, in addition to any
affirmative vote required by law or any other provision of the Certificate of
Incorporation, any Business Combination (as hereinafter defined) with Roche or
any affiliate of Roche (a "Subject Person") shall require (1) the affirmative
vote of the holders of at least 50% of the voting power of the then outstanding
shares of capital stock of Genentech entitled to vote generally in the election
of directors (the "Voting Stock"), voting together as a single class, who are
entitled to vote thereon (it being understood that for purposes of Article
Eleventh, each share of Voting Stock will have the number of votes granted
pursuant to Amended Article Third) and (2) the approval of a majority of the
members of the Genentech Board who are entitled to vote thereon in such
capacity. For purposes of Article Eleventh, (x) no Subject Person or any member
of a group of which a Subject Person is a member, shall be entitled to vote any
shares of Voting Stock beneficially owned by it or any member of such group and
(y) no person or group that beneficially owns at least 12% of the Voting Stock
not beneficially owned by all Subject Persons shall be entitled to vote with
respect to that portion of his or its shares of Voting Stock which exceed 12% of
the Voting Stock not beneficially owned by all Subject Persons. For purposes of
Article Eleventh, no director will be entitled to vote on any such Business
Combination in his capacity as director who is an officer of the corporation or
who is an employee, director, principal stockholder or partner of a Subject
Person or of an entity (other than Genentech or any of its subsidiaries) that
was dependent upon a Subject Person for more than 10% of its revenues or
earnings in its most recent fiscal year.

For the purposes of Article Eleventh, "Business Combination" is defined to
include (i) any merger or consolidation of Genentech or any majority-owned
subsidiary with a Subject Person; (ii) any sale, lease,

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license, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with a Subject Person of any
assets of any majority-owned subsidiary having an aggregate fair market value
equal to or greater than 10% of Genentech's assets; (iii) the issuance or
transfer by Genentech or any majority-owned subsidiary (in one transaction or a
series of transactions) of any securities of Genentech or any majority-owned
subsidiary to a Subject Person in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair market value of $20
million or more; or (iv) any reclassification of securities (including any
reverse stock split), or recapitalization of Genentech, or any merger or
consolidation of Genentech with any of its majority-owned subsidiaries or any
other transaction (whether or not with or into or otherwise involving Roche)
which has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or convertible securities
of Genentech or any majority-owned subsidiary which is, directly or indirectly,
owned by a Subject Person).

Article Eleventh provides that in the event any person becomes bound by the
Amended Governance Agreement, the provisions of Article Eleventh will continue
to be applicable, provided that each reference to Roche therein shall also be
deemed a reference to such person.

Article Eleventh further provides that, in addition to any vote required by
law, any amendment, modification or repeal of the provisions of Article Eleventh
will require the same stockholder and Genentech Board approval as any Business
Combination subject to Article Eleventh would require at the time of such
amendment, modification or repeal.

THE AMENDED GOVERNANCE AGREEMENT

The Amended Governance Agreement represents, in general, an extension of
the term of the Existing Governance Agreement between the Company and Roche, its
majority stockholder, which has been in effect since the 1990 Merger, and also
represents, with respect to certain matters as noted below, a modification of
the Existing Governance Agreement. The Amended Governance Agreement sets forth
certain rights and obligations of Genentech and Roche concerning, among other
things, the redemption of the Special Common Stock, the corporate governance of
Genentech, future acquisitions or dispositions of securities of Genentech by
Roche and obligations of Genentech and Roche in connection with the Put Rights.

THE FOLLOWING DESCRIPTION OF THE AMENDED GOVERNANCE AGREEMENT DOES NOT
PURPORT TO BE COMPLETE, AND IS QUALIFIED IN ITS ENTIRETY BY THE TEXT OF THE
AMENDED GOVERNANCE AGREEMENT, A FORM OF WHICH IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS EXHIBIT A TO ANNEX A AND IS INCORPORATED HEREIN BY
REFERENCE.

REDEMPTION OF SPECIAL COMMON STOCK

In the Amended Governance Agreement, Genentech agrees that, promptly upon
receipt of a written request from Roche for the redemption of the Special Common
Stock pursuant to the Call Rights, it will designate a Depositary for such
redemption in accordance with the terms of the Genentech Certificate of
Incorporation and notify Roche of such designation. Upon confirmation from the
Depositary that it has received sufficient funds from Roche to pay the aggregate
redemption price of all outstanding Special Common Stock (other than Special
Common Stock deposited or caused to be deposited with such depositary by Roche),
Genentech will give notice of the exercise of the Call Rights and the redemption
of the Special Common Stock. Genentech will set as the Redemption Date the date
set forth in Roche's written request for redemption; provided that such date
shall be consistent with the notice requirements of the Genentech Certificate of
Incorporation. The Redemption Date will in no event be later than the earlier of
June 30, 1999 or such earlier date on which a Triggering Disposition occurs.
Roche's right to cause Genentech to exercise the Call Rights terminates upon the
occurrence of a Triggering Disposition. The redemption price will be set in
accordance with the Genentech Certificate of Incorporation.

PUT RIGHTS WITH RESPECT TO SPECIAL COMMON STOCK

In the Amended Governance Agreement, Genentech also agrees that, prior to
commencement of the Put Period, it will designate a Depositary for the purchase
by the Company (or, under certain circumstances, by

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Roche) of shares of Special Common Stock pursuant to exercises of the Put Rights
by holders of Special Common Stock in accordance with the terms of the Genentech
Certificate of Incorporation and will notify Roche of such designation. Prior to
commencement of the Put Period, Genentech will give notice of the availability
of the Put Rights to holders of the Special Common Stock. The redemption price
will be $60 per share of Special Common Stock, subject to adjustment in
accordance with the Genentech Certificate of Incorporation. Unless accelerated
pursuant to an Insolvency Event, the Put Period will be the period commencing on
July 1, 1999 and ending on the close of business on the 30th business day
thereafter.

SUSPENSION OF OBLIGATIONS

The Amended Governance Agreement provides that Genentech's obligations
under the Amended Governance Agreement to effect the redemption of the Special
Common Stock pursuant to the Call Rights or the Put Rights will be suspended
during any period when, in the good faith judgment of the majority of
Genentech's directors, the redemption of the Special Common Stock would be
prohibited under the Delaware Law. During any such period, however, Roche's
obligations in respect of the Call Rights and the Put Rights would remain in
full force and effect. See "-- Redemption of Special Common Stock" and "Capital
Contribution and Assumption of Put Obligation by Roche."

INDEMNIFICATION

Roche has agreed in the Amended Governance Agreement to indemnify Genentech
and its officers and directors against all losses, claims, damages, liabilities
and expenses (including attorneys' fees) arising out of the redemption of the
Special Common Stock pursuant to the Call Rights or the Put Rights in accordance
with the provisions of the Amended Governance Agreement (including, without
limitation, in the event of the Company's consummation of the redemption of
Special Common Stock in contravention of Section 160 of the Delaware Law or any
other law for the protection of creditors), other than any such losses, claims,
damages, liabilities and expenses that result primarily from actions taken or
omitted in bad faith by the indemnified person or from the indemnified person's
gross negligence or willful misconduct.

OPTIONS

Roche and the Company have agreed in the Amended Governance Agreement to
make appropriate provisions to assure that any options, warrants, rights or
securities issued by the Company convertible into or exercisable or exchangeable
for Special Common Stock outstanding on the Redemption Date or the final day of
the Put Period (whether or not convertible, vested, exercisable or exchangeable
on such date) become convertible into or exercisable or exchangeable for
consideration of the same type and amount as the holders thereof would have
received had they converted, exercised or exchanged such options, warrants,
rights or securities prior to the Redemption Date or the final day of the Put
Period. The Amended Governance Agreement provides, however, that such provision
will not be deemed or construed as a waiver of any other rights that a holder of
any such securities may have.

FURTHER ACQUISITIONS OF SECURITIES OF GENENTECH BY ROCHE

The Amended Governance Agreement provides that Roche will not, prior to
June 30, 1999 (as opposed to June 30, 1995 under the Existing Governance
Agreement), propose any Business Combination (as defined under "Article Eleventh
of the Certificate of Incorporation") with Roche or any affiliate of Roche
unless a majority of the Independent Directors determine that there has been a
sustained, substantial impairment of the business, prospects or financial
viability of Genentech and its subsidiaries, taken as a whole, since the
Effective Time (as opposed to September 7, 1990 under the Existing Governance
Agreement). Unless such a determination is made, Roche will not propose any such
Business Combination during the period commencing on July 1, 1999 and
terminating on June 30, 2000, at a price per share for the unaffiliated holders
of the Common Stock into which shares of Special Common Stock will have been
converted on June 30, 1999 less than the price per share at which shares of
Special Common Stock could have been redeemed on such date, adjusted for any
event occurring since such date as if the Special Common Stock had continued to
be outstanding. In addition, any Business Combination with Roche or any
affiliate of Roche, whether or not prior

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to June 30, 2000, must be approved by the affirmative vote of the Independent
Directors and the holders of a majority of the Equity Securities not
beneficially owned by Roche or its affiliates.

The Amended Governance Agreement provides that for purposes of the approval
of the Genentech Board required under Article Eleventh for any Business
Combination permitted by the Amended Governance Agreement, the Independent
Directors will consider whether the Business Combination is fair to the minority
stockholders of Genentech without taking into account any possible discount due
to the fact that there exists a controlling stockholder of Genentech.

Subject to the Call Rights and the Put Rights, Roche has also agreed in the
Amended Governance Agreement that it will not, directly or indirectly, purchase
or otherwise acquire, or propose or offer to purchase or acquire, any Equity
Security of Genentech, whether by tender offer, market purchase, privately
negotiated purchase, merger or otherwise, except that Roche may acquire Equity
Securities such that Roche Holding's Voting Interest (as hereinafter defined) in
Genentech would not immediately after such acquisition exceed 79.9%. Roche has
agreed that in no event will it, directly or indirectly, prior to June 30, 2000
make any tender offer for Equity Securities of Genentech without the consent of
the majority of the Independent Directors other than as permitted in connection
with the exercise of the Put Rights. For purposes of the Amended Governance
Agreement, (i) "Equity Security" means any (A) voting stock of Genentech (other
than shares of voting stock not having the right to vote generally in any
election of directors of Genentech), (B) securities of Genentech convertible
into or exchangeable for such stock, and (C) options, rights and warrants issued
by Genentech to acquire such stock; (ii) "Roche Holding's Voting Interest" means
the percentage of votes for elections of directors of Genentech generally
controlled, directly or indirectly, by Roche Holding, assuming the conversion,
exchange or exercise into or for voting stock of all Equity Securities other
than voting stock and not taking into account any voting agreements or
arrangements granting to a third party control over the voting of voting stock
(including those contained therein) beneficially owned by Roche Holding; and
(iii) "Independent Director" means a director of Genentech who would be entitled
for purposes of Article Eleventh of the Certificate of Incorporation to vote on
a Business Combination with Roche. See "Article Eleventh of the Certificate of
Incorporation."

CAPITAL CONTRIBUTION AND ASSUMPTION OF PUT OBLIGATIONS BY ROCHE

Pursuant to the Amended Governance Agreement, Roche has agreed to, or to
cause one or more of its affiliates to, contribute to the Company, immediately
prior to the time that any amounts become due and payable to the holders of
Special Common Stock pursuant to the Put Rights, (i) funds in an amount equal to
the product of the number of shares of Special Common Stock with respect to
which the Put Rights have been properly exercised multiplied by the Put Price
plus (ii) such additional funds, if any, sufficient to permit the Company to
redeem the shares of Special Common Stock with respect to which the Put Rights
have been properly exercised without violating Section 160 of the Delaware Law,
any bankruptcy or insolvency law or other law or regulation for the protection
of creditors. In exchange for such payment, the Company has agreed to issue to
Roche (or to its designated affiliate) a number of duly authorized and validly
issued shares of Common Stock equal to the number of shares of Special Common
Stock acquired thereby by the Company. Notwithstanding the foregoing, Roche's
obligation to make any such payment to the Company shall be void and of no
further force and effect if, in lieu thereof, Roche shall (or shall cause one of
its affiliates to) elect to purchase, and make all arrangements necessary
(including compliance by Roche, or any such affiliate or affiliates, with the
Securities Act, the Exchange Act and any other applicable federal or state
securities laws) to purchase, during the Put Period, directly from the holders
of Special Common Stock at the Put Price the shares of Special Common Stock
which such holders elect or have elected to require the Company to purchase. The
Amended Governance Agreement provides that, if Roche so elects, the obligation
of Roche to purchase shares of Special Common Stock may, at the election of
Roche, be assigned by Roche to Roche Holding or any affiliate of Roche Holding.
Pursuant to the Amended Governance Agreement, the Company, upon authorization by
a majority of the Independent Directors, has the right to enforce the
obligations of Roche described in this paragraph directly against Roche, or in
the event of assignment by Roche, against Roche, Roche Holding and any affiliate
of Roche Holding to which any assignment is made.

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BOARD OF DIRECTORS

Pursuant to the Amended Governance Agreement, the number of directors
comprising the Genentech Board immediately after the Effective Time will be
thirteen and the directors of the Company after the Effective Time will be the
directors who were serving immediately prior to the Effective Time, until their
successors have been duly elected or appointed and qualified or until the
earlier death, resignation or removal in accordance with the Genentech
Certificate of Incorporation and By-Laws and the Amended Governance Agreement.
After the Effective Time, the Genentech Board will continue to include two
nominees of Roche, whom Roche will continue to designate prior to the mailing of
the applicable annual proxy statement of the Company. Such nominees will
continue to serve in the class or classes of directors in which they served
prior to the Effective Time. The Amended Governance Agreement provides that,
notwithstanding any other provision of the Amended Governance Agreement, the
Genentech Certificate of Incorporation or By-Laws or applicable law, Roche will
not at any time prior to the day following the last day of the Put Period be
entitled to designate, or to cause the nomination or election of, more than two
members of the Genentech Board. Directors nominated by Roche pursuant to the
Amended Governance Agreement are referred to as "Investor Directors" and all
other directors are referred to as "Noninvestor Directors."

Pursuant to the Amended Governance Agreement, after the last day of the Put
Period, the Genentech Board will include up to two nominees designated by Roche
and two officers of Genentech nominated by the nominating or proxy committee of
the Genentech Board. The remainder of the Genentech Board at such time is to be
comprised of Independent Directors. Upon its request, Roche will be entitled to
designate nominees for a number of such Independent Directors equal to Roche
Holding's Voting Interest times the total number of such Independent Directors,
rounded up to the next whole number if Roche Holding's Voting Interest is
greater than 50% and rounded down to the next whole number if Roche Holding's
Voting Interest is less than or equal to 50%. Notwithstanding the foregoing, (i)
the number of Independent Directors designated by Roche will not exceed 50%
after any Triggering Disposition and (ii) Roche will have no right to designate
any nominees for directors pursuant to the Amended Governance Agreement at any
time after Roche Holding's Voting Interest has fallen below 20%.

The Amended Governance Agreement provides that Genentech will cause the
Genentech Board to be increased or decreased in size, and will cause the
Genentech Board to fill the vacancies created by any such increase, as
appropriate in order to achieve the Genentech Board's proportionality required
by the foregoing. Any directors elected to fill a vacancy will serve until the
next annual meeting of stockholders, at which the newly created positions shall
be assigned to classes of directors consistent with the terms of the Genentech
Certificate of Incorporation and the By-Laws. Whenever necessary to maintain the
proportionality of the Genentech Board required by the Amended Governance
Agreement, Roche will cause directors designated by Roche to resign from the
Genentech Board. At such time as Roche Holding's Voting Interest falls below
20%, Roche will cause all the Investor Directors to resign from the Genentech
Board.

Under the Amended Governance Agreement, Roche and the nominating or proxy
committee will have the right to designate or nominate any replacement for a
director designated by Roche or nominated by such committee, respectively, at
the termination of such director's term or upon such director's death,
resignation, retirement, disqualification, removal from office or other cause.
To the extent permitted by the Genentech Certificate of Incorporation or the
By-Laws, the Genentech Board will elect each person so designated or nominated.

The Amended Governance Agreement provides that no individual designated by
Roche will serve as a director unless such individual has such business or
technical experience, stature and character as is commensurate with service on
the board of a publicly held enterprise. No such individual who is an officer,
director, partner or principal stockholder of any competitor of Genentech and
its subsidiaries (other than Roche and its affiliates) will serve as a director
of Genentech.

Pursuant to the Amended Governance Agreement, the Genentech Board will
designate a nominating or proxy committee, an executive committee, an audit
committee and a compensation committee. Each committee of the Genentech Board
(other than any special committee or committee of Independent Directors
constituted for the purposes of making any determination that is to be made
under the terms of the Amended

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Governance Agreement or the Certificate of Incorporation) will at all times
include at least one director designated by Roche and no action by any such
committee shall be valid unless taken at a meeting for which adequate notice has
been duly given to or waived by the members of such committee. Such notice will
be required to include a description of the general nature of the business to be
transacted at the meeting, and no other business may be transacted at such
meeting. Any committee member unable to participate in person at any meeting
will be given the opportunity to participate by telephone. The director
designated by Roche to serve on any committee will be entitled to designate as
his alternate another director designated by Roche.

The Amended Governance Agreement provides that the nominating or proxy
committee will include, in addition to the director designated by Roche, one
Noninvestor Director who is an officer of Genentech and one Independent
Director, and shall have the exclusive authority to nominate individuals to fill
all Genentech Board positions, except for those to be designated by Roche after
the last day of the Put Period pursuant to the relevant provisions of the
Amended Governance Agreement. With respect to any election of directors, any
nomination of a person not then serving as a director will require the unanimous
approval of the nominating or proxy committee; provided that the two Investor
Directors designated by Roche and the Independent Directors initially nominated
by Roche will not require such unanimous approval. Genentech has agreed to use
all reasonable efforts to solicit proxies for the nominees for director
nominated by such committee from all holders of voting stock entitled to vote
thereon.

CERTAIN APPROVAL RIGHTS

The Amended Governance Agreement provides that the approval of the
directors designated by Roche pursuant to the Amended Governance Agreement
(other than those designated pursuant to Roche's right to designate Independent
Directors) will be required to approve any of the following:

(a) the acquisition by Genentech of any business or assets that would
constitute a substantial portion of the business or assets of Genentech,
whether such acquisition be by merger or consolidation or the purchase of
stock or assets or otherwise;

(b) the sale, lease, license, transfer or other disposal of all or a
substantial portion of the business or assets of Genentech other than in
the ordinary course of business, other than any such sale, lease, license,
transfer or other disposal which is subject to the provisions described
below restricting Genentech and its subsidiaries from entering such
transactions prior to first negotiating with Roche;

(c) the issuance of any Equity Securities or other capital stock of
Genentech, except for (i) issuances of shares of Special Common Stock (or,
after the conversion thereof into shares of Common Stock, issuances of
shares of Common Stock) or options, warrants or rights to acquire, or
securities convertible into or exchangeable for, such Special Common Stock
(or Common Stock) pursuant to any employee compensation plan that has been
approved by a majority of the Independent Directors; (ii) issuances thereof
upon the exercise, conversion or exchange of any outstanding Equity
Securities or other capital stock; and (iii) other issuances thereof during
any 24-month period not exceeding 5% of the voting stock of Genentech
outstanding at the beginning of such 24-month period; or

(d) the repurchase or redemption of any Equity Securities or other
capital stock of Genentech, other than redemptions required by the terms
thereof and purchases made at fair market value in connection with any
deferred compensation plan maintained by Genentech.

The Amended Governance Agreement provides that for purposes of clauses (a)
and (b) above, unless the majority of Independent Directors shall have made a
contrary determination in good faith, a "substantial portion of the business or
assets of Genentech" will mean a portion of the business or assets of Genentech
accounting for 10% of the consolidated total assets, contribution to net income
or revenues of Genentech and its consolidated subsidiaries.

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AFFILIATION ARRANGEMENTS

Pursuant to the Amended Governance Agreement, except as otherwise provided
in the Licensing Agreement, Genentech will not, and will not permit any of its
subsidiaries to, enter into any material licensing or marketing agreement with
respect to any products, processes, inventions or developments made by Genentech
or any subsidiary of Genentech unless it shall have first negotiated in good
faith with Roche for a reasonable period of not less than three or more than six
months with a view towards reaching a mutually beneficial licensing or marketing
agreement with respect to such products, processes, inventions or developments.

CERTAIN AGREEMENTS OF ROCHE AS TO VOTING

Pursuant to the Amended Governance Agreement, Roche will vote its shares of
Common Stock and shares of Special Common Stock in any election of directors for
all nominees in proportion to the votes cast by the other holders of Special
Common Stock (excluding, at Roche's option, any votes cast by any person or
group that beneficially owns at least 12% of the Equity Securities not
beneficially owned by Roche Holding); provided that it may cast all of its votes
in favor of any nominee designated by it pursuant to the provisions of the
Amended Governance Agreement.

Pursuant to the Amended Governance Agreement, in any vote to amend the
terms of the Special Common Stock, Roche will vote its shares of Special Common
Stock, if any, in proportion to the votes cast by the holders of Special Common
Stock (other than Roche and its affiliates).

RESTRICTIONS ON TRANSFERS OF COMMON STOCK BY ROCHE

Roche has agreed in the Amended Governance Agreement that it will not sell
or otherwise transfer any shares of Common Stock or shares of Special Common
Stock (other than to any entity that is directly or indirectly 100% owned by
Roche Holding), except (i) pursuant to a registered underwritten public offering
subsequent to April 30, 2000 (or earlier, if it becomes illegal for Roche to own
Genentech stock or exercise rights of ownership with respect to the Genentech
stock) in accordance with its registration rights under the Amended Governance
Agreement (see " -- Registration Rights"), (ii) pursuant to Rule 144 promulgated
under the Securities Act, subsequent to April 30, 2000 (or earlier, if it
becomes illegal for Roche to own the Genentech Shares or exercise rights of
ownership with respect to the Genentech Shares), provided that any such sale
will be subject to the volume and manner of sale limitations set forth in such
rule, whether or not legally required, (iii) to any entity directly or
indirectly 100% owned by Roche Holding or (iv) after the last day of the Put
Period in a Liquidating Sale (as hereinafter defined) so long as the sale is a
sale of all Common Stock and Special Common Stock beneficially owned by Roche
Holding and Roche Holding's Voting Interest is not below 50%.

In the event Roche determines to sell its entire equity interest in
Genentech after the last day of the Put Period, the Amended Governance Agreement
is designed to afford the minority holders the ability to participate in such a
transaction provided that a majority of the Independent Directors and minority
stockholders approve. Thus, for purposes of the foregoing, a "Liquidating Sale"
means (i) a sale of all Genentech stock beneficially owned by Roche Holding to
any person or group that is acquiring all the outstanding voting stock of
Genentech at a per share consideration having at least the same value, and to be
paid in the same form as (or in cash), and not later than, the per share
consideration to be paid to Roche and its affiliates in a transaction that has
been approved by the Genentech Board and the stockholders in accordance with the
requirements that would be applicable to a Business Combination under Article
Eleventh proposed by Roche or (ii) if such transaction proposed by such person
or group has been rejected by the Independent Directors or the stockholders
entitled to vote thereon under Article Eleventh, the sale of all the Genentech
stock beneficially owned by Roche Holding to such person or group for per share
consideration having not more than the same value, and payable in the same form,
as was so proposed to be paid to stockholders.

Notwithstanding the foregoing, (x) no Liquidating Sale may be made prior to
the time that such transaction is either rejected by the Independent Directors
or the stockholders or consummated and (y) prior

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to the first anniversary of the last day of the Put Period, the per share value
offered to the public in any Liquidating Sale may not be less than the final
redemption price of the Special Common Stock under the Call Rights (adjusted
appropriately for events occurring after the conversion thereof as if it were
still outstanding). The good faith determination of the majority of the
Independent Directors of the value of the consideration offered in any proposal
will be conclusive and binding.

The Amended Governance Agreement provides, however, that no Liquidating
Sale will be permitted unless the transferee and each entity controlling such
transferee shall have agreed in writing to be bound, and to cause their
affiliates to be bound, by the terms of the Amended Governance Agreement as if
it were Roche and has entered into a confidentiality agreement with Genentech
substantially in the form of the confidentiality agreement between Roche Holding
and Genentech dated October 13, 1989 (as modified by Section 6.01 of the 1990
Merger Agreement); provided that no transferee in a Liquidating Sale shall be
entitled to Roche's rights under the Amended Governance Agreement with respect
to the composition of the Genentech Board and the committees of the Genentech
Board and the covenants of Genentech with respect to severance arrangements and
marketing agreements.

Roche has agreed in the Amended Governance Agreement that in the event of a
Triggering Disposition, it will use its best efforts to sell additional shares
of Common Stock within three years of the Triggering Disposition such that it
will beneficially own not more than 20% of the outstanding shares of Common
Stock. After a Triggering Disposition, Roche will have no further rights (i) to
request redemption of the Special Common Stock, or (ii) with respect to the
designation of members of committees of the Genentech Board, the requirement of
unanimous approval of Genentech Board nominees, the right to approve certain
actions as described above and the right to negotiate first with Genentech and
its subsidiaries with respect to material licensing or marketing agreements;
provided, however, that no Triggering Disposition will relieve Roche of any of
its obligations in connection with the Put Rights. Other than in connection with
its contingent obligations with respect to the Put Rights as described in
" -- Capital Contribution and Assumption of Put Obligation by Roche," after a
Triggering Disposition, Roche will not, without the prior written consent of the
Genentech Board, acting alone or as part of a group, acquire or offer or agree
to acquire, directly or indirectly, by purchase or otherwise, any Equity
Securities or all or any substantial portion of the assets of, or otherwise seek
to influence or control, in any manner whatsoever, the management or policies of
Genentech until the fifteenth anniversary of the date it ceases to beneficially
own more than 20% of the outstanding shares of Common Stock, provided that the
foregoing will not apply to any of Roche's portfolio managers whose investment
decisions are not directed by Roche.

REGISTRATION RIGHTS

The Amended Governance Agreement provides that, at any time after April 30,
2000 or such earlier date as it shall have become illegal for Roche Holding to
continue to own Genentech Shares, directly or indirectly, or to exercise fully
all rights of ownership with respect to Genentech Shares, upon the request of
Roche, Genentech will file a registration statement under the Securities Act as
to the number of shares of Common Stock or Special Common Stock specified in
such request; provided that, subject to certain exceptions, Genentech will not
be required to file more than three registration statements that become
effective and remain effective for a specified period. Roche's right to request
such registrations is subject to certain conditions set forth in the Amended
Governance Agreement, and Roche and Genentech have agreed to certain procedures
relating to such registration rights, which are set forth in the Amended
Governance Agreement; these conditions and procedures, however, remain identical
to those of the Existing Governance Agreement. Roche is required to use all
reasonable efforts to effect as wide a distribution of registered shares as
possible, and no sale may be knowingly made to any person or entity which is
part of any group that would, after giving effect to such sale, own more than 5%
of the outstanding Shares or 5% of the Company's Equity Securities.

All expenses incident to the performance by Genentech of its obligations
with respect to the registration of Roche's Genentech Shares will be borne by
Genentech except that Roche has agreed to pay any registration or filing fees
payable under any federal or state securities or Blue Sky laws and certain
expenses to be directly incurred by Roche, including underwriting fees,
discounts and commissions and counsel fees.

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Genentech and Roche each have agreed to indemnify the other, in certain
instances, with respect to liability incurred in connection with such
registrations.

CERTAIN COVENANTS

Genentech, pursuant to the Amended Governance Agreement, will not and will
not permit any of its subsidiaries to, (i) enter into any contract, agreement,
plan or arrangement covering any director, officer or employee of Genentech or
any of its subsidiaries that provides for the making of any payments, the
acceleration of vesting of any benefit or right of any other entitlement
contingent upon (A) the Merger or the exercise by Roche of any of its rights
under the Amended Governance Agreement to representation on the Genentech Board
(and its committees) or any acquisition by Roche of securities of Genentech
(whether by merger, tender offer, private or market purchases or otherwise) not
prohibited by the Amended Governance Agreement or (B) the termination of
employment after the occurrence of any such contingency if such payment,
acceleration or entitlement would not have been provided but for such
contingency or (ii) amend any existing contract, agreement, plan or arrangement
to so provide.

AMENDMENTS; TERMINATION

The provisions of the Amended Governance Agreement, by its terms, may not
be waived or amended without the approval of a majority of the Independent
Directors. Genentech intends to notify stockholders in the event that any
material provision of the Amended Governance Agreement is waived or amended.

The Amended Governance Agreement, by its terms, will terminate at such time
as Roche and its affiliates beneficially own 100% of the voting stock of
Genentech, except that Roche's agreement with respect to the indemnification of
Genentech and certain other persons in connection with a redemption of the
Special Common Stock pursuant to the Call Rights or the Put Rights and Roche's
agreement with respect to the treatment of options, warrants and convertible
securities following any such redemption, will survive such termination.

GUARANTY OF ROCHE HOLDING

GENERAL

Upon consummation of the transactions contemplated by the Merger Agreement,
Roche Holding will deliver the Guaranty to Genentech. THE FOLLOWING DESCRIPTION
OF THE TERMS AND CONDITIONS OF THE GUARANTY DOES NOT PURPORT TO BE COMPLETE AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE GUARANTY, A FORM OF WHICH IS
ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS EXHIBIT B TO ANNEX A AND
INCORPORATED HEREIN BY REFERENCE.

Pursuant to the Guaranty, Roche Holding unconditionally and irrevocably
guaranteed to Genentech the prompt and full discharge by Roche of all of Roche's
covenants, agreements, obligations and liabilities under Section 2.03 of the
Amended Governance Agreement, which section relates to Roche's obligation to
provide funding to Genentech, under certain circumstances, in connection with
the Company's obligations pursuant to the Put Rights. See "The Amended
Governance Agreement -- Capital Contribution and Assumption of Put Obligations."
The Guaranty applies to all such obligations, including, without limitation, the
due and punctual payment of all amounts which may become due and payable to the
Company and/or to the holders of Special Common Stock. With respect to all
obligations to pay money, such Guaranty is a guaranty of payment and not merely
of collection. If Roche defaults in the due and punctual performance of any of
its covenants, agreements, obligations and liabilities described above, or in
the full and timely payment of any amounts owed pursuant to such covenants,
agreements, obligations and liabilities described above, Roche Holding has
agreed to forthwith perform or cause to be performed such covenants, agreements,
obligations and liabilities described above, and forthwith make full payment of
any amount due with respect thereto at its sole cost and expense.

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COVENANTS

Under the Guaranty, Roche Holding has agreed to be bound by the provisions
of the Amended Governance Agreement and to abide, and to cause its affiliates to
abide, by the obligations and limitations set forth therein as if it were Roche,
and has agreed and acknowledged that any limitation or restriction on Roche set
forth therein will be deemed to be, and will be construed as, a limitation or
restriction on Roche Holding and its affiliates taken as a whole.

THE LICENSING AGREEMENT

THE FOLLOWING DESCRIPTION OF THE LICENSING AGREEMENT DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT OF THE
LICENSING AGREEMENT, A COPY OF WHICH WAS FILED WITH THE COMMISSION AS AN EXHIBIT
TO THE REGISTRATION STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE.

LICENSES, OPTIONS, KNOW-HOW AND TRADEMARKS

Pursuant to the Licensing Agreement, Genentech would agree to grant to
Roche an exclusive patent, know-how and trademark license to use, sell and,
under certain conditions, make in Canada: Activase(R) tissue plasminogen
activator; Protropin(R) and Nutropin(R) human growth hormone; and Actimmune(R)
interferon gamma 1-b, each as sold in Canada (collectively, the "Canada
Products"). Genentech has also agreed to grant to Roche an exclusive patent,
know-how and trademark license to use, sell and, under certain conditions, make
Pulmozyme(R), dornase alpha ("DNase"), outside the United States (the "Roche
Territory"). Except as noted below with respect to certain "in-licensed"
products, the Licensing Agreement provides that Genentech will grant to Roche an
option for an exclusive patent, know-how and trademark license in the Roche
Territory on a product-by-product basis to use, sell and, under certain
circumstances, make other Genentech products for which Genentech has rights as
of April 12, 1995 or for which Genentech subsequently acquires rights
("Genentech Products"). For certain products in-licensed from (x) Scios Nova
Inc. ("Scios Nova") (such products being referred to as "Scios Product") and (y)
IDEC Pharmaceuticals Corporation ("IDEC") (such products being referred to as
"IDEC Product"), Genentech will also grant to Roche an option for an exclusive
patent and know-how license outside the United States with respect to Scios
Product and IDEC Product to use, sell and, under certain conditions, make such
product. In Canada, Roche's rights with respect to Scios Product and IDEC
Product are subject to the preexisting co-promotion obligations of Genentech
with respect to such products. For other human pharmaceutical products for which
Genentech acquires rights in the Roche Territory by means of a patent and/or
know-how license from a third party ("In-Licensed Product"), subject to the
terms and conditions of the relevant license agreements relating to such
products and Roche's acceptance of the terms and conditions thereunder,
Genentech will grant to Roche an option for an exclusive patent and know-how
license in the Roche Territory on a product-by-product basis to use, sell and,
under certain circumstances, make such In-Licensed Products.

Prior to the completion of the first Phase II trial for a particular
product, Genentech retains authority to discontinue sole development of a
product and, subject to the provisions of the Amended Governance Agreement, to
license such product to a third party. See "The Amended Governance
Agreement -- Affiliation Arrangements" above. Upon the completion of Phase II
for a product, Genentech must notify Roche of this event and supply to Roche a
reasonable summary of information regarding the product, including data from any
Phase II trials. Within 30 days of such notification, the joint
Commercialization Committee (as defined in the Licensing Agreement) must meet to
review the results of the Phase II trials and other relevant data. Within 30
days of the commencement of such meeting, Roche must either exercise its option
for the product or irrevocably waive it. For those products for which Phase II
trials have already been completed as of the Effective Date, the
Commercialization Committee must meet within 45 days of the Effective Date to
review summary results of clinical data for such products. Within 90 days of the
commencement of this meeting, Roche must either exercise or waive its option for
a license for each such product on a product-by-product basis. If Roche waives
its option, Genentech is free to develop and sell the product itself or with
another party. If Genentech and Roche mutually agree, the options granted in the
Licensing Agreement can be exercised prior to the completion of Phase II.

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The licenses and options for licenses described above are conditioned on
Roche's using its best efforts in each country in the Roche Territory to take
all steps necessary to obtain regulatory approval in an expeditious fashion and
to sell the product in a manner so as to maximize revenues. The options granted
in the Licensing Agreement expire ten years after the Effective Date. Thus, any
option exercised by Roche during the ten-year term remains in effect for the
full term of the license (as described below) and any unexercised option at the
end of the ten-year period terminates.

Under the Licensing Agreement with respect to the current Genentech and
Roche collaborations on IIbIIIa antagonists and ras farnesyltransferase
inhibitors, Genentech has the sole right in the United States, and Roche has the
sole right in the Roche Territory, to use and sell such products. All research
efforts on these products will continue to be shared in an equal manner; no
royalties on sales shall be due from either party to the other. See "Certain
Relationships and Related Transactions." The costs for development of certain
products will be shared as described below under "Development and Marketing."

COMMERCIALIZATION COMMITTEES

To manage collaborations between Genentech and Roche, the Licensing
Agreement provides for the establishment of four committees: A Commercialization
Committee to provide a forum for the exchange of information about Genentech
Products; a Development Committee to coordinate development efforts between
Genentech and Roche; a Management Committee to review annually the development
and commercialization of all products covered by the Licensing Agreement, and a
Finance Committee to discuss financial activities relating to the Licensing
Agreement.

DEVELOPMENT AND MARKETING

Under the Licensing Agreement, Roche will, in general, reimburse Genentech
for 50% of Genentech's development costs, depending on the payment mechanism
described below, incurred in connection with a product for which Roche has been
granted a license or for which Roche has exercised its option for a license, and
for IIbIIIa antagonists and ras farnesyltransferase. With respect to Canada
Products, Roche will reimburse Genentech for 10% of Genentech's development
costs incurred in connection with such products. The mechanism for reimbursement
of development costs incurred up to the date of Roche's exercise of its option
for a product shall be either, at Genentech's election and with Roche's consent,
of the following: (i) upon Roche's exercise of its option by payment by in full
of 50% of the previously incurred development costs for that Product or (ii) by
the payment of 150% of prospective development costs for that product until 50%
of all previously incurred development costs for that product have been
reimbursed. One-half of all development costs incurred after Roche's exercise of
its option shall be reimbursed by Roche on an ongoing basis.

PRODUCTION AND SUPPLY

Pursuant to the Licensing Agreement, Genentech will manufacture and supply
to Roche clinical requirements of Genentech Products at cost and commercial
requirements at cost plus a margin of 20% on such cost. Roche will manufacture
and supply to Genentech clinical requirements of synthetic molecules other than
peptides or proteins ("Small Molecule Products") at cost and commercial
requirements at cost plus a margin of 20% on such cost. In-Licensed Products
will be manufactured and supplied to Roche, whether by Genentech, the licensor
or a third party, in a manner consistent with the license agreement for that
product. Roche will pay 50% of Genentech's costs associated with developing a
manufacturing process for products licensed by Roche. Genentech will pay that
proportion of Roche's costs associated with developing a

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manufacturing process for a Small Molecule Product licensed by Roche that
Genentech's expected revenues for sales of that product in the United States
bears to expected worldwide sales of that product.

ROYALTIES AND OTHER PAYMENTS

Genentech will receive the following royalties on product sales from Roche:

(i) On DNase, (x) a royalty of 20% on sales in countries that are
members of the European Economic Community or the European Free Trade
Association and in Canada and (y) in all other countries which are part of
the Roche Territory, a royalty of 12.5% for the first $100 million in
aggregate sales and thereafter a royalty of 15% for aggregate sales in
excess of $100 million until the later in each country of the expiration of
Genentech patents or 25 years from first commercial introduction;

(ii) On Canada Products, a royalty of 20% on sales of each such
product until the later of the expiration of a relevant Genentech patent in
Canada or 25 years from the Effective Date (with respect to Activase, Roche
will pay an additional 10% royalty on sales in each year that exceed 110%
of 1994 Activase sales up to a total payment of $27 million);

(iii) On each Genentech Product for which Roche exercises its option,
a royalty of 12.5% for the first $100 million in aggregate sales and
thereafter a royalty of 15% for aggregate sales in excess of $100 million
until the later in each country of the expiration of a relevant Genentech
patent or 25 years from first commercial introduction;

(iv) On Scios Product if Roche exercises its option, a royalty of 20%
on sales for so long as Genentech is paying royalties to Scios Nova on
sales of Scios Product and thereafter a royalty of 8% for aggregate annual
sales of $150 million or less and 10% for aggregate annual sales in excess
of $150 million until the later in each country of the expiration of a
relevant Genentech patent or 25 years from first commercial introduction;

(v) On IDEC Product if Roche exercises its option, a royalty of 20% on
sales for so long as Genentech is paying royalties to IDEC on sales of IDEC
Product and thereafter a royalty of 8% for aggregate annual sales of $75
million or less and 10% for aggregate annual sales in excess of $75 million
until the later in each country of the expiration of a relevant Genentech
patent or 25 years from first commercial introduction;

(vi) On In-Licensed Products, a mutually agreeable royalty to be
negotiated for each such product; and

(vii) On the expiration of any of the foregoing royalties, on a
product for which Roche continues to use a Genentech trademark, a royalty
of 2% for so long as the trademark is used.

In addition to the foregoing royalties, if Roche exercises its option for
Scios Product, Roche will pay Genentech $25 million and will reimburse Genentech
for certain one-time milestone payments that Genentech is obligated to pay upon
the occurrence of such milestones to Scios Nova. If Roche exercises its option
for IDEC Product, Roche will pay Genentech $10 million and will reimburse
Genentech for 50% of certain Genentech development costs and for certain
one-time milestone payments that Genentech is obligated to pay upon the
occurrence of such milestones to IDEC.

TRANSITION PROVISIONS

Pursuant to the Licensing Agreement, the operations of Genentech Canada,
Inc., Genentech Europe Limited and Genentech Ltd. (Japan) will be transferred to
Roche as soon as possible following consummation of the Merger but by no later
than January 1, 1996. Genentech and Roche will discuss and mutually agree with
respect to the continuing status of the employees of those organizations. The
records for those organizations and any appropriate product dossiers and
registrations will be transferred to Roche. Roche will assume any real property
leases of those organizations as well as any other liabilities that have arisen
in the normal course of business.

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TERM AND TERMINATION

The Licensing Agreement expires with respect to any individual product when
royalties are no longer payable by Roche to Genentech on sales of such product.
Other termination provisions include the following: Roche has the right to
terminate a license for a product upon six months notice if it has completed at
least one Phase III clinical trial and the results of that trial are unable to
support the registration of that product, or the results of other trials
establish that further development would not provide data sufficient to support
registration, and in such case, all rights to the product revert to Genentech.
If Roche fails to use its best efforts to commercialize a product in a country
and fails to take adequate remedial measures, Genentech may (i) terminate the
agreement with respect to that product in that country if a registration has not
been initiated or (ii) convert the exclusive license for that product in that
country to a nonexclusive one if registration has been initiated. Genentech may
terminate its development or commercialization at any time for any product which
has been licensed to Roche, and such product shall then be subject to Section
3.07 of the Amended Governance Agreement, provided that if such termination is
for reasons other than safety concerns, Genentech will have an obligation for up
to two years to provide Roche's clinical and commercial requirements. Either
party may terminate the Licensing Agreement for the breach of a material
obligation of the other. Genentech may terminate Roche's option for a license
for products if Roche's equity ownership in Genentech is less than 50% at any
time.

HOLDERS OF GENENTECH'S DEBENTURES AND WARRANTS

Holders of the 5% Convertible Subordinated Debentures due 2002 of Genentech
(the "Debentures") who convert their Debentures into Redeemable Common Stock or
Common Stock prior to the Effective Time pursuant to the terms of the Indenture,
dated as of March 27, 1987 (the "Indenture"), by and between Genentech and The
Bank of New York (the "Trustee"), will have their Genentech Shares converted
into and exchanged for Special Common Stock on the same basis as other holders
of Genentech Shares. See "The Merger Agreement -- Conversion and Exchange of
Genentech Shares and Merger Subsidiary of Common Stock."

Debentures not converted into Redeemable Common Stock or Common Stock prior
to the Effective Time will remain outstanding following the Effective Time as
obligations of Genentech as the surviving corporation in the Merger. Pursuant to
the Indenture, the holders of the Debentures who do not convert their Debentures
prior to the Effective Time (i) will thereafter have the right to convert such
Debentures into the number of shares of Special Common Stock they would have
received in the Merger had they converted their Debentures immediately prior to
the Effective Time (subject to further adjustment for events subsequent to the
Merger in the manner provided in the Indenture). As required by the Indenture,
Genentech will deliver a Supplemental Indenture to the Trustee at the Effective
Time which will provide for such adjustment.

For information as to the terms of the Debentures, including the terms
relating to conversion, see the Annual Report on Form 10-K of Genentech for the
year ended December 31, 1994, which is incorporated herein by reference.

Holders of warrants issued by Genentech (the "Warrants") to purchase
Redeemable Common Stock or Common Stock who exercise such Warrants and purchase
Redeemable Common Stock or Common Stock, as the case may be, prior to the
Effective Time pursuant to the terms of the Warrants, will have their Genentech
Shares converted into and exchanged for Special Common Stock on the same basis
as other holders of Genentech Shares. See "The Merger Agreement -- Conversion
and Exchange of Genentech Shares and Merger Subsidiary Common Stock."

The Warrants will remain outstanding following the Effective Time as
obligations of Genentech as the surviving corporation in the Merger. Pursuant to
the terms of the Warrants, each Warrant that is not exercised prior to the
Effective Time will become exercisable, in accordance with its terms, for the
number of shares of Special Common Stock that the holder of such Warrant would
have received in the Merger had such holder exercised such Warrant immediately
prior to the Effective Time (subject to the adjustment for events subsequent to
the Merger in the manner provided in the Warrants). As required by the Warrants,
Genentech

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will file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent an officer's certificate
which will provide for the adjustment described above.

Roche will agree in the Amended Governance Agreement to make appropriate
provisions to assure that any options, warrants, rights or securities
convertible into or exercisable or exchangeable for Special Common Stock
outstanding on the date of redemption of the Special Common Stock pursuant to
the Call Rights or the Put Rights (whether or not convertible, vested,
exercisable or exchangeable on such date) become convertible into or exercisable
or exchangeable for consideration of the same type and amount as the holders
thereof would have received had they converted, exercised or exchanged such
options, warrants, rights or securities prior to such date. The Amended
Governance Agreement provides, however, that such provision will not be deemed
or construed as a waiver of any other rights that a holder of any such
securities may have.

CERTAIN PROJECTIONS OF FUTURE OPERATIONS AND OTHER INFORMATION

Certain projected financial information prepared by management of Genentech
for the Genentech Board and the Special Committee is set forth below. Such
projections were not prepared with a view to publication nor with a view toward
complying with published guidelines of the Commission or the American Institute
of Certified Public Accountants regarding projections and forecasts. Such
projections are included herein only because they were considered by the Special
Committee and the Genentech Board during the course of its decision to enter
into the Proposed Transactions and because they were provided to Roche.

The following projected financial information was completed by Genentech on
April 28, 1995, was delivered to Roche on April 29, 1995 and was presented to
the Special Committee at the meetings held on April 29 and 30, 1995. Although
the Company had previously prepared projected financial information, such
projections were revised downward to reflect the Company's belief that certain
products in development would be commercially viable at dates later than had
previously been anticipated.

The information was presented in two forms, the first of which did not take
into account the effects of the Licensing Agreement:

1995-2000 BASE FINANCIAL PROJECTIONS -- BEFORE NEW LICENSING AGREEMENT

($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998 1999 2000
----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................................ $ 930 $1,025 $1,190 $1,380 $1,600 $1,965
Net Income...................................... 165 185 210 255 325 470
Earnings Per Share.............................. 1.35 1.50 1.64 2.00 2.48 3.55
</TABLE>

Under the Licensing Agreement, the international (European and Canadian)
operations included in the foregoing projected financial information would be
excluded. In lieu of these operations, Genentech would receive royalties on
product sales outside the U.S. and a margin on sales of product supplied by
Genentech to Roche for these markets. In addition Roche would pay 50% of the
development costs incurred by Genentech in respect of products with respect to
which Roche exercises its option under the Licensing Agreement. See "The
Licensing Agreement."

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The following projected financial information was prepared by the Company,
presented to the Special Committee and sent to Roche and gives effect to the
estimated effects on the above Base Financial Projections of the Licensing
Agreement:

1995-2000 FINANCIAL PROJECTIONS -- AFTER NEW LICENSING AGREEMENT

($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues....................................... $1,005 $1,065 $1,210 $1,305 $1,460 $1,725
Net Income..................................... 230 260 275 300 335 445
Earnings Per Share............................. 1.87 2.10 2.19 2.33 2.57 3.38
</TABLE>

Both sets of projected financial information set forth above were based on
certain common assumptions: (i) the absence of dividends or share repurchases by
the Company; (ii) no significant acquisitions by the Company; (iii) certain
assumed rates of taxation; and (iv) probability adjusted projections of expenses
and sales. The projected financial information which takes account of the
potential impact of the Licensing Agreement further assumes that: (i) Roche will
exercise its option with respect to all of the Company's products in
development, and the Company will be reimbursed for 50% of the total amount of
costs incurred with respect to a product up to the date of the exercise of such
option; (ii) Roche will pay the Company for 50% of such previously incurred
development costs by reimbursing the Company at 150% of prospectively incurred
development costs as described under "The Licensing Agreement -- Development and
Marketing"; (iii) Roche will accept the Company's calculation of development
costs associated with such products; (iv) sales of the Company's currently
existing products outside the United States will remain at approximately the
same levels assumed in the Base Financial Projections set forth above; (v) any
increase in revenues resulting from the Licensing Agreement would flow to
earnings rather than be used by the Company to accelerate new product
development; (vi) expenses associated with the Merger are excluded; and (vii)
Genentech's operations outside the United States will be transferred to Roche as
of January 1, 1996.

The projections set forth above are necessarily based upon assumptions with
respect to Genentech, the pharmaceutical and biotechnology industries, general
business and economic conditions, and other matters and are inherently uncertain
and involve numerous factors beyond Genentech's control, including, without
limitation, Roche's decision whether to exercise its options under the Licensing
Agreement. To the extent that such projections reflect the anticipated sales
performance of products currently marketed by Genentech and products currently
licensed by Genentech to third parties, such projections were developed based
upon information, in the nature of estimates, forecasts and projections,
provided by members of Genentech's staff. The anticipated sales performance of
potential new products that are currently in various stages of Genentech's
research and development process, and new indications for existing products,
were generated for purposes of the projections from estimates of the potential
markets for such products based upon analyses of the patient populations for the
health conditions to be treated by such products and estimates of sale prices
for such products. The projections assumed that such new products will in fact
be developed; will be effective; will obtain all necessary governmental
approvals; and will be introduced into the market; all in accordance with
management's current plans, including the timing assumptions thereof, with
respect to such products and, in most cases, prior to the introduction of
competitive products. However, in light of the uncertainties inherent in any
predictions as to whether and when the development of such products can be
successfully completed, management probability adjusted such projected expenses
and sales for new products and new indications on a product-by-product basis in
arriving at the projections set forth above. Management believes that this
probability adjustment, although subjective, is appropriate in light of the
uncertainties inherent in Genentech's business.

None of the Special Committee, Genentech Board nor Roche has been provided
updates of the projections set forth above since their presentation to the
Genentech Board on April 29 and 30, 1995. Specifically, the projections do not
take into account any possible adverse impacts that could arise in connection
with the results of pending clinical trials involving Genentech's products,
including the results of

68
<PAGE> 83

the Phase III trial conducted by Scios Nova investigating the use of Auriculin
for the treatment of acute renal failure.

The methods and assumptions used in preparing the projected financial
information set forth above involved significant elements of subjective judgment
which may or may not prove to be correct. Further, management recognized that
the product-by-product probability adjustment applied in the projections (to the
extent they relate to or are derived from the potential sales and expenses of
new products and new indications) may not adequately take into account the
possibility that some or all of the projected new products and indications may
not be successfully developed within the five-year period. ACCORDINGLY, SUCH
PROJECTED FINANCIAL INFORMATION IS NOT NECESSARILY INDICATIVE OF FUTURE
PERFORMANCE OF GENENTECH, WHICH MAY BE SIGNIFICANTLY LESS FAVORABLE OR MORE
FAVORABLE THAN AS SET FORTH ABOVE. THE INCLUSION OF SUCH PROJECTED FINANCIAL
INFORMATION HEREIN SHOULD NOT BE REGARDED AS A REPRESENTATION BY GENENTECH THAT
THE PROJECTED RESULTS INDICATED WILL BE ACHIEVED. BECAUSE SUCH PROJECTED
FINANCIAL INFORMATION IS INHERENTLY SUBJECT TO UNCERTAINTY, GENENTECH ASSUMES NO
RESPONSIBILITY FOR ITS ACCURACY.

The foregoing projections are not included in this Proxy
Statement/Prospectus in order to induce any stockholder to vote for approval of
the Proposal. Neither Genentech nor any of its financial advisors or any of
their respective directors or officers assumes any responsibility for the
accuracy of such projections. Genentech's independent auditors have not
performed any procedures with respect to such projections and, accordingly,
assume no responsibility for them. Such projections are not to be regarded as
facts and should not be relied upon as an accurate representation of future
results. In addition, because the estimates and assumptions underlying such
projections are based upon events and circumstances that have not taken place
and are inherently subject to significant scientific, financial, market,
economic and competitive uncertainties and contingencies which are difficult or
impossible to predict accurately and are beyond Genentech's control, there can
be no assurance that the projections will be realized. Accordingly, it is
expected that there will be differences between actual and projected results,
and actual results may be materially higher or lower than those set forth above.

CERTAIN INFORMATION CONCERNING
ROCHE AND ROCHE HOLDING

Roche, which was incorporated in the State of Delaware in 1987, is an
indirect wholly owned subsidiary of Roche Holding and is the holding company for
the principal operating subsidiaries of Roche Holding in the United States.
Roche, through its various direct and indirect subsidiaries, engages primarily
in the development and manufacture of pharmaceuticals, vitamins and fine
chemicals, diagnostics, flavors and fragrances, and in the business of
analytical laboratory services. In 1994, revenues of Roche were $4.5 billion, an
increase of 15% over the previous year.

Roche Holding is the parent company of an international health care concern
operating in more than 100 countries and employing approximately 60,000 people
worldwide. It was incorporated in 1896 in Basel, Switzerland, under the name of
F. Hoffmann-La Roche & Co. Limited Company. In June 1989 Roche Holding assumed
its present name and transferred its operating businesses and related assets and
liabilities to a newly established subsidiary, F. Hoffmann-La Roche Ltd, also
incorporated in Switzerland and having its principal office in Basel. In 1994,
Roche Holding and its subsidiaries had worldwide sales of 14.75 billion Swiss
Francs ($11.26 billion, converted at the rate of Sfr 1.3100 per U.S.$1.00, the
noon buying rate in the City of New York for cable transfers in Swiss francs as
certified for customs purposes by the Federal Reserve Bank of New York on
December 31, 1994), up 3% from the previous year. Roche Holding's business
consists principally of four divisions: Pharmaceuticals, Vitamins and Fine
Chemicals, Diagnostics and Fragrances and Flavors.

Roche Holding's capital stock is officially listed on the stock exchanges
of Zurich, Basel and Geneva.

69
<PAGE> 84

Roche Finance Ltd, a Swiss corporation ("Roche Finance"), owns 100% of the
stock of Roche, and in turn is a wholly owned subsidiary of Roche Holding. Roche
Finance is a holding company having participations in various subsidiaries of
Roche Holding. Roche Finance was incorporated in 1971 in Basel, Switzerland,
under the name Roche Chemie AG and assumed its present name in July 1989. The
address of the principal office of Roche Finance is Grenzacherstrasse 124,
CH-4002 Basel, Switzerland.

As of December 31, 1994, Roche and its subsidiaries had total assets of
approximately $9.49 billion, stockholders' equity of $2.39 billion and income
before provision for income taxes, amortization of goodwill and write-off of
contributed in-process research and development of $436 million. Roche Holding
had (together with its subsidiaries) approximately Sfr14.3 billion ($10.9
billion, converted at a rate of Sfr 1.31 per U.S.$1.00 as of December 31, 1994)
in cash and marketable securities as of December 31, 1994.

None of Roche, Roche Holding, or Roche Finance Ltd has during the last five
years (i) been convicted in a criminal proceeding (excluding traffic violations
or other similar misdemeanors); or (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.

Other than as described in "Summary and Special Factors -- The 1990
Merger", "General Information -- Required Vote", none of Roche, Roche Holding,
or Roche Finance is the direct or indirect beneficial owner of any security of
Genentech or, other than as described in this Proxy Statement/Prospectus, has
any contract, arrangement, understanding or relationship with respect to any
securities of Genentech.

Other than as described in "The Proposed Transactions -- Background of the
Proposed Transactions", none of Roche, Roche Holding, or Roche Finance has since
January 1, 1993 had any contacts, negotiations, or entered into any transactions
with Genentech, Inc. concerning a merger, consolidation or acquisition, a tender
offer or other acquisition of securities, an election of directors, or a sale or
other transfer of a material amount of assets, or entered any contracts,
arrangements, understandings or relationships with Genentech or any of its
executive officers, directors, controlling persons or subsidiaries.

Merger Sub was incorporated in the State of Delaware in May of 1995 and has
never carried on any independent business activities other than those incident
to its formation and the Merger. For these reasons, no meaningful financial data
are available with respect to Merger Sub. Merger Sub owns no physical properties
and has no subsidiaries. There are no pending legal proceedings to which Merger
Sub is a party or which relate to the property of Merger Sub.

CONDUCT OF GENENTECH'S BUSINESS AFTER
COMPLETION OF THE PROPOSED TRANSACTIONS;
ROCHE'S PLANS WITH RESPECT TO GENENTECH

As a result of the Licensing Agreement, Genentech expects that it will
terminate all or a substantial portion of its operations outside the United
States for at least ten years. No other changes to Genentech's business and
operations are anticipated to occur as a result of the Proposed Transactions,
and Genentech is unaware of any new plans of Roche with respect to Genentech or
its investment in Genentech.

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<PAGE> 85

PRINCIPAL STOCKHOLDERS OF GENENTECH

The following table sets forth, as of May 31, 1995, unless otherwise noted,
certain information regarding all stockholders known by Genentech to be the
beneficial owners of more than 5% of any class of Genentech's voting securities:

<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS NUMBER OF OF
OF BENEFICIAL OWNER SHARES CLASS CLASS
--------- ------------- -------
<S> <C> <C> <C>
Roche Holdings, Inc................... 67,133,409(1) Common Stock 100%
15 East North Street 9,487,600 Redeemable 18.8%
Dover, DE 19901 Common Stock
</TABLE>

- ---------------
(1) Prior to July 1, 1995, Roche has the right under the Existing Governance
Agreement to cause Genentech to redeem all outstanding shares of Redeemable
Common Stock if certain conditions are met.

71
<PAGE> 86

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth the beneficial ownership of shares of
Redeemable Common Stock and of the equity securities of Roche Holding as of May
1, 1995, unless otherwise noted, of (i) each director of Genentech, (ii) the
Chief Executive Officer and each of Genentech's four other most highly
compensated executive officers at December 31, 1994 (the "Named Executive
Officers"), and (iii) all directors and executive officers of Genentech as a
group:

AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP

<TABLE>
<CAPTION>
GENENTECH EQUITY SECURITIES OF
REDEEMABLE COMMON STOCK ROCHE HOLDING LTD
------------------------- -----------------------
PERCENT PERCENT
NAME OF BENEFICIAL OWNER SHARES OF CLASS SHARES OF CLASS
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Herbert W. Boyer.......................... 794,570(1) 1.56% 0 0
Jurgen Drews(2)........................... 30,200(3) *(4) 0 0
Armin M. Kessler(2)....................... 30,000(3) * 50 **(5)
Louis J. Lavigne, Jr...................... 102,306(6) * 0 0
Arthur Levinson........................... 231,579(7) * 0 0
Linda Fayne Levinson...................... 10,200(8) * 0 0
John P. McLaughlin........................ 148,753(9) * 0 0
J. Richard Munro.......................... 40,000(10) * 0 0
Donald L. Murfin.......................... 38,250(11) * 0 0
John T. Potts, Jr......................... 45,667(12) * 0 0
G. Kirk Raab.............................. 268,384(13) * 0 0
C. Thomas Smith, Jr....................... 40,000(10) * 0 0
Robert A. Swanson......................... 1,915,120(14) 3.75 0 0
David S. Tappan, Jr....................... 42,000(15) * 0 0
William D. Young.......................... 185,297(16) * 0 0
All Directors and Executive Officers as a
Group (36 persons)...................... 4,782,882(17) 9.02% 50 **
</TABLE>

- ---------------

(1) Includes stock options outstanding on May 1, 1995 to purchase 30,000 shares
of Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995.

(2) Pursuant to the 1990 Merger, Roche, 15 East North St., Dover, Delaware
19901, acquired 67,133,409 shares of Common Stock, representing 100% of the
class, and in addition as of May 1, 1995 owns 9,487,600 shares of
Redeemable Common Stock, representing approximately 18.8% of the class.
Pursuant to the Existing Governance Agreement, Roche appointed Messrs.
Drews and Kessler as its representatives on the Genentech Board.

(3) Includes stock options outstanding on May 1, 1995 to purchase 30,000 shares
of Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995.

(4) Asterisk (*) indicates that the amount beneficially owned is less than one
percent (1%) of the outstanding shares of Redeemable Common Stock.

(5) A double asterisk (**) indicates that the amount beneficially owned is less
than one percent (1%) of the outstanding equity securities of Roche Holding
Ltd.

(6) Includes stock options outstanding on May 1, 1995 to purchase 86,407 shares
of Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995.

(7) Includes stock options outstanding on May 1, 1995 to purchase 225,940
shares of Redeemable Common Stock which are currently exercisable or will
be exercisable by June 30, 1995.

(8) Includes stock options outstanding on May 1, 1995 to purchase 10,000 shares
of Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995.

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<PAGE> 87

(9) Includes stock options outstanding on May 1, 1995 to purchase 148,753
shares of Redeemable Common Stock which are currently exercisable or will
be exercisable by June 30, 1995.

(10) Includes stock options outstanding on May 1, 1995 to purchase 38,000 shares
of Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995.

(11) Includes stock options outstanding on May 1, 1995 to purchase 38,250 shares
of Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995.

(12) Includes stock options outstanding on May 1, 1995 to purchase 41,334 shares
of Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995.

(13) Includes stock options outstanding on May 1, 1995 to purchase 263,753
shares of Redeemable Common Stock which are currently exercisable or will
be exercisable by June 30, 1995.

(14) Includes stock options outstanding on May 1, 1995 to purchase 236,190
shares of Redeemable Common Stock which are currently exercisable or will
be exercisable by June 30, 1995. Also includes 1,678,928 shares of
Redeemable Common Stock held as trustee of six trusts. Mr. Swanson
disclaims beneficial ownership of the 553,473 shares held by five of such
trusts. Excludes ownership of 146,980 shares held by a charitable
foundation of which Mr. Swanson is one of the directors.

(15) Includes stock options outstanding on May 1, 1995 to purchase 42,000 shares
of Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995.

(16) Includes stock options outstanding on May 1, 1995 to purchase 117,814
shares of Redeemable Common Stock which are currently exercisable or will
be exercisable by June 30, 1995.

(17) Includes all shares of Redeemable Common Stock reflected in footnotes 1, 3
and 6 through 16 above and also includes outstanding stock options held by
21 other executive officers on May 1, 1995 to purchase 773,163 shares of
Redeemable Common Stock which are currently exercisable or will be
exercisable by June 30, 1995 and warrants issued in connection with the
formation of Genentech Clinical Partners IV exercisable for 72 shares of
Redeemable Common Stock.

73
<PAGE> 88

CERTAIN INFORMATION CONCERNING DIRECTORS AND

EXECUTIVE OFFICERS OF THE COMPANY

EXECUTIVE OFFICERS

The following table sets forth the name, age, and position of the executive
officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ------------------------------------- --- -------------------------------------------------
<S> <C> <C>
Gregory P. Baird*.................... 44 Vice President -- Corporate Communications
David W. Beier....................... 46 Vice President -- Government Affairs
Richard B. Brewer.................... 43 Senior Vice President
Robert L. Garnick, Ph.D.............. 45 Vice President -- Quality
Marty Glick.......................... 45 Vice President and Treasurer
Bradford S. Goodwin.................. 40 Vice President and Controller
Dennis Henner, Ph.D.................. 44 Vice President -- Research Technology
Paul F. Hohenschuh................... 52 Vice President -- Manufacturing
Edmon R. Jennings.................... 48 Vice President -- Sales and Marketing
Stephen G. Juelsgaard................ 46 Vice President, General Counsel & Assistant
Secretary
Kurt Kopp**.......................... 46 Vice President -- General Manager, Europe
Louis J. Lavigne, Jr................. 46 Senior Vice President and Chief Financial Officer
Bryan Lawlis, Ph.D................... 43 Vice President -- Process Science
Arthur D. Levinson, Ph.D. 45 Senior Vice President
M. David MacFarlane.................. 54 Vice President -- Regulatory Affairs
John P. McLaughlin................... 43 Senior Vice President and Secretary
Polly Moore, Ph.D.................... 47 Vice President -- Information Resources
James Panek.......................... 42 Vice President -- Engineering & Facilities
Eric J. Patzer, Ph.D................. 46 Vice President -- Development
Kim Popovits......................... 36 Vice President -- Sales
G. Kirk Raab......................... 59 President and Chief Executive Officer
Stephen Raines, Ph.D................. 57 Vice President -- Intellectual Property &
Assistant Secretary
Larry Setren......................... 43 Vice President -- Human Resources
Barry M. Sherman, M.D................ 53 Senior Vice President and Chief Medical Officer
Nicholas Simon, III.................. 41 Vice President -- Business Development
William D. Young..................... 50 Senior Vice President
</TABLE>

- ---------------

* Prior to joining Genentech in 1992, Mr. Baird was employed by G.D.
Searle & Co. for five years as Vice President of Corporate Communications.

** Mr. Kopp joined the Company in January 1993 as Vice President and
General Manager, Europe. Prior to joining Genentech in 1993, Mr. Kopp was
employed by F. Hoffmann-La Roche, Ltd from 1980 until December 1992, most
recently as Regional Director for Latin America. Mr. Kopp is a citizen of
Switzerland.

During the last five years, no person named above has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).

During the last five years, no person named above was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.

Except as indicated above, (i) each person named above has been an officer
and/or employee of Genentech or one or more of its subsidiaries during each of
the preceding five years; (ii) each person named above is a citizen of the
United States of America; and (iii) the business address of each person listed
above is 460 Point San Bruno Boulevard, South San Francisco, California.

74
<PAGE> 89

DIRECTORS

The following table sets forth the name and age (as of the date of the
Special Meeting) of the directors of the Company, the class to which each has
been elected, their principal occupations at present, the positions and offices
held by each with the Company in addition to the position as a director, and the
period during which each has served as a director of the Company.

<TABLE>
<CAPTION>
SERVED AS
PRINCIPAL OCCUPATION -- DIRECTOR
NAME AGE POSITION HELD SINCE
---- ---------------------------------------------- ----------
<S> <C> <C> <C>
1998 CLASS
Jurgen Drews............. 61 President, International Research and 1990
Development of the Roche Group
Armin M. Kessler......... 57 Member of the Board of Directors of Roche 1990
Holding
Donald L. Murfin......... 51 General Partner of Chemical and Materials 1980
Enterprise Associates, L.P.
John T. Potts, Jr. ...... 63 Physician-in-Chief at Massachusetts General 1982
Hospital
G. Kirk Raab............. 59 President and Chief Executive Officer of 1985
Genentech

1997 CLASS
Herbert W. Boyer......... 58 Director of Genentech 1976
Linda Fayne Levinson..... 53 President of Fayne Levinson Associates, Inc. 1992

1996 CLASS
J. Richard Munro......... 64 Chairman of the Executive Committee of the 1988
Board of Time Warner Inc.
C. Thomas Smith, Jr. .... 56 President and Chief Executive Officer of VHA, 1986
Inc.
Robert A. Swanson........ 47 Chairman of the Board of Genentech, Inc. 1976
David S. Tappan, Jr. .... 72 Director of Fluor Corporation 1981
</TABLE>

1998 Class

Dr. Drews has been President, International Research and Development, and a
member of the Executive Committee, of the Roche Group, an international health
care concern, since 1991. Dr. Drews served as Chairman of the Research Board and
a member of the Executive Committee of HLR from 1986 to 1991, and served as the
Director of Pharmaceutical Research at HLR from 1985 to 1986. These Roche
entities are affiliated with the Company. Dr. Drews served as Head of
Pharmaceutical Research and Development for Sandoz Ltd from 1982 to 1985, and as
Head of the Sandoz Research Institute from 1979 to 1982. Dr. Drews is a citizen
of Germany; his business address is c/o Hoffmann-LaRoche Inc., 340 Kingsland
Street, Nutley, New Jersey.

Dr. Kessler has been a member of the Board of Directors of Roche Holding,
the parent company of an international health care concern, since 1989. He
served as Chief Operating Officer of Roche Holding between 1990 and April 1995,
and as head of the Pharmaceutical Division of Roche Holding between 1986 and
April 1995. In addition, he has had responsibility for the Diagnostic Division
of F. Hoffmann-La Roche & Co. Ltd since 1989. These Roche entities are
affiliated with the Company. Dr. Kessler served as managing director of Roche
Products Ltd from 1985 to 1986, and as President, Chairman & CEO of Givaudan
Corporation, a subsidiary of Hoffmann-La Roche Inc., from 1983 to 1985. Dr.
Kessler is a citizen of Switzerland; his business address is c/o Roche Holding
Ltd, Grenzacherstrasse 124, CH-4002 Basel, Switzerland.

Mr. Murfin is General Partner of Chemicals and Materials Enterprise
Associates, L.P., a venture capital firm focusing on businesses based on
specialty chemicals and materials. Mr. Murfin was Managing Partner of Trident
Venture Partners from 1988 to 1989. Mr. Murfin served from 1979 to 1988 as
President of Lubrizol Enterprises, Inc., a venture development subsidiary of The
Lubrizol Corporation, a manufacturer of chemical

75
<PAGE> 90

additives for lubricants and fuels and specialty chemicals for industrial
applications, of which he was Vice President from 1985 to 1988. Mr. Murfin
served as Chairman of the Board of Genex Corporation from 1990 to 1991. Mr.
Murfin is a director of Targeted Genetics Corporation and Corvita Corporation, a
Trustee of the Edison BioTechnology Center and serves on the boards of directors
of a number of private technology based businesses. Mr. Murfin is a citizen of
the United States; his business address is Chemicals & Materials Enterprise
Assoc., One Cleveland Center, Suite 2700, Cleveland, Ohio.

Dr. Potts has been Physician-in-Chief at Massachusetts General Hospital and
Jackson Professor of Clinical Medicine at Harvard Medical School since 1981. Dr.
Potts also serves as a consultant to the Company. Dr. Potts' accomplishments
have been recognized with a series of honors over the years, including the
prestigious Fred Conrad Koch Award of the Endocrine Society, the Prize Andre
Lichwitz, and the American Society of Bone and Mineral Research's highest honor,
the William F. Neumann Award. He holds many active and honorary memberships in
scientific and professional organizations, including the Institute of Medicine,
the American Academy of Arts and Sciences, and the Association of Professors of
Medicine. Dr. Potts is a citizen of the United States; his business address is
Massachusetts General Hospital, Medical Services, Bigelow 740, Boston,
Massachusetts.

Mr. Raab was elected Chief Executive Officer of the Company in February
1990 and has been President and a director since 1985. Mr. Raab was President,
Chief Operating Officer and a director or Abbott Laboratories, a health care
company, from 1981 to 1985. He is Chairman of the Board of Directors of the
Biotechnology Industry Association and the California Health Care Institute. He
is also a member of the Board of Directors of the Pharmaceutical Research and
Manufacturers of America and Shaman Pharmaceuticals, Inc. He is a member of the
Board of Trustees of Colgate University, the San Francisco Ballet and the San
Francisco Symphony Orchestra. Mr. Raab is a citizen of the United States; his
business address is Genentech, Inc., 460 Point San Bruno Blvd., South San
Francisco, California.

1997 Class

Dr. Boyer, a founder of the Company, has been a director of the Company
since 1976 and is a consultant to the Company. He served as Vice President of
the Company from 1976 to 1991. Dr. Boyer, a Professor of Biochemistry at the
University of California at San Francisco from 1976 to 1991, demonstrated the
usefulness of recombinant DNA technology to produce medicines economically,
which laid the groundwork for the Company's development. In 1993, Dr. Boyer
received the 1993 Helmut Horten Research Award. He also received the National
Medal of Science from President Bush in 1990, the National Medal of Technology
in 1989 and the Albert Lasker Basic Medical Research Award in 1980. He is an
elected member of the National Academy of Sciences and a Fellow in the American
Academy of Arts and Sciences. Dr. Boyer is a citizen of the United States; his
business address is Genentech, Inc., 460 Point San Bruno Blvd., South San
Francisco, California.

Ms. Levinson has served as the President of Fayne Levinson Associates,
Inc., a general management consulting firm to consumer and financial service
organizations, since 1982. Ms. Levinson also serves as a member of the Board of
Egghead, Inc. Ms. Levinson was an executive at Creative Artists Agency, Inc.
from 1993 through February 1994 and was a partner of Wings Partners, a Los
Angeles-based merchant bank whose holdings include Northwest Airlines, from 1989
until 1993. Ms. Levinson was a Senior Vice President at American Express Travel
Related Services Co., Inc., from 1984 until 1987. In 1982, Ms. Levinson served
as Executive Vice President, Marketing, Hotel Group at John B. Coleman & Co. Ms.
Levinson was at McKinsey & Co., a worldwide general management consulting firm,
from 1972 through 1981, where she was made the first woman partner in 1979. Ms.
Levinson is a citizen of the United States; her business address is 710 22nd
Street, Santa Monica, California.

1996 Class

Mr. Munro is Chairman of the Executive Committee of the Board of Directors
of Time Warner Inc., a media and entertainment company. Mr. Munro was Chairman
of Time, Inc., a predecessor of Time Warner Inc., from 1986 to 1989 and its
Chief Executive Officer from 1980 to 1989. He is a director of Time Warner

76
<PAGE> 91

Inc., Mobil Corporation, Kellogg Company, and K-Mart Corporation. He is a member
of the National Coalition of AIDS Research (Washington, D.C.) and the Counsel on
Foreign Relations, Chairman of the Points of Light Foundation, a director of the
United Negro College Fund, and a trustee of Hamilton College, St. Lawrence
University, Teacher's College, Columbia University and the Salisbury School. Mr.
Munro is a citizen of the United States; his business address is Time Warner,
Inc., 300 First Stamford Plaza, Stamford, Connecticut.

Mr. Smith has been President and Chief Executive Officer of VHA, Inc., an
alliance of 1,150 healthcare organizations in 47 states, since 1991. Mr. Smith
served as President of Yale-New Haven Hospital, a nonprofit teaching hospital
affiliated with Yale University Medical School, from 1977 to 1991. Mr. Smith was
the 1991 Chairman of the Board of Trustees of the American Hospital Association,
and serves on the Board of VHA and the National Committee on Quality of Health
Care. Previously he was on the Board of the Association of American Medical
Colleges. Mr. Smith was the 1991 Rene Sand lecturer at the Congress of the
International Hospital Federation, the third American to be so honored. Mr.
Smith is a citizen of the United States; his business address is VHA, Inc., 220
E. Las Colinas Blvd., Irving, Texas.

Mr. Swanson, a founder of the Company and its Chief Executive Officer from
1976 to 1990, has been Chairman of the Genentech Board since 1990. Prior to
forming the Company, Mr. Swanson was a partner with Kleiner & Perkins venture
capital partnership in San Francisco, and from 1970 to 1974, he was an
investment officer with Citicorp Venture Capital Ltd. He serves on the Board of
Fellows of the Faculty of Medicine at Harvard University, and is a member of the
Biology Visiting Committee of, and has served as a Trustee for, the
Massachusetts Institute of Technology. Mr. Swanson is a member of the Royal
Swedish Academy of Engineering Sciences and a member of the Board of Molten
Metal Technology, Inc. He also serves as a trustee of the San Francisco Ballet,
the San Francisco Museum of Modern Art, and the Nueva School. Mr. Swanson is a
citizen of the United States; his business address is Genentech, Inc., 460 Point
San Bruno Blvd., South San Francisco, California.

Mr. Tappan served as Chairman of the Board of Fluor Corporation ("Fluor"),
an international engineering, construction and technical services company, from
1984 through 1990, at which time he retired. He was Chief Executive Officer of
Fluor from 1984 to 1990. Mr. Tappan is a director of Beckman Instruments, Inc.,
Advanced Tissue Sciences, Inc., and Allianz Insurance Company. He is a member of
the Board of Trustees of the University of Southern California and The Scripps
Research Institute Board of Trustees. Mr. Tappan is a citizen of the United
States; his business address is Genentech, Inc., 460 Point San Bruno Blvd.,
South San Francisco, California.

To the knowledge of the Company, none of the Company's directors has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), or has been party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which such person was or is subject to a judgment, decree or final
order enjoining further violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.

TRANSACTIONS IN SECURITIES OF GENENTECH DURING THE LAST 60 DAYS

This section sets forth the transactions in the Company's Redeemable Common
Stock effected in the 60-day period preceding May 15, 1995 by certain affiliates
of the Company. No transactions by any such affiliates have been effected since
May 15, 1995. All dollar amounts are per share of Redeemable Common Stock. On
April 18, 1995, David Beier exercised options to purchase 3,000 shares of
Redeemable Common Stock for $25.50 and sold such shares of Redeemable Common
Stock on the same day for $50.875. On the same day, Mr. Beier exercised options
to purchase 7,000 shares of Redeemable Common Stock for $26.50 and sold such
shares of Redeemable Common Stock that day for $50.875. Mr. Beier also sold 156
shares of Redeemable Common Stock which he had purchased through the Company's
Employee Stock Plan (the "ESP") more than 60 days prior to May 15, 1995 for
$50.875. On April 19, 1995, Mr. Beier sold 932 shares of Redeemable Common Stock
which he had purchased through the ESP more than 60 days prior to May 15, 1995
for $50.50. Dennis Henner sold 5,000 shares of Redeemable Common Stock which he
had purchased

77
<PAGE> 92

through the ESP more than 60 days prior to May 15, 1995 on April 19, 1995 for
$50.25. On April 20, 1995, Bryan Lawlis exercised options to purchase 5,000
shares of Redeemable Common Stock for $25.50 and options to purchase 3,560
shares of Redeemable Common Stock for $29.50 and sold such shares of Redeemable
Common Stock for $50.50. That same day, Mr. Lawlis sold 689 shares of Redeemable
Common Stock which he had purchased through the ESP on April 3, 1995 for $50.50.
David MacFarlane exercised options to purchase 5,000 shares of Redeemable Common
Stock for $25.75 and options to purchase 2,500 shares for $26.50 on April 18,
1995 and sold such shares of Redeemable Common Stock the same day for $50.625.
Eric Patzer exercised options to purchase 2,554 shares of Redeemable Common
Stock for $15.625 and sold such shares of Redeemable Common Stock for $50.875 on
April 24, 1995. Mr. Patzer's wife, Janet Briggs, exercised options to purchase
4,500 shares of Redeemable Common Stock on April 24, 1995 for $25.50 and sold
such shares of Redeemable Common Stock the same day for $50.875.

On April 3, 1995, each of the following officers of the Company, or his
spouse where indicated, purchased under the ESP the number of shares of
Redeemable Common Stock noted in parentheses after his name for $30.49 per share
of Redeemable Common Stock: Gregory Baird (425); Mr. Beier (418); Richard Brewer
(328); Robert Garnick (494); Marty Glick (460); Bradford Goodwin (480); Mr.
Henner (472); Paul Hohenschuh (416) and Mr. Hohenschuh's wife, Marjorie Winkler
(232); Edmon Jennings (456); Steve Juelsgaard (481); Mr. Lawlis (492); Louis
Lavigne (76); Arthur Levinson (266); Mr. MacFarlane (439); Polly Moore (468) and
Dr. Moore's husband, Stuart Builder (203); James Panek (493); Mr. Patzer (153)
and Mr. Patzer's wife, Ms. Briggs (277); Kimberly Popovitz (415); Stephen Raines
(361); Larry Setren (449); Barry Sherman (455); Nicholas Simon (448); and
William Young (295).

CERTAIN INFORMATION CONCERNING
THE DIRECTORS AND EXECUTIVE OFFICERS
OF ROCHE AND ROCHE HOLDING

DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND OR EMPLOYMENT AND FIVE-YEAR
BUSINESS ADDRESS EMPLOYMENT HISTORY
------------------------------- ------------------------------------------------------
<S> <C> <C>
* Mr. Fritz Gerber Chairman of the Board and Chief Executive Officer of
(President) Roche Holding. Mr. Gerber is also a director of
Nestle, S.A., Swiss Credit Bank and IBM.

* Dr. Henri B. Meier Chief Financial Officer of Roche Holding. Prior to
(Vice President 1994, Dr. Meier was a General Manager of Roche Holding
and Treasurer) Ltd.

Peter N. Schiller Attorney-at-Law.
Hoffstots Lane
Sands Point, New York 11050
(Secretary)
</TABLE>

To the best knowledge of Roche, no person named above has during the last
five years (i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors); or (ii) been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as a result of
which such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.

78
<PAGE> 93

To the best knowledge of Roche, no person named above is the direct or
indirect beneficial owner of any security of Genentech, or has any contract,
arrangement, understanding or relationship with respect to any securities of
Genentech.

To the best knowledge of Roche, other than as described in "The Proposed
Transactions -- Background of the Proposed Transactions," no person named above
has since January 1, 1993 had any contacts, negotiations, or entered into any
transactions with Genentech, Inc. concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors, or a sale or other transfer of a material amount of assets, or
entered any contracts, arrangements, understandings or relationships with
Genentech or any of its executive officers, directors, controlling persons or
subsidiaries.

DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE HOLDING

The following table sets forth the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each director and executive officer of
Roche Holding. Except as otherwise noted, the business address of each such
person is c/o Roche Holding Ltd, Grenzacherstrasse 124, CH-4002 Basel,
Switzerland, and such person is a Swiss citizen except that Dr. Drews is a
German citizen and Mr. Belingard is a French citizen. In addition, except as
otherwise noted, each executive officer of Roche Holding has been employed by
Roche Holding in the positions listed below during the last five years.
Directors are identified by an asterisk next to their names.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND OR EMPLOYMENT AND FIVE-YEAR
BUSINESS ADDRESS EMPLOYMENT HISTORY
------------------------------- ------------------------------------------------------
<S> <C> <C>
* Mr. Fritz Gerber Chairman of the Board and Chief Executive Officer. Mr.
Gerber is also a director of Nestle, S.A., Swiss
Credit Bank and IBM.

* Dr. Lukas Hoffmann Vice Chairman of the Board. Dr. Hoffmann is also the
Le petit Essert Vice Chairman of World Wildlife Fund International (a
1147 Montricher, nonprofit organization) and is the founder and head of
Switzerland Station Biologique, a private research center in
France.

* Dr. Andres F. Leuenberger Vice Chairman and Delegate of the Board. Prior to
1990, Dr. Leuenberger was a member of the Board of
Directors and Managing Director of Roche Holding. Dr.
Leuenberger is also Chairman of the Swiss Federation
of Commerce and Industry and a director of the
Swiss-American Chamber of Commerce.

* Dr. h.c. Paul Sacher Conductor and founder of the Paul Sacher Foundation (a
Haus auf Burg nonprofit organization).
Muensterplatz 4
Basel 4051, Switzerland

* Dr. Armin M. Kessler Dr. Kessler is also a director of Genentech. Prior to
May 1995, Dr. Kessler was Chief Operating Officer and
head of Roche Holding Ltd's Pharmaceuticals division.

* Dr. Henri B. Meier Chief Financial Officer. Prior to 1994, Dr. Meier was
a General Manager of Roche Holding Ltd.

* Dr. Jakob Oeri Surgeon and retired Head Physician, Kantonsspital
St. Alban -- Vorstadt 71 Basel (hospital).
4052 Basel, Switzerland

* Prof. jur. Kurt Jenny Attorney. Prof. Jenny is also Chairman of the Board of
Aeschengraben 18 Directors of Swiss Industry Fair. Prior to 1993, Prof.
4051 Basel, Switzerland Jenny held various positions in the Basel state
government, including President and Head of the
Department of Finance.
</TABLE>

79
<PAGE> 94

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND OR EMPLOYMENT AND FIVE-YEAR
BUSINESS ADDRESS EMPLOYMENT HISTORY
------------------------------- ------------------------------------------------------
<S> <C> <C>
* Prof. Dr. Werner Stauffacher Head, Department of Research,
Department of Research University of Basel.
University of Basel
Hebelstrasse 32
4056 Basel, Switzerland

* Prof. Charles Weissmann Professor, University of Zurich.
Institut fur Molekularbiologie I
der Universitaet Zurich
Hoenggerberg
8903 Zurich, Switzerland

Dr. Markus Altwegg General Manager. Head of Pharma Stammhaus Basel, Group
Informatics.

Mr. Jean-Luc Belingard General Manager. Head of Diagnostics Division.

Dr. Roland Bronnimann General Manager. Head of Vitamins and Fine Chemicals
Division.

Prof. Jurgen Drews General Manager. Head of Research and Development.
Prof. Drews is also a director of Genentech.

Dr. Franz B. Humer General Manager. Head of Roche Holding Ltd's
Pharmaceuticals Division. Prior to 1995, Dr. Humer was
an Executive Director of Glaxo Holdings, a United
Kingdom public limited company.
</TABLE>

To the best knowledge of Roche, no person named above has during the last
five years (i) been convicted in a criminal proceeding (excluding traffic
violations or other misdemeanors); or (ii) been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction as a result of which
such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.

To the best knowledge of Roche, other than as described in "Security
Ownership of Management", no person named above is the direct or indirect
beneficial owner of any security of Genentech, or has any contract, arrangement,
understanding or relationship with respect to any securities of Genentech.

To the best knowledge of Roche, other than as described in "The Proposed
Transactions -- Background of the Proposed Transactions", no person named above
has since January 1, 1993 had any contacts, negotiations, or entered into any
transactions with Genentech concerning a merger, consolidation or acquisition, a
tender offer or other acquisition of securities, an election of directors, or a
sale or other transfer of a material amount of assets, or entered any contracts,
arrangements, understandings or relationships with Genentech or any of its
executive officers, directors, controlling persons or subsidiaries.

TRANSACTIONS IN SECURITIES OF GENENTECH DURING THE LAST 60 DAYS

On April 3, 1995, Roche purchased 144,600 shares of Redeemable Common Stock
of the Company in open market purchases effected on the NYSE. The purchase
prices of such securities purchased were as follows: 50,000 shares purchased at
$46.50 per share; 17,600 shares purchased at $46.25 per share; 60,000 shares
purchased at $46.75 per share; 1,000 shares purchased at $46.875 per share; and
16,000 shares purchased at $47.00 per share. On March 30, 1995, Roche purchased
12,400 shares of Redeemable Common Stock of the Company in an open market
purchase on the NYSE, for a purchase price of $47.875 per share. Other than
these purchases, none of Roche, Roche Holding, Roche Finance Ltd, or any of the
directors of Roche or Roche Holding have effected any transactions with respect
to securities of Genentech in the 60-day period preceding the date of this Proxy
Statement/Prospectus.

80
<PAGE> 95

TRANSACTIONS IN SECURITIES OF GENENTECH DURING THE LAST TWO YEARS

Since January 1, 1993, Roche has purchased an aggregate of 7,780,500 shares
of Redeemable Common Stock of Genentech. The range of prices paid and the
average purchase price for such pruchases of Redeemable Common Stock on a
quarterly basis is included in the following chart.

<TABLE>
---------------------------------------------------------------------------------
AMOUNT OF AVERAGE
SHARES PURCHASE
QUARTER ENDED PURCHASED HIGH LOW PRICE
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
March 31 2,036,700 $35.00 $32.25 $33.45
---------------------------------------------------------------------------------
June 30 709,500 $35.00 $34.625 $31.65
---------------------------------------------------------------------------------
September 30 0 0 0 0
---------------------------------------------------------------------------------
December 31 0 0 0 0
---------------------------------------------------------------------------------
1994
---------------------------------------------------------------------------------
March 31 0 0 0 0
---------------------------------------------------------------------------------
June 30 3,271,400 $50.00 $44.375 $47.63
---------------------------------------------------------------------------------
September 30 0 0 0 0
---------------------------------------------------------------------------------
December 31 1,106,300 $48.00 $42.25 $46.76
---------------------------------------------------------------------------------
1995
---------------------------------------------------------------------------------
March 31 512,000 $47.875 $44.625 $45.92
---------------------------------------------------------------------------------
Through May 31 144,600 $47.00 $46.50 $46.68
---------------------------------------------------------------------------------
</TABLE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In January 1980, Genentech and Hoffmann-La Roche Inc. ("Hoffmann-La Roche")
entered into an agreement regarding the development and commercialization of
human leukocyte ("alpha") and fibroblast ("beta") interferons. Hoffmann-La Roche
is a New Jersey corporation and a subsidiary of Roche, and, as such, is
affiliated with Genentech. Pursuant to this agreement, as amended from time to
time, Genentech granted Hoffmann-La Roche a sole and exclusive, worldwide
license to use and sell (and, under certain circumstances, manufacture) alpha
and beta interferons using organisms and know-how developed by Genentech, and
under patent rights belonging to Genentech, for a period of 20 years. Pursuant
to this agreement, Genentech is entitled to royalties on sales of interferons by
Hoffmann-La Roche for 10 years after commercial introduction, unless the period
of exclusivity is extended for an additional five-year royalty-bearing period.
These royalties totaled $7.9 million in 1994.

In May 1991, Genentech entered into an agreement with Hoffmann-La Roche in
settlement of all disputes, including all issues in litigation between the
parties, relating to the patent on human growth hormone and methods for its
preparation. Under the settlement agreement, Genentech received a non-exclusive
license under the patent and will make payments and/or grant credits, against
future royalties under the interferon license described above, to Hoffmann-La
Roche totalling $4 million over a ten-year period. In addition, Hoffmann-La
Roche received a paid-up non-exclusive license under certain Genentech patents
for specific product applications.

In January 1992, Genentech entered into an agreement with HLR relating to
the development and supply of a recombinant tumor necrosis factor ("TNF")
receptor-fusion protein being evaluated for in septic shock, rheumatoid
arthritis and multiple sclerosis. Pursuant to this agreement, Genentech is
responsible for developing and scaling up a recombinant production process for
TNF receptor-fusion protein and for supplying preclinical and clinical
requirements of such material and, eventually, commercial requirements. HLR

81
<PAGE> 96

reimburses Genentech for certain costs of developing and scaling its
manufacturing capability and will purchase manufactured TNF receptor-fusion
protein from Genentech; for calendar year 1994, such costs totalled
approximately $7.1 million. In addition, Genentech has the option to participate
in certain commercial opportunities with HLR.

In March 1992, Genentech announced a collaborative agreement with HLR
intended to combine the resources of the two companies to focus on
commercialization of Genentech's drug Pulmozyme(R). HLR is a Swiss corporation
and a subsidiary of Roche Holding, and as such is affiliated with Genentech.
Pulmozyme(R) is also being evaluated in both the United States and Europe as a
potential treatment for chronic obstructive pulmonary diseases. Specifically,
the agreement between Genentech, Genentech Europe Limited, a wholly-owned
subsidiary of Genentech, and HLR calls for the collaborative clinical
development, registration and marketing of Pulmozyme by Genentech and HLR in 17
European countries (the "Collaborative Countries"). Genentech Europe Limited and
its affiliates are responsible for the manufacture and supply of Pulmozyme
throughout the Collaborative Countries and for the marketing of the product in
certain of the Collaborative Countries. HLR provides technical support to
Genentech and will make milestone payments of up to $30 million to Genentech if
certain conditions are met. HLR and Genentech Europe Limited share the
developmental costs and the marketing and selling effort for Pulmozyme(R) and
profits from product sales. As of December 31, 1994, Genentech has earned and
received $19 million in milestone payments from HLR (including $10.0 million
earned in the fiscal year 1994) and Genentech Europe Limited had received $10.5
million in payments in accordance with the profit sharing arrangement between
the companies (including $8.7 million accrued in fiscal year 1994). On January
1, 1995, Genentech Europe Limited's rights and obligation under this Agreement
were assigned to Genentech Biopharmaceuticals Limited. Genentech Europe Limited
has also granted HLR exclusive licenses to sell Pulmozyme(R) in the countries
outside of the Collaborative Countries, the United States and Canada under a
common Genentech trademark in exchange for royalties and, in the case of Japan,
for the payment of $5 million, which includes payments to be made if certain
development targets are met. Also, during fiscal year 1994, Genentech Europe
Limited sold $6.7 million worth of Pulmozyme(R) to HLR. Such agreement will be
terminated if the Proposal is approved, and its subject matter will become part
of the Licensing Agreement. See "The Licensing Agreement."

Genentech and Roche also entered a Small Molecule Screening Agreement for
the screening of Roche's chemical library using certain mutually agreed
Genentech assays to find lead molecules for development into small molecule
therapeutics. Roche has the responsibility for supplying the chemical library to
be screened. Genentech has the responsibility for supplying the assays and for
undertaking the initial screening. If the screening results in the
identification of a molecule of interest to one of the parties, that party shall
advise the other party of its interest. The second party can then elect to
proceed with the interested party and jointly develop the molecule or it can
choose to let the interested party develop the molecule on its own. If a
molecule is jointly developed, the parties are to share equally the cost of
joint development and to agree to a plan proportioning research and development
responsibilities between them based on their capability. If a product is jointly
developed, both Genentech and Roche have the right to make, use and sell that
product and will negotiate an allocation of the major marketing territories
between them as well as appropriate royalties payable by each to the other for
sales of that product in that party's marketing territory. As a general
principle, the markets for each product are to be allocated on an equal basis,
but Genentech is to have at least 50% of the marketing rights in North America
and Roche is to have at least 50% of the marketing rights in Europe, subject to
certain exceptions. After allocation of marketing rights, each party is to pay
the other a royalty on sales in that party's marketing territory with the
royalty to be determined by negotiation. As a general principle, the percentage
royalty payable on sales by either party to the other should have equivalent
royalty rates. If a product is unilaterally developed, the party unilaterally
developing that product has the sole right to make, use and sell that product
throughout the world and will pay the other party a royalty of 5% of sales.

In 1994 Genentech entered into four research and development collaboration
agreements with HLR (and Hoffmann-La Roche, Inc.), each an affiliate of
Genentech (collectively, "HLR/Roche") which involve consideration in excess of
$60,000. The four collaborations are in the areas of IIb/IIIa antagonists, IL-8
antagonists, LFA/ICAM antagonists, and ras farnesyltransferase inhibitors. The
collaboration pursuant to the

82
<PAGE> 97

IL-8 agreement is in the process of being terminated. In general, under the IIb
IIIa antagonists collaboration agreement Genentech will have marketing rights in
the United States and Canada (the "Genentech Countries") to products developed
through the collaboration, and HLR will have marketing rights to products in the
rest of the world ("ROW Countries"). In general, Genentech and HLR will share
equally all development costs of products for the Genentech Countries and
Europe; however, HLR will bear all such costs associated with other countries.
In general, Genentech will pay royalties to HLR on product sales in each of the
Genentech Countries, and HLR will pay an equivalent royalty rate to Genentech on
product sales in each of the ROW Countries. If under certain circumstances one
of the parties declines to participate and share in future research and
development of a product, royalties to be received by such party shall be
reduced. For the year ended December 31, 1994 no amounts have been paid under
this agreement. This agreement will be revised if the Proposal is approved and
certain of its terms will be modified in accordance with the Licensing
Agreement. See "The Licensing Agreement."

In general, under each of the LFA/ICAM antagonists and ras
farnesyltransferase inhibitors agreements, Genentech and HLR/Roche will share
equally (i) the rights to market and sell any products in the United States,
Canada, Mexico and Europe (the "Collaborative Countries") and (ii) any profits
from product sales in the Collaborative Countries. HLR/Roche will have the
rights to market and sell any products in the rest of the world, including, in
certain circumstances, Japan (the "ROW Countries"). In general, Genentech and
HLR/Roche will share equally all development costs of products for the
Collaborative Countries; however, HLR/Roche will bear all such costs associated
with ROW Countries. In general, if Genentech meets certain requirements as to
its development and sales efforts in Japan, each party will (i) share equally
all development costs for products in Japan, (ii) have the right to use, market
and sell such products in Japan, and (iii) pay a royalty to the other party on
product sales in Japan. Otherwise, Japan shall be considered part of HLR/Roche's
ROW Countries and HLR/Roche shall pay Genentech a royalty on products sales in
Japan. Under certain circumstances, each party has the option to decline to
participate and share in future research and development of products (the
"Optout Option"). If Genentech has not exercised its Optout Option, HLR/Roche
will pay a royalty to Genentech on sales of products in each of the ROW
Countries, and if Genentech has exercised its Optout Option, HLR/Roche will pay
a reduced royalty to Genentech on worldwide sales of products. If HLR/Roche has
exercised its Optout Option, Genentech will pay a royalty to HLR/Roche on sales
of products in each of the Collaborative Countries. For the year ended December
31, 1994, no amounts have been paid under these agreements. The ras
farnesyltransferase inhibitors agreement will be revised if the Proposal is
approved and certain of its terms will be modified in accordance with the
Licensing Agreement. See "The Licensing Agreement."

In addition to the foregoing agreements, Genentech is developing a
mammalian cell line for HLR to produce a molecule that HLR is developing. HLR
will provide Genentech future services of an equivalent value in exchange for
Genentech's development efforts.

OTHER MATTERS

The Genentech Board does not intend to bring any other matters before the
Special Meeting.

AUDITORS' REPRESENTATIVES

Representatives of Ernst & Young LLP, Genentech's independent auditors,
will be present at the Special Meeting and will have the opportunity to make a
statement if they desire to do so. Such representatives are also expected to be
available to respond to appropriate questions.

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<PAGE> 98

LEGAL MATTERS

The legality of the shares of Special Common Stock to be issued in
connection with the Merger will be passed upon by Wachtell, Lipton, Rosen &
Katz, New York, New York, special counsel for Genentech. The discussion of the
federal income tax consequences of the Merger to Genentech's stockholders
contained herein is based upon an opinion of Wachtell, Lipton, Rosen & Katz, New
York, New York, special counsel for Genentech.

EXPERTS

The consolidated financial statements of Genentech incorporated by
reference in Genentech's 1994 Annual Report on Form 10-K for the year ended
December 31, 1994, have been audited by Ernst & Young LLP, independent auditors,
and incorporated by reference in this Proxy Statement/Prospectus which are
referred to and made a part of this Proxy Statement/Prospectus and Registration
Statement, as set forth in their report incorporated therein and herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

84
<PAGE> 99

ANNEX A
[CONFORMED COPY]

AGREEMENT AND PLAN OF MERGER

AMONG

ROCHE HOLDINGS, INC.,

HLR (U.S.) II, INC.

AND

GENENTECH, INC.

DATED MAY 23, 1995
<PAGE> 100

TABLE OF CONTENTS

<TABLE>
<S> <C>
ARTICLE I
Definitions.......................................................................... A-1

ARTICLE II

The Merger; Effective Time; Closing.................................................. A-2

2.1. The Merger................................................................. A-2
2.2. Effective Time............................................................. A-2
2.3. Closing.................................................................... A-3

ARTICLE III

Terms of Merger...................................................................... A-3

3.1. Certificate of Incorporation............................................... A-3
3.2. The By-Laws................................................................ A-3
3.3. Directors.................................................................. A-3
3.4. Officers................................................................... A-3

ARTICLE IV

Merger Consideration; Conversion or Cancellation of Shares in the Merger............. A-3

4.1. Share Consideration; Conversion or Cancellation of Shares in the Merger.... A-3
4.2. Exchange of Shares in the Merger........................................... A-4
4.3. Transfer of Shares after the Effective Time................................ A-5

ARTICLE V

Additional Covenants and Agreements.................................................. A-5

5.1. Stockholder Meeting; Proxy Material; Registration Statement; Stock Exchange A-5
Listing....................................................................
5.2. Reasonable Efforts......................................................... A-5
5.3. Continued Applicability of Governance Agreement............................ A-5
5.4. Compliance with Securities Laws............................................ A-6
5.5. Option Plans............................................................... A-6
5.6. Additional Agreements...................................................... A-6
5.7. Voting..................................................................... A-6
5.8. Certain Proceedings........................................................ A-6

ARTICLE VI

Conditions........................................................................... A-6

6.1. Conditions to Each Party's Obligations..................................... A-6
6.2. Condition to Obligations of Roche and Merger Sub........................... A-7
6.3. Conditions to Obligations of the Company................................... A-7

ARTICLE VII

Termination.......................................................................... A-7

7.1. Termination................................................................ A-7
7.2. Effect of Termination and Abandonment...................................... A-7
</TABLE>

i
<PAGE> 101

<TABLE>
<S> <C>
ARTICLE VIII

Miscellaneous and General............................................................ A-8

8.1. Expenses................................................................... A-8
8.2. Notices, Etc............................................................... A-8
8.3. Amendments, Waivers, Etc................................................... A-8
8.4. No Assignment.............................................................. A-8
8.5. Entire Agreement........................................................... A-8
8.6. No Third Party Beneficiaries............................................... A-9
8.7. Jurisdiction............................................................... A-9
8.8. Governing Law.............................................................. A-9
8.9. Name, Captions, Etc........................................................ A-9
8.10. Counterparts............................................................... A-9
</TABLE>

ii
<PAGE> 102

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated May 23, 1995, among
Roche Holdings, Inc., a Delaware corporation ("Roche"), HLR (U.S.) II, Inc., a
newly formed Delaware corporation which is a direct wholly-owned subsidiary of
Roche ("Merger Sub"), and Genentech, Inc., a Delaware corporation (the
"Company").

RECITALS

WHEREAS, the Boards of Directors of Roche, Merger Sub and the Company each
have determined that it is in the best interests of their respective
stockholders for Merger Sub to merge with and into the Company, upon the terms
and subject to the conditions of this Agreement;

NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, Roche, Merger Sub and the Company
hereby agree as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement, the following terms shall have the respective
meanings set forth below:

"Affiliate": As defined in Rule 12b-2 under the Exchange Act.

"Authorization": Any consent, approval or authorization of, expiration or
termination of any waiting period requirement by, or filing, registration,
qualification, declaration or designation with, any Governmental Body.

"Certificate of Merger": The certificate of merger with respect to the
merger of Merger Sub with and into the Company, containing the provisions
required by, and executed in accordance with, Section 251 of the DGCL.

"Certificates": As defined in Section 4.2(b).

"Closing Date": The date on which the Effective Time occurs.

"Code": The Internal Revenue Code of 1986, as amended, and all regulations
promulgated thereunder, as in effect from time to time.

"Common Shares": The shares of Common Stock, par value $.02 per share, of
the Company.

"DGCL": The General Corporation Law of the State of Delaware.

"Effective Time": As defined in Section 2.2.

"Exchange Act": The Securities Exchange Act of 1934, as amended, including
the rules and regulations promulgated thereunder.

"Exchange Agent": As defined in Section 4.2(a).

"Exchange Fund": As defined in Section 4.2(a).

"Governance Agreement": The Governance Agreement dated as of September 7,
1990 between Roche and the Company.

"Governmental Body": Any Federal, state, municipal, political subdivision
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.

"Marketing Agreement": The Agreement between F. Hoffmann -- La Roche Ltd.
and the Company, to be dated as of the Closing Date, in substantially the form
attached hereto as Exhibit D.

"Merger": As defined in Section 2.1.

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"New Governance Agreement": The Amended and Restated Governance Agreement
between Roche and the Surviving Corporation, to be dated as of the Closing Date,
in substantially the form attached hereto as Exhibit A.

"New Guaranty": The Guaranty of Roche Holding Ltd, a Swiss corporation, to
be dated as of the Closing Date, in substantially the form attached hereto as
Exhibit B.

"NYSE": The New York Stock Exchange, Inc.

"Option": As defined in Section 4.1(d).

"Option Plans": As defined in Section 4.1(d).

"Person": Any individual or corporation, company, partnership, trust,
incorporated or unincorporated association, joint venture or other entity of any
kind.

"Redeemable Common Shares": The shares of Redeemable Common Stock, par
value $.02 per share, of the Company.

"Roche Shares": The Common Shares held by Roche or any Affiliate thereof.

"S-4 Registration Statement": As defined in Section 5.1(b).

"SEC": The Securities and Exchange Commission.

"Securities Act": The Securities Act of 1933, as amended, including the
rules and regulations promulgated thereunder.

"Share Consideration": The Special Common Shares which the holders of
Common Shares (other than Roche or any Affiliate of Roche) will be entitled to
receive in the Merger pursuant to Section 4.1(a) hereof.

"Shares": Collectively, the Common Shares and the Redeemable Common Shares
(other than Common Shares or Redeemable Common Shares owned by Roche or any
Affiliate of Roche).

"Special Common Shares": The shares of Special Common Stock, par value
$.02 per share, of the Surviving Corporation.

"Stockholder Meeting": As defined in Section 5.1.

"Surviving Corporation": The surviving corporation in the Merger.

"Termination Date": As defined in Section 5.3.

ARTICLE II

THE MERGER; EFFECTIVE TIME; CLOSING

2.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), Merger Sub, which at such time
shall have no assets or business operations and shall exist solely for the
purpose of effecting the Merger, shall be merged (the "Merger") with and into
the Company in accordance with the provisions of Section 251 of the DGCL and
with the effect provided in Sections 259 and 261 of the DGCL. The separate
corporate existence of Merger Sub shall thereupon cease and the Company shall be
the Surviving Corporation and shall continue to be governed by the laws of the
State of Delaware.

2.2. Effective Time. The Merger shall become effective on the date and at
the time (the "Effective Time") that the Certificate of Merger shall have been
accepted for filing by the Secretary of State of the State of Delaware (or such
later date and time as may be specified in the Certificate of Merger), which
shall be the Closing Date or as soon as practicable thereafter.

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2.3. Closing. The consummation of the transactions contemplated by this
Agreement shall take place (i) at the offices of Wachtell, Lipton, Rosen & Katz,
New York, New York, at 10:00 a.m. on the second business day following the date
on which the last of the conditions set forth in Article VI hereof is fulfilled
or (subject to applicable law) waived or (ii) at such other place and/or time
and/or on such other date as Roche and the Company may agree or as may be
necessary to permit the fulfillment or waiver of the conditions set forth in
Article VI.

ARTICLE III

TERMS OF MERGER

3.1. Certificate of Incorporation. The Certificate of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the New Governance Agreement and of the
DGCL, except that at the Effective Time Article THIRD of such Certificate of
Incorporation shall be amended by operation of the Merger, of this Agreement and
of the DCGL in substantially the form attached hereto as Exhibit C.

3.2. The By-Laws. The By-Laws of the Company in effect at the Effective
Time shall be the By-Laws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the Certificate of Incorporation of the
Surviving Corporation, of the New Governance Agreement and of the DGCL.

3.3. Directors. The directors of the Company at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws and the New
Governance Agreement.

3.4. Officers. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws and the New
Governance Agreement.

ARTICLE IV

MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER

4.1. Share Consideration; Conversion or Cancellation of Shares in the
Merger. Subject to the provisions of this Article IV, at the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
the shares of the constituent corporations and options issued by any such
corporation in respect of any such shares shall be treated as follows:

(a) Each Common Share issued and outstanding immediately prior to the
Effective Time (other than the Roche Shares, which Common Shares shall be
cancelled, and thereupon the holders thereof shall cease to have rights
with respect thereto, and other than shares held in the treasury of the
Company) shall be converted into one Special Common Share.

(b) All Common Shares converted into Special Common Shares pursuant to
Section 4.1(a) shall cease to be outstanding, shall be cancelled and
retired and shall cease to exist, and each holder of a certificate
theretofore representing any such Common Shares shall thereafter cease to
have any rights with respect to such Common Shares, except the right to
receive for each Common Share, upon the surrender of such certificate in
accordance with Section 4.2, the Share Consideration.

(c) The common stock, par value $.02 per share, of Merger Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into a number of Common Shares equal to, in the aggregate, the number of
Roche Shares.

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(d) Each outstanding option to purchase Redeemable Common Shares or
Common Shares, as the case may be (each, an "Option"), issued pursuant to
the Company's stock option plans (collectively, the "Option Plans")
(whether or not vested or exercisable) shall, without any action by the
holder thereof, constitute an option to acquire, on the same terms and
conditions as were applicable under such Option immediately prior to the
Effective Time, that number of Special Common Shares equal to the number of
Redeemable Common Shares or Common Shares, as the case may be, subject to
such Option immediately prior to the Effective Time, at the price or prices
per share in effect pursuant to the terms of such Option immediately prior
to the Effective Time.

4.2. Exchange of Shares in the Merger. The manner of exchanging Shares
converted in the Merger pursuant to Section 4.1(a) hereof shall be as follows:

(a) At the Effective Time, the Company shall make available to an
exchange agent selected by the Company (the "Exchange Agent"), for the
benefit of those Persons who immediately prior to the Effective Time were
the holders of Shares, a sufficient number of certificates representing
Special Common Shares required to effect the delivery of the aggregate
Share Consideration required to be issued pursuant to Section 4.1(a) (the
certificates representing Special Common Shares comprising such aggregate
Share Consideration being hereinafter referred to as the "Exchange Fund").

(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Shares (the
"Certificates") (i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the
surrender of the Certificates for exchange therefor. Upon surrender of
Certificates to the Exchange Agent, together with such letter of
transmittal duly executed and any other required documents, the holder of
such Certificates shall be entitled to receive for the Shares represented
by such Certificates the Share Consideration and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, Certificates
shall represent solely the right to receive the Share Consideration. No
dividends or other distributions that are declared after the Effective Time
on Special Common Shares and payable to the holders of record thereof after
the Effective Time will be paid to Persons entitled by reason of the Merger
to receive Special Common Shares until such Persons surrender their
Certificates. Upon such surrender, there shall be paid to the Person in
whose name the Special Common Shares are issued any dividends or other
distributions having a record date after the Effective Time and payable
with respect to such Special Common Shares between the Effective Time and
the time of such surrender. After such surrender there shall be paid to the
Person in whose name the Special Common Shares are issued any dividends or
other distributions on such Special Common Shares which shall have a record
date after the Effective Time and prior to such surrender and a payment
date after such surrender; such payment shall be made on such payment date.
In no event shall the Persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any certificate representing Special Common Shares is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the Person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of certificates for such Special Common
Shares in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable. The
Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the Special Common Shares held by it from time to
time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such Special Common
Shares for the account of the Persons entitled thereto.

(c) Any portion of the Exchange Fund which remains unclaimed by the
former holders of Shares for one year after the Effective Time shall be
delivered to the Surviving Corporation, upon demand of the Surviving
Corporation, and any former holders of Shares shall thereafter look only to
the Surviving Corporation for payment of their claim for the Share
Consideration for the Shares. If, after the Effective

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Time, certificates representing Shares outstanding prior to the Effective
Time are presented to the Surviving Corporation, they shall be cancelled
and exchanged for the consideration provided for, and in accordance with
the procedures set forth, in this Article IV.

4.3. Transfer of Shares after the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Company after the close of
business on the day prior to the date of the Effective Time.

ARTICLE V

ADDITIONAL COVENANTS AND AGREEMENTS

5.1. Stockholder Meeting; Proxy Material; Registration Statement; Stock
Exchange Listing. (a) The Company shall cause a meeting of its stockholders
(the "Stockholder Meeting") to be duly called and held as soon as reasonably
practicable for the purpose of voting on the approval and adoption of this
Agreement and the Merger (including the amendments to the Certificate of
Incorporation of the Company to be effected by the Merger). The directors of the
Company shall, subject to their fiduciary duties, recommend approval and
adoption of this Agreement and the Merger (including such amendments) by the
Company's stockholders. In connection with such meeting, the Company (i) will
promptly prepare and file with the SEC, will use all reasonable efforts to have
cleared by the SEC and will thereafter mail to its stockholders as promptly as
practicable a proxy statement/prospectus, registration statement and all other
documents which may be required to be filed or mailed in connection with such
meeting and the consummation of the transactions contemplated hereby, (ii) will,
subject to the fiduciary duties of its board of directors, use all reasonable
efforts to obtain the necessary approvals by its stockholders of this Agreement
and the transactions contemplated hereby and (iii) will otherwise comply with
all legal requirements applicable to such meeting.

(b) The Company shall promptly prepare and file with the SEC under the 1933
Act a registration statement on Form S-4 with respect to the Special Common
Stock (the "S-4 Registration Statement") and shall use all reasonable efforts to
cause the S-4 Registration Statement to be declared effective as promptly as
practicable. The Company shall take any action required to be taken under
foreign or state securities or Blue Sky laws in connection with the issuance of
Special Common Stock in the Merger.

(c) The Company shall use all reasonable efforts to cause the Special
Common Stock to be issued in connection with the Merger, and upon exercise of
Options which are exercised after the Effective Time to be listed on the NYSE,
subject to official notice of issuance and evidence of satisfactory
distribution.

5.2. Reasonable Efforts. The Company and Roche shall and shall use all
reasonable efforts to cause their respective subsidiaries to: (i) promptly make
all filings and seek to obtain all Authorizations required under all applicable
laws with respect to the Merger and the other transactions contemplated hereby
and will cooperate with each other with respect thereto; (ii) use all reasonable
efforts to promptly take, or cause to be taken, all other actions and do, or
cause to be done, all other things necessary, proper or appropriate to satisfy
the conditions set forth in Article VI and to consummate and make effective the
transactions contemplated by this Agreement on the terms and conditions set
forth herein as soon as practicable (including seeking to remove promptly any
injunction or other legal barrier that may prevent such consummation); and (iii)
not take any action which might reasonably be expected to impair the ability of
the parties to consummate the Merger at the earliest possible time (regardless
of whether such action would otherwise be permitted or not prohibited
hereunder); provided that the foregoing shall not require Roche to furnish,
other than for itself and its United States Affiliates, financial statements
prepared in accordance with United States generally accepted accounting
principles or any reconciliation of financial statements with United States
generally accepted accounting principles.

5.3. Continued Applicability of the Governance Agreement. On and after
July 1, 1995, each of Roche and the Company shall continue to abide by the terms
of the Governance Agreement, except that the references (a) in Section 2.01 to
"June 30, 1996" shall be deemed to be replaced by the date that is the first
anniversary of the date, if any, upon which this Agreement is terminated
pursuant to Section 7.01 hereof (the "Termination Date"); (b) in Sections 3.01
and 3.02(a) to "July 1, 1995" shall be deemed to be replaced by the date that is
the Termination Date; (c) in Section 4.01 to "June 30, 1995" shall be deemed to
be replaced

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by the Termination Date; and (d) in Section 4.01 to "June 30, 1996" shall be
deemed to be replaced by the first anniversary of the Termination Date.

5.4. Compliance with Securities Laws. The parties hereto agree to take,
and to cause their respective affiliates to take, all actions necessary to
comply with the Securities Act and the Exchange Act and the rules and
regulations promulgated under such statutes in connection with the Merger and
the transactions contemplated by this Agreement; provided that the foregoing
shall not require Roche to furnish, other than for itself and its United States
Affiliates, financial statements prepared in accordance with United States
generally accepted accounting principles or any reconciliation of financial
statements with United States generally accepted accounting principles.

5.5. Option Plans. The Surviving Corporation shall take all action
necessary to ensure that, as provided in Section 4.1(d) hereof, Options
outstanding immediately prior to the Effective Time shall represent, at and
after the Effective Time, Options to acquire Special Common Shares on the same
terms as in effect immediately prior to the effective time pursuant to such
Options (and the related Option Plans) with respect to Shares. The Surviving
Corporation shall take all corporate action necessary to reserve for issuance a
sufficient number of Special Common Shares for delivery upon exercise of the
Options. The Surviving Corporation shall file a registration statement on Form
S-8 (or any successor form) or another appropriate form, effective as of the
Effective Time, with respect to Special Common Shares subject to such Options
and shall use all reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
Options remain outstanding.

5.6. Additional Agreements. The Company and Roche agree to execute each of
the New Governance Agreement and the Marketing Agreement in the forms attached
hereto as Exhibits A and D, respectively, immediately prior to the Effective
Time.

5.7. Voting. Roche agrees to vote all Common Shares owned by it or any of
its affiliates in favor of the Merger.

5.8. Certain Proceedings. In the event that any action, suit, proceeding
or investigation relating hereto or to the transactions contemplated by this
Agreement is commenced, whether before or after the Closing Date, the parties
hereto agree to cooperate and use their respective reasonable efforts to
vigorously defend against and respond thereto.

ARTICLE VI

CONDITIONS

6.1. Conditions to Each Party's Obligations. The respective obligations of
each party to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived in whole or in part by
the party being benefitted thereby, to the extent permitted by applicable law:

(a) Stockholder Approval. This Agreement and the amendments to
Article THIRD of Company's Certificate of Incorporation shall have been
duly approved or ratified by the requisite vote of holders of Common Shares
and Redeemable Common Shares in accordance with applicable law, the
Certificate of Incorporation (including Article ELEVENTH thereof) and
By-Laws of the Company and the Governance Agreement.

(b) Additional Agreements. The New Governance Agreement and the
Marketing Agreement shall have been executed in substantially the forms
attached hereto as Exhibits A and D, respectively, and shall be in full
force and effect.

(c) Amendment of Certificate of Incorporation. Article THIRD of the
Certificate of Incorporation shall have been amended by operation of the
Merger in substantially the form attached hereto as Exhibit C.

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(d) No Injunction. No provision of any applicable law or regulation
and no judgment, injunction, order or decree shall prohibit the
consummation of the Merger.

(e) Registration Statement. The S-4 Registration Statement shall have
been declared effective and shall be effective at the Effective Time, and
no stop order suspending effectiveness shall have been issued, no action,
suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities laws or the Securities Act or Exchange Act
relating to the issuance or trading of the Special Common Shares shall have
been received.

(f) Listing of Special Common Shares on NYSE. The Special Common
Shares required to be issued hereunder (including upon exercise of Options
as referred to in Section 4.1(d)) shall have been approved for listing on
the NYSE, subject only to official notice of issuance.

(g) Third Party Consents. All required authorizations, consents or
approvals of any third party, the failure to obtain which would have a
material adverse effect on the Company and its subsidiaries taken as a
whole, shall have been obtained.

6.2. Condition to Obligations of Roche and Merger Sub. The respective
obligations of Roche and Merger Sub to consummate the transactions contemplated
by this Agreement are subject to the fulfillment at or prior to the Effective
Time of the condition, which may be waived in whole or part by Roche and Merger
Sub, as the case may be, to the extent permitted by applicable law, that the
Company shall have performed or complied in all material respects with all
agreements and conditions contained herein required to be performed or complied
with by it prior to or at the time of the Closing.

6.3. Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of the following
conditions, which may be waived in whole or in part by the Company to the extent
permitted by applicable law:

(a) Performance. Roche shall have performed or complied in all
material respects with all agreements and conditions contained herein
required to be performed or complied with by it prior to or at the time of
the Closing.

(b) New Guaranty. The New Guaranty shall have been executed in
substantially the form attached as Exhibit B hereto and shall be in full
force and effect.

ARTICLE VII

TERMINATION

7.1. Termination. This Agreement may be terminated and the Merger may be
abandoned at any time:

(a) Prior to the Effective Time, before or after the approval by
holders of Common Shares or Redeemable Common Shares, by the mutual written
consent of Roche and the Company;

(b) By either the Company or Roche, upon written notice to the other
parties hereto, if the stockholder approval contemplated by Section 6.1(a)
hereof is not obtained by the Company at the Stockholder Meeting; or

7.2. Effect of Termination and Abandonment. In the event of termination of
this Agreement and abandonment of the Merger pursuant to this Article VII, no
party hereto (or any of its directors or officers) shall have any liability or
further obligation to any other party to this Agreement, except that nothing
herein will relieve any party from liability for any breach of this Agreement.

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ARTICLE VIII

MISCELLANEOUS AND GENERAL

8.1. Expenses. Each party shall bear its own expenses, including the fees
and expenses of any attorneys, accountants, investment bankers, brokers, finders
or other intermediaries or other Persons engaged by it, incurred in connection
with this Agreement and the transactions contemplated hereby.

8.2. Notices, Etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party when delivered personally
(by courier service or otherwise), when delivered by telecopy and confirmed by
return telecopy, or seven days after being mailed by first-class mail, postage
prepaid and return receipt requested in each case to the applicable addresses
set forth below:

If to the Company:

Genentech, Inc.
490 Point San Bruno Boulevard
South San Francisco, California 94080
Attn.: John P. McLaughlin
Telecopy: 415-952-9881

Richard D. Katcher, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: 212-403-2000

If to Roche:

Roche Holdings, Inc.
c/o Roche Holding Ltd
Grenzacherstrasse 124
CH-4002 Basel
Switzerland
Telecopy: 011-41-61-688-1396
Attn.: Dr. Felix Amrein

with a copy to:

Peter R. Douglas, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: 212-450-4800

or to such other address as such party shall have designated by notice so given
to each other party.

8.3. Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified except by an instrument in writing
signed by the party against whom enforcement is sought.

8.4. No Assignment. This Agreement shall be binding upon and shall inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns; provided that, except as otherwise expressly set forth
in this Agreement, neither the rights nor the obligations of any party may be
assigned or delegated without the prior written consent of the other party.

8.5. Entire Agreement. Except as otherwise provided herein, this Agreement
and the exhibits hereto embody the entire agreement and understanding between
the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter. There are no
representa-

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tions, warranties or covenants by the parties hereto relating to such subject
matter other than those expressly set forth in this Agreement and the exhibits
hereto and any writings expressly required hereby or thereby.

8.6. No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of and shall not be enforceable by any Person or entity who or
which is not a party hereto.

8.7. Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York or any court of the State of New York located in the City of New York
in any action, suit or proceeding brought by either party hereto and arising in
connection with this Agreement, and agrees that any such action, suit or
proceeding shall be brought only in such court (and waives any objection based
on forum non conveniens or any other objection to venue therein); provided,
however, that such consent to jurisdiction is solely for the purpose referred to
in this Section 8.7 and shall not be deemed to be a general submission to the
jurisdiction of said Courts or in the State of New York other than for such
purpose. Roche and the Company hereby waive any right to a trial by jury in
connection with any such action, suit or proceeding.

8.8. Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Delaware, without regard to principles of conflict of laws.

8.9. Name, Captions, Etc. The name assigned this Agreement and the section
captions used herein are for convenience of reference only and shall not affect
the interpretation or construction hereof. Unless otherwise specified, (a) the
terms "hereof", "herein" and similar terms refer to this Agreement as a whole
and (b) references herein to Articles or Sections refer to articles or sections
of this Agreement.

8.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties set forth below.

GENENTECH, INC.

By: /s/ G. KIRK RAAB
--------------------------------
Name: G. Kirk Raab
Title: President and CEO

ROCHE HOLDINGS, INC.

By: /s/ HENRI B. MEIER
--------------------------------
Name: Henri B. Meier
Title: Vice President

HLR (U.S.) II, INC.

By: /s/ FELIX AMREIN
--------------------------------
Name: Felix Amrein
Title: Vice President

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EXHIBIT A

AMENDED AND RESTATED GOVERNANCE AGREEMENT

AGREEMENT DATED AS OF , 1995 between Roche Holdings, Inc., a
Delaware corporation ("Roche"), and Genentech, Inc., a Delaware corporation (the
"Company").

WHEREAS, Roche, a subsidiary of Roche ("Merger Sub") and the Company have
entered into an Agreement and Plan of Merger dated as of , 1995 (the
"Merger Agreement") pursuant to which, among other things, (i) Merger Sub is
being merged (the "Merger") with and into the Company on the date hereof, (ii)
all capital stock of the Company not owned by Roche or any Affiliate (as
hereinafter defined) of Roche shall be converted into shares of Special Common
Stock, par value $.02 per share (the "Special Common Stock"), of the Surviving
Corporation (as defined in the Merger Agreement), and (iii) all of the common
stock of Merger Sub owned by Roche shall be converted into Common Stock (as
defined below), all upon the terms and subject to the conditions set forth in
the Merger Agreement; and

WHEREAS, Roche and the Company have previously entered into a Governance
Agreement, dated as of September 7, 1990 (the "Governance Agreement"); and

WHEREAS, Roche and the Company have agreed that the Governance Agreement
shall be amended and restated in its entirety contemporaneously with the
effectiveness of the Merger; and

WHEREAS, Roche and the Company have agreed to set forth in this Agreement
the terms and conditions upon which the Company shall redeem the Special Common
Stock; and

WHEREAS, Roche and the Company have agreed to establish in this Agreement
certain terms and conditions concerning the corporate governance of the Company;
and

WHEREAS, Roche and the Company also have agreed to establish in this
Agreement certain terms and conditions concerning the acquisition and
disposition of securities of the Company by Roche and its Affiliates;

NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and agreements contained herein, Roche and the Company hereby agree, and hereby
amend and restate the Governance Agreement in its entirety, as follows:

ARTICLE I

REDEMPTION AND REPURCHASE OF
SPECIAL COMMON STOCK

SECTION 1.01. Redemption and Repurchase of Special Common Stock. (a)
Subject to Sections 1.01(c) and 4.02, the Company shall, promptly upon receipt
of a written request from Roche for the redemption of the Special Common Stock,
designate a depositary (the "Depositary") for such redemption in accordance with
paragraph (A) of Article THIRD, Section (c)(iv) of the Company's certificate of
incorporation (the "Certificate of Incorporation") and notify Roche of such
designation. Upon confirmation from the Depositary that it has received
sufficient funds from Roche to pay the aggregate Redemption Price (as defined in
the Certificate of Incorporation) in respect of all outstanding shares of
Special Common Stock, the Company shall give, or cause to be given, the Call
Notification (as defined in the Certificate of Incorporation) in accordance with
such paragraph (B) of Article THIRD, Section (c)(ii). The Company shall set as
the date of redemption (the "Redemption Date") the date set forth in Roche's
written request for redemption; provided that such date shall be consistent with
the notice requirements of such paragraph (B). The Redemption Date shall in no
event be later than the earlier of June 30, 1999 or such earlier date on which
Roche's right to request redemption pursuant to this Section 1.01 shall
terminate. The calculation of the Redemption Price per share of Special Common
Stock, which shall be made in accordance with paragraph (A) of Article THIRD,
Section (c)(ii) of the Certificate of Incorporation, shall be verified with
Roche prior to the mailing of such notice.

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(b) At least ten, but not more than thirty, days prior to the commencement
of the Put Period (as defined in the Certificate of Incorporation), or, in the
event of an acceleration of the Put in accordance with the terms of Section
(c)(v) of Article THIRD of the Certificate of Incorporation, as soon as
practicable following the date of the occurrence of the Insolvency Event (as
defined in the Certificate of Incorporation) giving rise to such acceleration
(but in no event later than the tenth day following such date), the Company
shall (i) designate the Depositary for making payments to, and receiving shares
from, holders of Special Common Stock in connection with exercises of the Put
(as defined in the Certificate of Incorporation) in accordance with paragraph
(A) of Article THIRD, Section (c)(iv) of the Certificate of Incorporation and
notify Roche of such designation and (ii) give, or cause to be given, the Put
Notification (as defined in the Certificate of Incorporation) in accordance with
paragraph (B) of Article THIRD, Section (c)(iii) of the Certificate of
Incorporation or Section (c)(v) thereof, as the case may be. The Company shall
set as the Put Period the period required to be set pursuant such Section
(c)(iii) or Section (c)(v), as the case may be.

(c) The Company's obligations under Sections 1.01(a) and 1.01(b) hereof
shall be suspended during any period when, in the good faith judgment of the
majority of the Company's directors, the redemption of the Special Common Stock
would be prohibited under the Delaware General Corporation Law (the "DGCL").

(d) Subject to the provisions of Section 1.01(c), the Company hereby
irrevocably appoints Roche its attorney-in-fact for purposes of redeeming the
Special Common Stock in accordance with the terms of Sections 1.01(a) and
1.01(b) hereof and the Certificate of Incorporation.

SECTION 1.02. Deposit of Shares in Lieu of Cash. If so instructed in
connection with any redemption of the Special Common Stock pursuant to Sections
1.01(a) hereof and Article THIRD, Section (c)(ii) of the Certificate of
Incorporation, the Company shall deposit or cause to be deposited with the
Depositary any certificates representing shares of Special Common Stock
delivered to it by or on behalf of Roche promptly after the receipt thereof.

SECTION 1.03. Indemnification. Roche shall indemnify the Company and its
officers and directors against all losses, claims, damages, liabilities and
expenses (including attorneys' fees) arising out of the redemption (pursuant to
the Call or the Put (each as defined in the Certificate of Incorporation)) of
the Special Common Stock in accordance with the provisions of this Agreement
(including, without limitation, in the event of the Company's consummation of
the redemption of Special Common Stock in contravention of Section 160 of the
DGCL or any other law for the protection of creditors), other than any such
losses, claims, damages, liabilities and expenses that result primarily from
actions taken or omitted in bad faith by the indemnified person or from the
indemnified person's gross negligence or willful misconduct.

SECTION 1.04. Options, Etc. Roche and the Company will make appropriate
provisions to assure that any options, warrants, rights or securities issued by
the Company and convertible into or exercisable or exchangeable for shares of
Special Common Stock outstanding on the Redemption Date or the final day of the
Put Period (whether or not convertible, vested, exercisable or exchangeable on
such date) become convertible into or exercisable or exchangeable for
consideration of the same type and amount as the holders thereof would have
received had they converted, exercised or exchanged such options, warrants,
rights or securities prior to the Redemption Date or the final day of the Put
Period. Nothing herein shall be deemed or construed as a waiver of any other
rights that a holder of any such securities may have.

ARTICLE II

FURTHER ACQUISITIONS OF
COMPANY SECURITIES BY ROCHE

SECTION 2.01. Mergers, Etc. (a) Unless a majority of the Independent
Directors (as hereinafter defined) shall have determined that there has been a
sustained, substantial impairment of the business, prospects or financial
viability of the Company and its subsidiaries, taken as a whole, since the
effective time of the Merger (the "Effective Time"), Roche shall not, prior to
June 30, 1999, propose any Business Combination (as such term is used in Article
ELEVENTH of the Certificate of Incorporation) with Roche or any affiliate (an
"Affiliate") of Roche, as such term is defined in Rule 12b-2 promulgated under
the Securities

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Exchange Act of 1934, as amended (such Act, including the rules and regulations
promulgated thereunder, the "1934 Act"). Unless such a determination shall be
made, Roche shall not propose any such Business Combination during the period
commencing on July 1, 1999 and terminating on June 30, 2000, at a price per
share for the unaffiliated holders of the common stock into which shares of
Special Common Stock shall have been converted on June 30, 1999 less than the
price per share at which shares of Special Common Stock could have been redeemed
on such date, adjusted for any event occurring since such date as if the Special
Common Stock had continued to be outstanding.

(b) For purposes of the approval of the board of directors of the Company
(the "Board") required under Article ELEVENTH of the Certificate of
Incorporation for any transaction permitted by Section 2.01(a), the Independent
Directors shall consider whether the Business Combination is fair to the
minority stockholders of the Company without taking into account any possible
discount due to the fact that there exists a controlling stockholder of the
Company.

(c) The term "Independent Director" means a director of the Company who
would be entitled for purposes of Article ELEVENTH of the Certificate of
Incorporation to vote on a Business Combination with Roche.

SECTION 2.02. Additional Limitation. Subject to (a) Sections 1.01 and 2.01
and (b) the obligation of the Company to honor the rights of holders of Special
Common Stock to sell Special Common Stock to the Company in accordance with the
Call and the Put, Roche shall not, directly or indirectly, purchase or otherwise
acquire, or propose or offer to purchase or acquire, any Equity Security (as
defined below) of the Company, whether by tender offer, market purchase,
privately negotiated purchase, merger or otherwise, except that Roche may
acquire Equity Securities such that Parent's Voting Interest (as defined below)
in the Company would not immediately after such acquisition exceed 79.9%. Except
as expressly required pursuant to the terms of the Special Common Stock and this
Agreement, in no event will Roche, directly or indirectly, make any tender offer
for Equity Securities of the Company without the consent of the majority of the
Independent Directors. For purposes of this Agreement, (i) "Equity Security"
means any (A) voting stock of the Company (other than shares of voting stock not
having the right to vote generally in any election of directors of the Company),
(B) securities of the Company convertible into or exchangeable for such stock,
and (C) options, rights and warrants issued by the Company to acquire such
stock; and (ii) "Parent's Voting Interest" means the percentage of votes for
elections of directors of the Company generally controlled directly or
indirectly by Roche Holding Ltd, a Swiss corporation ("Parent"), assuming the
conversion, exchange or exercise into or for voting stock of all Equity
Securities other than voting stock and not taking into account any voting
agreements or arrangements granting to a third party control over the voting of
voting stock (including those contained herein) beneficially owned by Parent.

SECTION 2.03. Capital Contribution and Assumption of Put
Obligations. Roche agrees to, or to cause one or more of its Affiliates to,
contribute to the Company, immediately prior to the time that any amounts become
due and payable to the holders of Special Common Stock pursuant to Article
THIRD, Section (c)(iii) of the Company's Certificate of Incorporation, (i) funds
in an amount equal to the product of the number of shares of Special Common
Stock with respect to which the Put has been properly exercised multiplied by
the Put Price (as defined in Article THIRD of the Company's Certificate of
Incorporation) plus (ii) such additional funds, if any, sufficient to permit the
Company to redeem the shares of Special Common Stock with respect to which the
Put has been properly exercised without violating Section 160 of the DGCL, any
bankruptcy or insolvency law or other law or regulation for the protection of
creditors. In exchange for such payment, the Company will issue to Roche (or to
its designated Affiliate) a number of duly authorized and validly issued Common
Shares equal to the number of shares of Special Common Stock acquired thereby by
the Company. Notwithstanding the foregoing, Roche's obligation to make any such
payment to the Company under this Section 2.03 shall be void and of no further
force and effect if, in lieu thereof, Roche shall (or shall cause one of its
Affiliates to) elect to purchase, and make all arrangements necessary (including
compliance by Roche, or any such Affiliate or Affiliates, with the 1934 Act, the
1933 Act (as hereinafter defined) and any other applicable Federal or state
securities laws) to purchase, during the Put Period, directly from the holders
of Special Common Stock at the Put Price the shares of Special Common Stock
which such holders elect or have elected to require the Company to purchase. It
is understood and agreed that, if Roche so

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elects, the obligation of Roche to purchase shares of Special Common Stock may,
at the election of Roche, be assigned by Roche to Parent or any Affiliate of
Parent. The Company shall, upon authorization by a majority of the Independent
Directors, have the right to enforce the obligations of Roche under this Section
2.03 directly against Roche, or in the event of assignment by Roche, against
Roche, Parent and any Affiliate of Parent to which any assignment is made. No
assignment pursuant to this Section 2.03 shall relieve Roche of any of its
obligations under this Section 2.03 or otherwise.

ARTICLE III

BOARD OF DIRECTORS

SECTION 3.01. Initial Composition of Board of Directors at the Effective
Time. The number of directors comprising the Board immediately after the
Effective Time shall be 13. The directors of the Company following the Effective
Time shall be the directors of the Company immediately prior to the Effective
Time, until their successors have been duly elected or appointed and qualified
or until the earlier death, resignation or removal in accordance with the
Company's Certificate of Incorporation and By-Laws and this Agreement. After the
Effective Time, the Board shall continue to include up to two nominees of Roche,
whom Roche shall continue to designate prior to the mailing of the applicable
annual proxy statement of the Company. Such nominees shall continue to serve in
the class or classes of directors in which they served prior to the Effective
Time in a manner consistent with the terms of the Certificate of Incorporation
and bylaws of the Company. Directors nominated by Roche pursuant to this Section
3.01 or Section 3.02 are referred to herein as "Investor Directors" and all
other directors are referred to herein as "Noninvestor Directors".
Notwithstanding any other provision of this Agreement, the Certificate of
Incorporation or by-laws of the Company or applicable law, Roche shall not at
any time prior to the day following the last day of the Put Period be entitled
to designate, or cause the nomination or election of, more than two members of
the Board.

SECTION 3.02. Proportional Representation. (a) The Company agrees that
after the last day of the Put Period the Board shall include two nominees
designated by Roche and two officers of the Company nominated by the nominating
or proxy committee of the Board. The remainder of the Board shall be comprised
of Independent Directors. Upon its request, Roche shall be entitled to designate
nominees for a number of such Independent Directors equal to Parent's Voting
Interest times the total number of such Independent Directors, rounded up to the
next whole number if Parent's Voting Interest is greater than 50% and rounded
down to the next whole number if Parent's Voting Interest is less than or equal
to 50%. Notwithstanding the foregoing, (i) the number of Independent Directors
designated by Roche shall not exceed 50% after any Triggering Disposition (as
defined in Section 4.02) and (ii) Roche shall have no right to designate any
nominees for directors hereunder at any time after Parent's Voting Interest has
fallen below 20%.

(b) The Company agrees to cause the Board to be increased or decreased in
size, and to cause the Board to fill the vacancies created by any such increase,
as appropriate in order to achieve the proportionality required by Section
3.02(a). Any directors elected to fill a vacancy shall serve until the next
annual meeting of stockholders, at which the newly created positions shall be
assigned to classes of directors consistent with the terms of the Certificate of
Incorporation and the Company's bylaws. Whenever necessary to maintain the
proportionality required by Section 3.02(a), Roche will cause directors
designated by Roche to resign from the Board. At such time as Parent's Voting
Interest falls below 20%, Roche will cause all the Investor Directors to resign
from the Board.

(c) Roche and the nominating or proxy committee shall have the right to
designate or nominate any replacement for a director designated by Roche or
nominated by such committee, respectively, at the termination of such director's
term or upon death, resignation, retirement, disqualification, removal from
office or other cause. To the extent permitted by the Certificate of
Incorporation or bylaws of the Company, the Board shall elect each person so
designated or nominated.

(d) No individual designated by Roche shall serve as a director unless such
individual has such business or technical experience, stature and character as
is commensurate with service on the board of a publicly held

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enterprise. No such individual who is an officer, director, partner or principal
stockholder of any competitor of the Company and its subsidiaries (other than
Roche and its Affiliates) shall serve as a director of the Company.

SECTION 3.03. Committees. The Board shall designate a nominating or proxy
committee, an executive committee, an audit committee and a compensation
committee. Each committee of the Board (other than any special committee or
committee of Independent Directors constituted for the purposes of making any
determination that is to be made under the terms of this Agreement or the
Certificate of Incorporation) shall at all times include at least one director
designated by Roche and no action by any such committee shall be valid unless
taken at a meeting for which adequate notice has been duly given to or waived by
the members of such committee. Such notice shall include a description of the
general nature of the business to be transacted at the meeting and no other
business may be transacted at such meeting. Any committee member unable to
participate in person at any meeting shall be given the opportunity to
participate by telephone. The director designated by Roche to serve on any
committee may designate as his alternate another director designated by Roche.

SECTION 3.04. Nomination of Other Directors. (a) The nominating or proxy
committee shall include, in addition to the director designated by Roche, one
Noninvestor Director who is an officer of the Company and one Independent
Director, and shall have the exclusive authority to nominate individuals to fill
all Board positions except for those designated by Roche pursuant to the first
sentence of Section 3.02(a). With respect to any election of directors, any
nomination of a person not then serving as a director shall require the
unanimous approval of the nominating or proxy committee; provided that the
directors designated by Roche pursuant to Section 3.01, the directors designated
by Roche pursuant to the first sentence of Section 3.02(a), and the directors
initially nominated by Roche pursuant to the third sentence of Section 3.02(a)
shall not require such unanimous approval.

(b) The Company agrees to use all reasonable efforts to solicit proxies for
the nominees for director nominated by such committee from all holders of voting
stock entitled to vote thereon.

SECTION 3.05. Roche Approval Required for Certain Actions. The approval of
the directors designated by Roche pursuant to Section 3.01 or the first sentence
of 3.02(a) shall be required to approve any of the following:

(a) the acquisition by the Company of any business or assets that
would constitute a substantial portion of the business or assets of the
Company, whether such acquisition be by merger or consolidation or the
purchase of stock or assets or otherwise;

(b) the sale, lease, license, transfer or other disposal of all or a
substantial portion of the business or assets of the Company other than in
the ordinary course of business, other than any such sale, lease, license,
transfer or other disposal which is subject to the provisions of Section
3.07;

(c) the issuance of any Equity Securities or other capital stock of
the Company, except for (i) issuances of shares of Special Common Stock
(or, after the conversion thereof into shares of the Company's Common
Stock, par value $.02 per share (the "Common Stock"), Common Stock) or
options, warrants or rights to acquire, or securities convertible into or
exchangeable for, such Special Common Stock (or Common Stock) pursuant to
any employee compensation plan that has been approved by a majority of the
Independent Directors, (ii) issuances thereof upon the exercise, conversion
or exchange of any outstanding Equity Securities or other capital stock;
and (iii) other issuances thereof during any 24 month period not exceeding
5% of the voting stock of the Company outstanding at the beginning of such
24 month period; or

(d) the repurchase or redemption of any Equity Securities or other
capital stock of the Company, other than redemptions required by the terms
thereof and purchases made at fair market value in connection with any
deferred compensation plan maintained by the Company.

For purposes of clauses (a) and (b), unless the majority of Independent
Directors shall have made a contrary determination in good faith, a "substantial
portion of the business or assets of the Company" shall mean a

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portion of the business or assets of the Company accounting for 10% of the
consolidated total assets, contribution to net income or revenues of the Company
and its consolidated subsidiaries.

SECTION 3.06. Voting of Shares. (a) In any election of directors, Roche
will vote its shares of Common Stock and of Special Common Stock for all
nominees in proportion to the votes cast by the other holders of Special Common
Stock (excluding, at Roche's option, any votes cast by any person (as such term
is defined in Section 16(a) of the 1934 Act) or group (as defined in Section
13(d) of the 1934 Act) that beneficially owns (as defined in Rule 13d-3
promulgated under the 1934 Act) at least 12% of the Equity Securities not
beneficially owned by Parent); provided that it may cast all of its votes in
favor of any nominee designated by it pursuant to the provisions of this
Agreement.

(b) In any vote to amend the terms of the Special Common Stock, Roche will
vote its shares of Special Common Stock, if any, in proportion to the votes cast
by the holders of Special Common Stock (other than Roche and its Affiliates).

SECTION 3.07. Affiliation Arrangements. Except as otherwise provided in
the Marketing Agreement between F. Hoffmann -- La Roche Ltd and the Company
dated as of the date hereof, the Company will not, and will not permit any of
its subsidiaries to, enter into any material licensing or marketing agreement
with respect to any products, processes, inventions or developments made by the
Company or any subsidiary of the Company unless it shall have first negotiated
in good faith with Roche for a reasonable period of not less than three or more
than six months with a view towards reaching a mutually beneficial licensing or
marketing agreement with respect to such products, processes, inventions or
developments.

ARTICLE IV

RESTRICTIONS ON TRANSFER
OF COMMON STOCK

SECTION 4.01. Restrictions on Transfer of Common Stock. (a) Roche agrees
that it will not sell or otherwise transfer any shares of Common Stock or
Special Common Stock except (i) pursuant to a registered underwritten public
offering in accordance with Article V, (ii) pursuant to Rule 144 promulgated
under the Securities Act of 1933, as amended (such Act, including the rules and
regulations promulgated thereunder, the "1933 Act"), provided that Roche at or
prior to the time of such sale or transfer could have requested a registration
pursuant to Section 5.01 and that any such sale shall be subject to the volume
and manner of sale limitations set forth in such rule, whether or not legally
required, (iii) to any entity that is directly or indirectly 100% owned by
Parent or (iv) after the last day of the Put Period and so long as Parent's
Voting Interest is not below 50%, in a Liquidating Sale, as defined below;
provided that (x) no Liquidating Sale shall be made prior to the time that such
transaction is either rejected by the Independent Directors or the stockholders,
or consummated and (y) prior to the first anniversary of the last day of the Put
Period the per share value offered to the public in any Liquidating Sale shall
not be less than the final Redemption Price of the Special Common Stock
(adjusted appropriately for events occurring after the conversion thereof as if
it were still outstanding). The good faith determination of the majority of the
Independent Directors of the value of the consideration offered in any proposal
shall be conclusive and binding.

(b) "Liquidating Sale" shall mean (i) a sale of all shares of Common Stock
and Special Common Stock beneficially owned by Parent to any person or group
that is acquiring all outstanding voting stock of the Company at a per share
consideration having at least the same value, and to be paid in the same form as
(or in cash), and not later than, the per share consideration to be paid to
Roche and its Affiliates in a transaction that has been approved by the Board
and the stockholders in accordance with the requirements that would be
applicable to a Business Combination under Article ELEVENTH of the Certificate
of Incorporation proposed by Roche or (ii) if such transaction proposed by such
person or group has been rejected by the Independent Directors or the
stockholders entitled to vote thereon under Article ELEVENTH of the Certificate
of Incorporation, the sale of all the shares of Common Stock and Special Common
Stock beneficially owned by Parent to such person or group for per share
consideration having not more than the same value, and payable in the same form,
as was so proposed to be paid to stockholders.

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(c) If requested by Roche, the Company shall use its best efforts to
consider any proposal involving a Liquidating Sale expeditiously and, if
recommended by the Board or any independent or special committee thereof to the
stockholders, to cause a stockholder meeting to be convened as promptly as
practicable for the purpose of voting on such proposal.

(d) Notwithstanding the foregoing, no Liquidating Sale shall be permitted
unless the transferee and each entity controlling such transferee shall have
agreed in writing to be bound, and to cause their Affiliates to be bound, by the
terms of this Agreement (including, without limitation, Section 3.06 hereof) as
if it were Roche and has entered into a confidentiality agreement with the
Company substantially in the form of the Confidentiality Agreement between
Parent and the Company dated October 13, 1989 (as modified by Section 6.01 of
the Agreement and Plan of Merger dated as of February 2, 1990 among the Company,
Roche and HLR (U.S.), Inc.); provided that no transferee in a Liquidating Sale
shall be entitled to the rights of Roche set forth in Articles III (other than
Section 3.06) and VII hereof.

SECTION 4.02. Commitment to Complete Disposition. In the event that Roche
sells shares of Common Stock in an underwritten public offering or pursuant to
Rule 144 prior to April 30, 2004 (a "Triggering Disposition"), it shall use its
best efforts to sell additional shares of Common Stock within three years of the
Triggering Disposition such that it will beneficially own not more than 20% of
the outstanding shares of Common Stock. After a Triggering Disposition, Roche
shall have no further rights (i) to request redemption of the Special Common
Stock or (ii) pursuant to Sections 3.03, 3.04, 3.05 and 3.07 or Article VII;
provided, however, that no Triggering Disposition shall relieve Roche of any of
its obligations pursuant to the Put. Other than in connection with its
contingent obligations with respect to the Put pursuant to Section 2.03 hereof,
after a Triggering Disposition, Roche shall not, without the prior written
consent of the Board, acting alone or as part of a group, acquire or offer or
agree to acquire, directly or indirectly, by purchase or otherwise, any Equity
Securities or all or any substantial portion of the assets of, or otherwise seek
to influence or control, in any manner whatsoever, the management or policies of
the Company until the fifteenth anniversary of the date it ceases to
beneficially own more than 20% of the outstanding shares of Common Stock,
provided that the foregoing shall not apply to any of Roche's portfolio managers
whose investment decisions are not directed by Roche.

ARTICLE V

REGISTRATION RIGHTS

SECTION 5.01. Registration. (a) The Company agrees that, at any time after
April 30, 2000 or such earlier date as it shall have become illegal for Parent
to continue to own the shares of Common Stock or Special Common Stock directly
or indirectly or to exercise fully all rights of ownership with respect to the
shares of Common Stock or Special Common Stock, upon the request of Roche it
will file a registration statement (a "Registration Statement") under the 1933
Act as to the number of shares of Common Stock and/or Special Common Stock
specified in such request (the "Registered Shares"); provided that, subject to
Section 5.04, the Company shall not be required to file more than three
Registration Statements that become effective and remain effective for the
period referred to in Section 5.01(b).

(b) The Company agrees to use its best efforts to have any registration of
the Registered Shares declared effective as promptly as practicable after the
filing thereof and (ii) to keep such registration statement effective for a
period (up to three months) sufficient to complete the distribution of the
Registered Shares. The Company further agrees to supplement or make amendments
to the Registration Statement, if required by (x) the registration form utilized
by the Company for such registration or by the instructions applicable to such
registration form, (y) the 1933 Act or the rules and regulations thereunder or
(z) Roche (or any underwriter for Roche) with respect to information concerning
Roche or such underwriter or the plan of distribution to be utilized with
respect to the Registered Shares. The Company agrees to furnish to Roche copies
of any such supplement or amendment prior to its being used or filed with the
Securities and Exchange Commission (the "SEC").

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SECTION 5.02. Registration Procedures. Subject to the provisions of
Section 5.01 hereof, in connection with the registration of shares of Common
Stock hereunder, the Company will as expeditiously as possible:

(a) furnish to Roche, prior to the filing of a Registration Statement,
copies of such Registration Statement as is proposed to be filed, and
thereafter such number of copies of such Registration Statement, each
amendment and supplement thereto (in each case including all exhibits
thereto), the prospectus included in such Registration Statement (including
each preliminary prospectus) and such other documents in such quantities as
Roche may reasonably request from time to time in order to facilitate the
disposition of the Registered Shares;

(b) use all reasonable efforts to register or qualify the Registered
Shares under such other securities or blue sky laws of such jurisdiction as
Roche reasonably requests and do any and all other acts and things as may
be reasonably necessary or advisable to enable Roche to consummate the
disposition in such jurisdictions of the shares of Common Stock or Special
Common Stock owned by Roche; provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this subsection (b), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;

(c) use all reasonable efforts to cause the Registered Shares to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable Roche to consummate the disposition of such shares of
Common Stock or Special Common Stock;

(d) notify Roche, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event
as a result of which the prospectus included in such Registration Statement
or amendment contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of the Registered Shares, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading;

(e) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of the
Registered Shares;

(f) make available for inspection by Roche, any underwriter
participating in any disposition pursuant to such registration, and any
attorney, accountant or other agent retained by any Roche or any such
underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the
officers, directors and employees of the Company to supply all information
reasonably requested by any such Inspector in connection with such
registration; provided that (i) records and information obtained hereunder
shall be used by such persons only to exercise their due diligence
responsibility and (ii) records or information which the Company
determines, in good faith, to be confidential shall not be disclosed by the
Inspectors unless (x) the disclosure of such Records or information is
necessary to avoid or correct a misstatement or omission in the
Registration Statement or (y) the release of such Records or information is
ordered pursuant to a subpoena or other order from a court or governmental
authority of competent jurisdiction. Roche shall use reasonable efforts,
prior to any such disclosure, to inform the Company that such disclosure is
necessary to avoid or correct a misstatement or omission in the
Registration Statement. Roche further agrees that it will, upon learning
that disclosure of such Records or information is sought in a court or
governmental authority, give notice to the Company and allow the Company,
at the expense of the Company, to undertake appropriate action to prevent
disclosure of the Records or information deemed confidential;

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(g) use all reasonable efforts to obtain a comfort letter from the
independent public accountants for the Company in customary form and
covering such matters of the type customarily covered by comfort letters as
Roche reasonably requests;

(h) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve months, beginning within three months after the
effective date of the registration, which earnings statement shall satisfy
the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
and

(i) use all reasonable efforts to cause all Registered Shares to be
listed on each securities exchange on which similar securities issued by
the Company are listed.

SECTION 5.03. Conditions to Offerings. The obligations of the Company to
take the actions contemplated by Sections 5.01 and 5.02 with respect to an
offering of shares of Common Stock shall be subject to the following conditions:

(i) The Registered Shares shall (unless reduced pursuant to Section
5.04(b)) constitute at least 10% of the outstanding common stock of the
Company and shall be distributed in an underwritten firm commitment public
offering. Roche shall have the right to select the investment banker or
bankers and lead manager or managers to administer the offering and its or
their counsel; provided that such lead manager or managers and such counsel
must be reasonably satisfactory to the Company.

(ii) There shall not have been an offering registered pursuant to
Section 5.01 within the immediately preceding twelve months and if such
earlier offering was completed or is continuing.

(iii) Roche shall conform to all applicable requirements of the 1933
Act and the 1934 Act with respect to the offering and sale of securities
and advise each underwriter, broker or dealer through which any of the
Registered Shares are offered that the Registered Shares are part of a
distribution that is subject to the prospectus delivery requirements of the
1933 Act.

(iv) Roche shall use all reasonable efforts to effect as wide a
distribution of such Registered Shares as reasonably practicable, and in no
event shall any sale of Registered Shares be made knowingly to any person
(including such person's Affiliates and any person or entities which are to
the knowledge of Roche part of any group (as defined in Section 13(d) of
the 1934 Act) which includes such purchaser (or any of its Affiliates))
who, after giving effect to such sale, would beneficially own (as defined
in Rule 13d-3 promulgated under the 1934 Act) Equity Securities
representing more than 5% of the Company's outstanding Common Stock or 5%
of the Company's Equity Securities.

The Company may require Roche to furnish to the Company such information
regarding Roche or the distribution of the Registered Shares as the Company may
from time to time reasonably request in writing, in each case only as required
by the 1933 Act or the rules and regulations thereunder or under state
securities or Blue Sky laws.

Roche agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5.02(d) hereof, such
holder will forthwith discontinue disposition of Registered Shares pursuant to
the registration covering such shares of Common Stock until Roche's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
5.02(d) hereof.

SECTION 5.04. Additional Conditions. (a) The Company's obligations
pursuant to Section 5.01 shall be suspended if (i) the fulfillment of such
obligations would require the Company to make a disclosure that would, in the
reasonable good faith judgment of the Company's board of directors, be
detrimental to the Company and premature, (ii) the Company has filed a
registration statement with respect to securities to be distributed in an
underwritten public offering and it is advised by its lead or managing
underwriter that an offering by Roche of the Registered Shares would materially
adversely affect the distribution of such equity securities or (iii) the
fulfillment of such obligations would require the Company to prepare audited
financial statements not required to be prepared for the Company to comply with
its obligations under the 1934 Act as of any date not coincident with the last
day of any fiscal year of the Company. Such obligations shall be

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reinstated (x) in the case of clause (i) above, upon the making of such
disclosure by the Company (or, if earlier, when such disclosure would either no
longer be necessary for the fulfillment of such obligations or no longer be
detrimental), (y) in the case of clause (ii) above, upon the conclusion of any
period during which the Company would not, pursuant to the terms of its
underwriting arrangements, be permitted to sell the Registered Securities for
its own account and (z) in the case of clause (iii) above, as soon as it would
no longer be necessary to prepare such financial statements to comply with the
1933 Act. The period during which Roche is required to sell its shares of Common
Stock pursuant to Section 5.05 shall be tolled for the duration of any
suspension pursuant to this paragraph.

(b) The number of shares of Common Stock to be registered pursuant to
Section 5.01 shall be reduced to the extent that the Company is advised in
writing by an investment banker of national standing that the sale of all shares
of Common Stock requested to be registered by Roche would materially and
adversely affect the market price of the Company's equity securities. No
registration reduced pursuant to this Section 5.04(b) shall be counted for
purposes of the proviso to Section 5.01(a).

SECTION 5.05. Registration Expenses. All expenses incident to the
performance of or compliance with this Article by the Company, including,
without limitation, all fees and expenses of compliance with securities or blue
sky laws (including reasonable fees and disbursements of counsel in connection
with blue sky qualifications of the Registered Shares), rating agency fees,
printing expenses, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the fees and expenses incurred
in connection with the listing of the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed, fees and disbursements of counsel for the Company and its independent
certified public accountants (including the expenses of any comfort letters
required by or incident to such performance), securities acts liability
insurance (if the Company elects to obtain such insurance), the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration and the fees and expenses of other persons retained by the
Company (all such expenses being herein called "Registration Expenses"), will be
borne by the Company. The Company will not have any responsibility for any
registration or filing fees payable under any federal or state securities or
Blue Sky laws or for any of the expenses of the holders of Registrable
Securities incurred in connection with any registration hereunder including,
without limitation, underwriting fees, discounts and commissions and transfer
taxes, if any, attributable to the sale of Registrable Securities, counsel fees
of such holders and travel costs.

SECTION 5.06. Indemnification; Contribution. (a) Indemnification by the
Company. The Company agrees to indemnify, to the fullest extent permitted by
law, Roche, its directors and officers and each person who controls Roche
(within the meaning of either the 1933 Act or the 1934 Act) against any and all
losses, claims, damages, liabilities and expenses (including attorneys' fees)
caused by any untrue or alleged untrue statement of material fact contained in
any Registration Statement, prospectus or preliminary prospectus (each as
amended and or supplemented, if the Company shall have furnished any amendments
or supplements thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, provided that the Company shall not be
required to indemnify any holder or its officers, directors or controlling
persons for any losses, claims, damages, liabilities or expenses resulting from
any such untrue statement or omission if such untrue statement or omission is
made in reliance on and conformity with any information with respect to such
holder furnished to the Company by such holder expressly for use therein. In
connection with an underwritten offering, the Company will indemnify each
underwriter thereof, the officers and directors of such underwriter, and each
person who controls such underwriter (within the meaning of either the 1933 Act
or 1934 Act) to the same extent as provided above with respect to the
indemnification of Roche; provided that such underwriter agrees to indemnify the
Company to the same extent as provided below with respect to the indemnification
of the Company by Roche.

(b) Indemnification by Roche. In connection with any registration in which
Roche is participating, Roche will furnish to the Company in writing such
information and affidavits with respect to Roche as the Company reasonably
requests for use in connection with any such registration, prospectus, or
preliminary

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prospectus and agrees to indemnify the Company, its directors, its officers who
sign the Registration Statement and each person, if any, who controls the
Company (within the meaning of either the 1933 Act or of the 1934 Act) to the
same extent as the foregoing indemnity from the Company to such holder, but only
with respect to information relating to such holder furnished to the Company in
writing by Roche expressly for use in the Registration Statement, the
prospectus, any amendment or supplement thereto, or any preliminary prospectus.

(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 5.07(a)
or Section 5.07(b), such person (hereinafter called the indemnified party) shall
promptly notify the person against whom such indemnity may be sought
(hereinafter called the indemnifying party) in writing and the indemnifying
party, upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and the indemnified party
shall have been advised by counsel that representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties, and that
all such fees and expenses shall be reimbursed as they are incurred. In the case
of any such separate firm for the indemnified parties, such firm shall be
designated in writing by the indemnified parties. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the third sentence of this
Section 5.07(c), the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement in entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request or reasonably
objected in writing, on the basis of the standards set forth herein, to the
propriety of such reimbursement prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.

(d) Contribution. If the indemnification provided for in this Section 5.07
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
this Section 5.07, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include,

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subject to the limitations set forth in Section 5.07(c), any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5.07(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

If indemnification is available under this Section 5.07, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 5.06(a) and (b) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 5.06(d).

SECTION 5.07. Rule 144. The Company covenants that it will file the
reports required to be filed by it under the 1933 Act and the 1934 Act and the
rules and regulations adopted by the SEC thereunder, and it will take such
further action as Roche may reasonably request, all to the extent required from
time to time to enable Roche to sell shares of Common Stock without registration
under the 1933 Act within the limitation of the exemptions provided by (a) Rule
144 under the 1933 Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
Roche, the Company will deliver to Roche a written statement as to whether it
has complied with such requirements.

SECTION 5.08. No Inconsistent Agreements; etc. (a) The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to Roche in this Agreement.

(b) Any determination required to be made by the Company under this Article
V shall be made by the Independent Directors.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

SECTION 6.01. Representations of the Company. (a) The execution, delivery
and performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company's
corporate powers and have been duly authorized by all necessary corporate
action. This Agreement constitutes a valid and binding agreement of the Company.

(b) The execution, delivery and performance by the Company of this
Agreement require no action by or in respect of, or filing with, any
governmental body, agency, official or authority, other than (i) compliance with
any applicable requirements of the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder, as amended (the "1934 Act"); (ii)
compliance with any applicable requirements of the Securities Act of 1933, as
amended (the "1933 Act"); and (iii) compliance with any applicable foreign or
state securities or Blue Sky laws.

(c) The execution, delivery and performance by the company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the certificate of
incorporation or bylaws of the Company, and (ii) assuming compliance with the
matters referred to in Section 6.01(b), contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company.

SECTION 6.02. Representations of Roche. (a) The execution, delivery and
performance by Roche of this Agreement and the consummation by Roche of the
transactions contemplated hereby are within Roche's corporate powers and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of Roche.

(b) The execution, delivery and performance by Roche of this Agreement
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority, other than (i) compliance with

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any applicable requirements of the 1934 Act; (ii) compliance with any applicable
requirements of the 1933 Act; and (iii) compliance with any applicable foreign
or state securities or Blue Sky laws.

(c) The execution, delivery and performance by Roche of this Agreement and
the consummation by Roche of the transactions contemplated hereby do not and
will not (i) contravene or conflict with the certificate of incorporation or
bylaws of Roche, and (ii) assuming compliance with the matters referred to in
Section 6.01(b), contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Roche.

ARTICLE VII

COVENANTS

SECTION 7.01. Severance Arrangements. The Company will not and will not
permit any of its subsidiaries to, (i) enter into any contract, agreement, plan
or arrangement covering any director, officer or employee of the Company or any
Subsidiary that provides for the making of any payments, the acceleration of
vesting of any benefit or right or any other entitlement contingent upon (A) the
Merger or the exercise by Roche of any of its rights under this Agreement to
representation on the Board of Directors (and its committees) or any acquisition
by Roche of securities of the Company (whether by merger, tender offer, private
or market purchases or otherwise) not prohibited by this Agreement or (B) the
termination of employment after the occurrence of any such contingency if such
payment, acceleration or entitlement would not have been provided but for such
contingency or (ii) amend any existing contract, agreement, plan or arrangement
to so provide.

SECTION 7.02. Marketing Agreements. Roche and the Company agree to
negotiate in good faith with respect to the establishment of a marketing
arrangement under which the Company would market, on agreed terms, certain
products of Roche and its Affiliates.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,

If to the Company:

Genentech, Inc.
490 Point San Bruno Boulevard
South San Francisco, California 94080
Attn: John P. McLaughlin
Telecopy: 415-952-9881

Richard D. Katcher, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: 212-403-2000

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If to Roche:

Roche Holdings, Inc.
c/o Roche Holding Ltd
Grenzacherstrasse 124
CH-4002 Basel
Switzerland
Telecopy: 011-41-61-688-1396
Attn: Dr. Felix Amrein

with a copy to:

Peter R. Douglas, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: 212-450-4800

or such other address or telecopier number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (i) if given by telecopier, when such
telecopy is transmitted to the telecopier number specified in this Section and
the appropriate answerback is received or (ii) if given by any other means, when
delivered at the address specified in this Section.

SECTION 8.02. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by Roche and the Company, or in the
case of a waiver, by the party against whom the waiver is to be effective;
provided that no such amendment or waiver shall be effective without the
approval of a majority of the Independent Directors.

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

SECTION 8.03. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other party hereto except that, subject to the
limitations set forth in Section 4.01(d), Roche may assign its rights to any
transferee of its shares of Common Stock permitted under clause (iii) or (iv) of
Section 4.01.

SECTION 8.04. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware.

SECTION 8.05. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by the other party hereto.

SECTION 8.06. Specific Performance. The Company acknowledges and agrees
that Roche's and the Company's respective remedies at law for a breach or
threatened breach of any of the provisions of this Agreement would be inadequate
and, in recognition of that fact, agrees that, in the event of a breach or
threatened breach by the Company or Roche of the provisions of this Agreement,
in addition to any remedies at law, Roche and the Company, respectively, without
posting any bond shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.

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SECTION 8.07. Termination. This Agreement (other than Sections 1.03 and
1.04 hereof) shall terminate at such time as Roche and its Affiliates
beneficially own 100% of the voting stock of the Company.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

GENENTECH, INC.

By
------------------------------------
Title:

ROCHE HOLDINGS, INC.

By
------------------------------------
Title:

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<PAGE> 127

EXHIBIT B

GUARANTY

SECTION 1. The Guaranty. Roche Holding Ltd, a Swiss corporation
("Guarantor"), hereby unconditionally and irrevocably guarantees to Genentech,
Inc., a Delaware corporation (the "Company"), and to the holders of Special
Common Stock, par value $.02 per share (the "Special Common Stock"), of the
Company the prompt and full discharge by Roche Holdings, Inc., a Delaware
corporation ("Roche"), of all of Roche's covenants, agreements, obligations and
liabilities under Section 2.03 of the Amended and Restated Governance Agreement
between Roche and the Company (the "Amended and Restated Governance Agreement")
(collectively, the "Obligations"), in accordance with the terms hereof and
thereof. Guarantor hereby so guarantees full and complete performance by Roche
of each and all of the Obligations, including, without limitation, the due and
punctual payment of all amounts which may become due and payable to the Company
and/or to the holders of Special Common Stock. Guarantor acknowledges and agrees
that, with respect to all obligations to pay money, such guaranty shall be a
guaranty of payment and not of collection. If Roche shall default in the due and
punctual performance of any of the Obligations or in the full and timely payment
of any amounts owed pursuant to the Obligations, Guarantor will forthwith
perform or cause to be performed such Obligations and will forthwith make full
payment of any amount due with respect thereto at its sole cost and expense.

SECTION 2. Guaranty Unconditional. The liabilities and obligations of
Guarantor to the Company pursuant to this Guaranty shall be unconditional and
irrevocable and shall not be conditioned or contingent upon the pursuit of any
remedies against Roche or any other person.

SECTION 3. Waivers of Guarantor. (a) Guarantor hereby waives any right,
whether legal or equitable, statutory or non-statutory, to require the Company
to proceed against or take any action against or pursue any remedy with respect
to Roche or any other person or make presentment or demand for performance or
give any notice of nonperformance before the Company may enforce rights against
Guarantor hereunder. The unconditional obligation of Guarantor hereunder will
not be affected, impaired or released by any extension, waiver, amendment or
thing whatsoever which would release a guarantor (other than performance).

(b) Guarantor hereby waives irrevocably any defense based upon or arising
by reason of any disability or incapacity of Roche or lack of authority of any
officer or director of Roche, and any immunity (whether on the basis of
sovereignty or otherwise) from the jurisdiction, attachment or execution to
which it or its property might otherwise be entitled in any action arising out
of or based upon this Guaranty which may be instituted in the courts of the
State of Delaware, the State of New York, the United States of America, or any
other domestic or foreign jurisdiction.

SECTION 4. Definitions. Terms used herein that are defined in the Amended
and Restated Governance Agreement are, unless otherwise defined, used herein as
therein defined.

SECTION 5. Representations and Warranties. (a) Corporate Existence and
Power. The Guarantor is a corporation duly incorporated, validly existing and
in good standing under the laws of Switzerland, and has all corporate powers
required to carry on its business as now conducted. The Guarantor is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a material adverse effect on the financial condition,
business or results of operations of the Guarantor.

(b) Corporate Authorization. The execution, delivery and performance by
the Guarantor of this Guaranty and the consummation by the Guarantor of the
transactions contemplated hereby are within the Guarantor's corporate powers.
This Guaranty is a valid and binding obligation of the Guarantor, enforceable in
accordance with its terms, except as (i) the enforceability hereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.

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(c) Governmental Authorization. The execution, delivery and performance by
the Guarantor of this Guaranty require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than such
filings or registrations with, or authorizations, consents or approvals of,
governmental bodies, agencies, officials or authorities, the failure of which to
make or obtain would not reasonably be expected to have a material adverse
effect on the financial condition, business or results of operations of
Guarantor.

(d) Non-Contravention. The execution, delivery and performance by the
Guarantor of this Guaranty and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) contravene or conflict
with the certificate of incorporation or bylaws of the Guarantor, (ii) assuming
compliance with the matters referred to in Section 5(c), contravene or conflict
with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to the
Guarantor or any of its Subsidiaries or (iii) constitute a default under or give
rise to a right of termination, cancellation or acceleration of any right or
obligation of the Guarantor or to a loss of any benefit to which the Guarantor
is entitled under any provision of any agreement, contract or other instrument
binding upon the Guarantor or any license, franchise, permit or other similar
authorization held by the Guarantor, except such as would not have a material
adverse effect on the business, financial condition or results of operations of
the Guarantor and its subsidiaries, taken as a whole.

SECTION 6. Covenants of Guarantor. Guarantor, for itself and its
affiliates (as such term is defined in Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, as amended), agrees to be bound by the
provisions of the Amended and Restated Governance Agreement and abide, and to
cause its affiliates to abide, by the obligations and limitations set forth
therein as if it were Roche, and agrees and acknowledges that any limitation or
restriction on Roche set forth therein shall be deemed to be, and shall be
construed as, a limitation or restriction on Guarantor and its affiliates taken
as a whole.

SECTION 7. Notice. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given to:

Roche Holdings, Inc.
c/o Roche Holding Ltd
Grenzacherstrasse 124
CH-4002 Basel
Switzerland

Telecopy: 011-41-61-688-1396
Attn.: Dr. Felix Amrein

with a copy to:

Peter R. Douglas, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: 212-450-4800

or such other address or telecopier number as such party may hereafter specify
in writing. Each such notice, request or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in this Section or (ii) if given by any other means, when
delivered at the address specified in this Section.

SECTION 8. Authorized Agent. The Guarantor hereby appoints [ ]
as its authorized agent upon whom process may be served in any action or
proceeding arising out of or based upon this Guaranty. The Guarantor hereby
expressly submits to the jurisdiction of any State or Federal court in New York
City or the State of Delaware.

SECTION 9. Successors and Assigns. The provisions of this Guaranty shall
be binding upon and inure to the benefit of the Company and Guarantor and their
respective successors and assigns. This Guaranty is

AB-2
<PAGE> 129

intended to be for the benefit of and grant to holders of Special Common Stock
outstanding at the Effective Time the rights specified herein.

SECTION 10. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed
as of this day of , 1995.

ROCHE HOLDING LTD

By
------------------------------------
Title:

Agreed and Accepted:

GENENTECH, INC.

By
-------------------------------------------------
Title:

AB-3
<PAGE> 130

STATE OF NEW YORK
COUNTY OF NEW YORK ss.:

On the day of , 1995, before me personally came [NAME], to
me known, who, being by me duly sworn, did depose and say that he is [TITLE] of
Roche Holding Ltd, a Swiss corporation, one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.

--------------------------------------
Notary Public

AB-4
<PAGE> 131

EXHIBIT C

THIRD: (a) The corporation is authorized to issue three (3) classes of
stock to be designated, respectively, preferred stock, special common stock and
common stock. The total number of shares which the corporation is authorized to
issue is four hundred million (400,000,000) shares. One hundred million
(100,000,000) shares shall be designated preferred stock, par value $.02 per
share ("Preferred Stock"), one hundred million (100,000,000) shares shall be
designated special common stock, par value $.02 per share ("Special Common
Stock"), and two hundred million (200,000,000) shares shall be designated common
stock, par value $.02 per share ("Common Stock").

(b) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized to fix or alter the dividend
rights, dividend rate, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), the redemption price or prices,
and the liquidation preferences of any wholly unissued series of Preferred
Stock, and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.

(c) The holders of Special Common Stock and Common Stock shall, on all
matters submitted to a vote of the stockholders of the corporation, each be
entitled to one vote per share, voting together as a single class unless
otherwise provided for in this certificate of incorporation or required by
applicable law. The rights, preferences, privileges and restrictions of Special
Common Stock and Common Stock shall be identical in all respects, except as
follows:

(i) Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the corporation, no distribution shall be made (1)
to the holders of shares of Common Stock unless, prior thereto, the holders of
shares of Special Common Stock shall have received $.01 per share, plus an
amount equal to declared and unpaid dividends and distributions thereon to the
date of such payment; provided that the holders of shares of Special Common
Stock shall be entitled to receive an aggregate amount per share equal to the
aggregate amount to be distributed per share to holders of Common Stock, or (2)
to the holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Special Common Stock, except
distributions made ratably on the Special Common Stock and all such other parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.

(ii) Redemption. The Special Common Stock may be redeemed, in whole but
not in part, at the option (the "Call") of the corporation, during the periods
and at the prices and upon the terms and conditions set forth below.

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(A) Price. 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 in paragraph (C) below (the "Redemption
Price"):

<TABLE>
<CAPTION>
PRICE PERIOD
-------------------------------------------------------------------- ------
<S> <C>
July 1, 1995 to September 30, 1995.................................. $61.25
October 1, 1995 to December 31, 1995................................ $62.50
January 1, 1996 to March 31, 1996................................... $63.75
April 1, 1996 to June 30, 1996...................................... $65.00
July 1, 1996 to September 30, 1996.................................. $66.25
October 1, 1996 to December 31, 1996................................ $67.50
January 1, 1997 to March 31, 1997................................... $68.75
April 1, 1997 to June 30, 1997...................................... $70.00
July 1, 1997 to September 30, 1997.................................. $71.50
October 1, 1997 to December 31, 1997................................ $73.00
January 1, 1998 to March 31, 1998................................... $74.50
April 1, 1998 to June 30, 1998...................................... $76.00
July 1, 1998 to September 30, 1998.................................. $77.50
October 1, 1998 to December 31, 1998................................ $79.00
January 1, 1999 to March 31, 1999................................... $80.50
April 1, 1999 to June 30, 1999...................................... $82.00
</TABLE>

(B) Notice. Notice of any proposed redemption of the Special Common Stock
shall be given by mailing a copy of such notice (the "Call Notification"),
postage prepaid, to the holders of record of the shares of Special Common Stock
at their respective addresses then appearing on the books of the corporation,
not more than 30 or less than 10 days prior to the date fixed for redemption,
but neither failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceeding for the redemption of the
Special Common Stock.

(C) Adjustments. If the corporation shall at any time after the initial
issuance of any Special Common Stock pay any dividend on Special Common Stock
payable in Special Common Stock or effect a subdivision or combination of the
Special Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Special Common Stock, then in each such case the Redemption
Prices set forth above shall be adjusted by multiplying each Redemption Price in
effect immediately prior to such event by the ratio of the number of shares of
Special Common Stock outstanding immediately prior to such event to the number
of shares of Special Common Stock outstanding immediately after such event. If
the corporation shall at any time after the initial issuance of any Special
Common Stock declare or pay any dividend on Special Common Stock in cash,
securities or other property other than Special Common Stock, the Redemption
Prices in effect for each period after such event shall each be reduced by the
per share value of such dividend 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 shall 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 Investor Directors (as
defined in the Amended and Restated Governance Agreement dated as of
, 1995 (the "Governance Agreement") between Roche Holdings, Inc., a
Delaware corporation ("Roche"), and the Company). The Board of Directors shall
determine in good faith the value of any noncash dividend for purposes of those
adjustments.

(iii) Put by Holders. Unless the Call has been previously exercised,
during the Put Period (as defined below), each holder of the Special Common
Stock shall have the option (the "Put") to require the corporation to redeem all
or part of the Special Common Stock held by such holder.

(A) Price. In connection with the exercise of the Put by any holder of
Special Common Stock, the corporation shall redeem each share of Special Common
Stock subject to the Put at a redemption price per

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<PAGE> 133

share equal to the Put Price (as defined below). The holder shall have the right
to require the corporation to redeem all or part of the Special Common Stock
held by such holder by delivery of the Put Notice (as defined below) during the
Put Period to the corporation or the Depositary (as defined below) electing to
have shares of Special Common Stock redeemed by the corporation and specifying
therein the number of whole shares of Special Common Stock which such holder has
elected to cause the corporation to redeem, accompanied by a certificate or
certificates representing such shares.

(B) Notice. At least ten and not more than thirty days prior to the
beginning of the Put Period or, in the event of an acceleration of the Put in
accordance with the terms of Section (c)(v) of this Article THIRD, as soon as
practicable following the date of the occurrence of the Insolvency Event giving
rise to such acceleration (but in no event later than the tenth day following
such date), the corporation shall mail the Put Notification (as defined below)
to each holder of Special Common Stock at such holder's address as it appears on
the transfer books of the corporation and to each holder of an option to
purchase shares of the Special Common Stock at the address for such holder set
forth in the records of the corporation, in each case together with a form of
Put Notice to be used by such holder in exercising the Put. The Put Notification
shall comply in all respects with applicable provisions of the Securities
Exchange Act as in effect at the time the Put Notification is given. A notice
similar to the Put Notification shall be given by the corporation by publication
in a newspaper of general circulation in the State of New York, City of New York
at least ten and no more than thirty days prior to the beginning of the Put
Period or, in the event of an acceleration of the Put in accordance with the
terms of Section (c)(v) of this Article THIRD, as soon as practicable following
the date of the occurrence of the Insolvency Event giving rise to such
acceleration (but in no event later than the tenth day following such date). If
the corporation shall fail to give the Put Notification to the holders of
Special Common Stock at least ten days prior to the beginning of the Put Period
or, in the event of an acceleration of the Put in accordance with the terms of
Section (c)(v) of this Article THIRD, as soon as practicable following the date
of the occurrence of the Insolvency Event giving rise to such acceleration (but
in no event later than the tenth day following such date), as provided herein,
the rights of the holders of Special Common Stock shall not be prejudiced
thereby and the Put shall nevertheless become exercisable at the beginning of
the Put Period as herein provided but the expiration of the Put Period shall be
extended to that date which is thirty-five Business Days, or, in the event of
such acceleration, sixty-five Business Days, from the date the Put Notification
is given to holders of Special Common Stock. To facilitate the giving of the Put
Notification to the holders of Special Common Stock, the Board of Directors may
fix a record date for determination of holders of Special Common Stock entitled
to be given the Put Notification, which record date may not be more than five
days prior to the date the Put Notification is given pursuant to this paragraph
(B).

(C) Adjustments. If the corporation shall at any time after the initial
issuance of any Special Common Stock effect a subdivision or combination of the
Special Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Special Common Stock, then in each such case the Put Price
shall be adjusted by multiplying the Put Price in effect immediately prior to
such event by the ratio of the number of shares of Special Common Stock
outstanding immediately prior to such event to the number of shares of Special
Common Stock outstanding immediately after such event.

(iv) Procedures.

(A) Payment. (1) On or prior to the date any Call Notification is first
sent or given, the corporation shall deposit or cause to be deposited the
aggregate of the Redemption Price (in each case, together with accrued and
unpaid dividends to such date) of the shares to be redeemed with the Depositary,
in trust for payment to the holders of the Special Common Stock, and deliver
irrevocable written instructions authorizing the Depositary to apply such
deposit solely to the redemption of the shares to be redeemed. The amount of
funds required to be deposited in connection with the Call pursuant to the first
sentence of this Section (c)(iv)(A) shall be reduced by the aggregate Redemption
Price of any shares of Special Common Stock deposited by Roche Holdings, Inc., a
Delaware corporation, in lieu of such funds. In the case of the exercise of the
Call, each holder of shares of Special Common Stock will be paid within three
Business Days following the surrender of the certificate or certificates
representing such shares to the Depositary together with a properly executed
letter of transmittal covering such shares of stock, the Redemption Price for
such shares.

AC-3
<PAGE> 134

The corporation's written instructions to the Depositary may provide that any of
such deposit remaining unclaimed, at the expiration of two years after the date
fixed for redemption pursuant to the Call, by the holder of any of such shares
be returned to the corporation and revert to the general funds of the
corporation, after which return such holder shall have no claim against the
Depositary but shall have a claim as an unsecured creditor against the
corporation for the Redemption Price together with accrued and unpaid dividends
to such redemption date, without interest. The Call Notification having been
duly given, or the Depositary having been irrevocably authorized by the
corporation 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 Special Common Stock
with respect to which such deposit shall have been made pursuant to exercise of
the Call shall 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 shall 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.

(2) Promptly following the end of the Put Period, the corporation shall
deposit or cause to be deposited with the Depositary funds in an amount
sufficient to pay the Put Price for all shares of Special Common Stock with
respect to which the Put has been properly exercised and for which certificates
representing such shares, together with a properly executed Put Notice, have
been surrendered to the Depositary. Each holder of shares of Special Common
Stock who has properly exercised the Put, and who has surrendered the shares of
Special Common Stock with respect to which the Put has been exercised, together
with a properly executed Put Notice, shall be paid promptly following the end of
the Put Period. In the event the Put Period is accelerated in accordance with
the terms of Section (c)(v) hereof, the corporation shall deposit or cause to be
deposited with the Put Price for all shares of Special Common Stock with respect
to which the Put has been properly exercised and for which certificates
representing such shares, together with a properly executed Put Notice, have
been surrendered to the Depositary, (x) promptly following the thirtieth day of
the Put Period, with respect to shares of Special Common Stock surrendered on or
prior to the thirtieth day of the Put Period, and (y) promptly following the end
of the Put Period with respect to all shares of Special Common Stock surrendered
thereafter. In the event of such acceleration, each holder of shares of Special
Common Stock who has properly exercised the Put and surrendered the shares of
Special Common Stock with respect to which the Put has been exercised, together
with a properly executed Put Notice, (i) on or prior to the thirtieth day of the
Put Period, shall be paid promptly following the thirtieth day of the Put Period
and (ii) prior to the end of the Put Period, shall be paid promptly following
the end of the Put Period. In the event of the exercise of the Put for less than
all of the shares of Special Common Stock represented by a certificate, a new
certificate representing the shares of Special Common Stock not redeemed
pursuant to the exercise of the Put shall be issued to the holder of such
shares.

(B) Redeemed Shares. All shares of Special Common Stock redeemed by the
corporation pursuant to the Call or the Put, as the case may be, shall be
retired and cancelled promptly after the redemption thereof. All such shares
shall upon their cancellation become authorized but unissued shares of common
stock without designation as to series and may be reissued as part of any series
of common stock existing or to be created by resolution or resolutions of the
Board of Directors as permitted by this Certificate of Incorporation or as
otherwise permitted under Delaware law. No shares of Special Common Stock shall
be issued after the date of redemption of the Special Common Stock pursuant to
the Call.

(v) Default. Unless the Call has been previously exercised, if, prior to
the last day of the Put Period, (i) the corporation shall file a voluntary
petition in bankruptcy, or seek reorganization, in order to effect a plan or
other arrangement with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or recodified from time to
time (the "Bankruptcy Code"), or under any state or federal law granting relief
to debtors, whether now or hereafter in effect, or (ii) any involuntary petition
or proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against the corporation and the same is not dismissed
within thirty (30) days, or the corporation shall file an answer admitting the
jurisdiction

AC-4
<PAGE> 135

of the court and the material allegations of any involuntary petition, or (iii)
the corporation shall be adjudicated a bankrupt, or an order for relief shall be
entered by any court of competent jurisdiction under the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors, then, and upon the occurrence of such event (an
"Insolvency Event"), without notice of any kind whatsoever, the right of the
holders of the Special Common Stock to exercise the Put shall accelerate, and
the Put shall be exercisable immediately upon the occurrence of such event and
until the end of the Put Period.

(vi) Conversion. Each share of Special Common Stock outstanding following
the close of business on the last day of the Put Period (the "Conversion Date"),
shall, unless previously called for redemption on or prior to such date,
automatically be converted into one share of Common Stock in accordance with the
terms and conditions set forth below; provided, however, that the conversion
provided in this Section (c)(vi) shall not impair or otherwise affect the right
of the holder of any Special Common Stock to receive the Put Price for any
shares of Special Common Stock with respect to which the Put has been exercised
prior to the Conversion Date.

(A) Notice; Replacement of Shares. Notice of the Conversion Date shall
be given by mailing a copy of such notice, postage prepaid, to the holders of
record of the shares of Special Common Stock at their respective addresses then
appearing on the books of the corporation, not more than 30 nor less than 10
days prior to the Conversion Date, but neither failure to mail such notice nor
any defect therein or in the mailing thereof shall affect the validity of the
conversion of the Special Common Stock. Upon request of any holder, the
corporation shall 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 Special Common Stock. Thereafter, all Special
Common Stock shall immediately cease to be outstanding for any purpose, except
the right to request Common Stock certificates upon surrender of the
certificates representing Special Common Stock and the right to receive declared
and unpaid dividends on such Special Common Stock. No shares of Special Common
Stock shall be issued after the Conversion Date.

(B) Reservation of Shares. The corporation shall provide, free from
preemptive rights, out of its authorized but unissued shares, or out of shares
held in its treasury, sufficient shares of Common Stock to provide for the
conversion of the Special Common Stock of all issued and outstanding shares of
Special Common Stock on the Conversion Date. The corporation covenants that all
shares of Common Stock which may be issued upon conversion of Special Common
Stock will upon issue be fully paid and non-assessable by the corporation and
free from all taxes, liens and charges with respect to the issue thereof. The
corporation further covenants that, if on the Conversion Date the Special Common
Stock shall be listed on the New York Stock Exchange or an any other national
securities exchange or the NASDAQ National Market System, the corporation 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 Common Stock
issuable upon conversion of the Special Common Stock.

(vii) Dividends, etc. Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Certificate of Incorporation,
holders of Special Common Stock and Common Stock shall be entitled to receive
such dividends and other distributions in cash, Preferred Stock, stock of any
corporation other than the corporation or property of the corporation as may be
declared thereon by the Board of Directors from time to time out of assets or
funds of the corporation legally available therefor and shall share equally on a
per share basis in all such dividends and other distributions. In the case of
dividends or other distributions payable in stock of the corporation other than
Preferred Stock, including distributions pursuant to stock splits or divisions
of stock of the corporation other than Preferred Stock which occur after the
initial issuance of shares of Special Common Stock by the corporation, only
shares of Common Stock shall be paid or distributed with respect to Common Stock
and only shares of Special Common Stock in an amount per share equal to the
amount per share paid or distributed with respect to Common Stock shall be paid
or distributed with respect to Special Common Stock. In the case of any
combination or reclassification of the Special Common Stock or the Common Stock,
the shares of the Common Stock or the Special Common Stock, as the case may be,
shall also be combined or reclassified so that the number of shares of Special
Common Stock outstanding immediately following such combination or
reclassification shall bear the same relationship to the

AC-5
<PAGE> 136

number of shares of Special Common Stock outstanding immediately prior to such
combination or reclassification as the number of shares of Common Stock
outstanding immediately following such combination or reclassification bears to
the number of shares of Common Stock outstanding immediately prior to such
combination or reclassification.

(viii) Consolidation, Merger, etc. In case the corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case, each share of
Special Common Stock shall at the same time be similarly exchanged or changed
into an amount per share, equal to the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged; provided that
any such stock may be made redeemable on terms no less favorable to the holder
thereof than the terms upon which the Special Common Stock is redeemable; and
provided further, that any such stock shall be subject to a right on the part of
the holder to put such stock on terms no less favorable to the holder thereof
than the terms upon which the Special Common Stock is required to be redeemed by
the corporation pursuant to the Put.

(ix) Rank. The Special Common Stock shall rank junior (as to dividends and
upon liquidation, dissolution and winding up) to all series of the corporation's
Preferred Stock.

(x) Legend. Each certificate representing shares of Special Common Stock
shall bear the following legend:

"The shares of Special Common Stock represented hereby are subject to
(i) redemption at the option of the corporation during the periods, at
the prices and on the terms and conditions specified in the
corporation's certificate of incorporation, (ii) an option on the part
of the holder, under certain circumstances, to require the corporation
to redeem such shares of Special Common Stock, at the price and on the
terms and conditions specified in the corporation's certificate of
incorporation and (iii) conversion into Common Stock, par value $.02,
of the corporation on the date specified, and upon the terms and
conditions set forth in, such certificate of incorporation. After
redemption the shares represented by this certificate shall cease to
be outstanding for all purposes and the holder hereof shall be
entitled to receive only the redemption price of such shares, without
interest. After conversion this certificate shall represent the shares
of Common Stock into which the shares of Special Common Stock
represented hereby shall have been converted, and this certificate may
be exchanged for a new certificate representing such shares of Common
Stock."

(d) In addition to any affirmative vote required by law or this Certificate
of Incorporation, any amendment of the provisions of this Article THIRD shall
require the affirmative vote of the holders of a majority of the shares of
Common Stock entitled to vote and of the holders of a majority of the shares of
Special Common Stock entitled to vote, each voting separately as a class.

(e) Certain Definitions. For purposes of this Article THIRD, the following
terms shall have the following meaning:

(1) "Depositary" shall mean the bank or trust company in the Borough of
Manhattan, the City and State of New York, having combined capital, surplus and
undivided profits of at least $500,000,000 which is appointed by the corporation
to serve as agent for the purpose of receiving certificates representing shares
of the Special Common Stock upon exercise of the Put or Call, as the case may
be, and distributing the Redemption Price or the Put Price therefor, as the case
may be.

(2) "Put Notice" shall mean a written notice electing to have shares of
Special Common Stock redeemed by the corporation pursuant to the exercise of the
Put.

(3) "Put Notification" shall mean a written notice from the corporation to
the holders of the Special Common Stock and the holders of options to purchase
shares of the Special Common Stock informing each such holder of (A) the rights
of such holder to cause the corporation to redeem shares of Special Common Stock
during the Put Period, (B) the date of the commencement and termination of the
Put Period, (C) the Put Price, (D) the identity and address of the Depositary
and (E) instructions as to how to exercise the Put.

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<PAGE> 137

The Put Notification shall, in all respects, comply with the requirements of the
Securities Exchange Act (as defined below).

(4) "Put Period" shall mean, subject to paragraph (A) of subsection
(c)(iii) of this Article THIRD, the period commencing on July 1, 1999 and ending
on the close of business on the thirtieth Business Day thereafter or such later
date as may be required under the Securities Exchange Act; provided, that in the
event of acceleration of the Put Period pursuant to subsection (c)(v) of this
Article THIRD, the Put Period shall be the period commencing as soon as
practicable following the date of the occurrence of the Insolvency Event giving
rise to such acceleration (but in no event later than ten days following such
date) and ending on the close of business on the sixtieth Business Day
thereafter or such later date as may be required under the Securities Exchange
Act.

(5) "Put Price" shall mean a purchase price of $60.00 per share of Special
Common Stock, subject to adjustment as provided in paragraph (C) of subsection
(c)(iii) of this Article THIRD.

(6) "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

AC-7
<PAGE> 138

ANNEX B

[LEHMAN BROTHERS LETTERHEAD]

April 30, 1995

Special Committee of the Board of Directors
Genentech, Inc.
460 Point San Bruno Boulevard
South San Francisco, CA 94080

Members of the Special Committee:

We understand that Genentech, Inc. (the "Company") and Roche Holdings, Inc.
("Roche") are proposing to enter into a Transaction Agreement, to be dated as of
the date hereof (together with all exhibits thereto, the "Transaction
Agreement"), pursuant to which the Company and Roche would, among other matters,
agree to: (i) amend the terms of the Redeemable Common Stock ("Redeemable Common
Stock") of the Company to (x) extend the redemption period with respect to the
Redeemable Common Stock (which will be renamed "Special Common Stock") for an
additional four years, (y) establish prices at which the Company may redeem such
shares, and (z) provide a right on the part of holders of such shares to require
the Company to purchase such shares during a specified period (the "Put"). The
four-year extension of the redemption period will have a schedule of redemption
prices starting at a price of $61.25 per share for the quarter ending September
30, 1995 and increasing over time on a quarterly basis to $82 per share for the
quarter ending June 30, 1999, after which the Company's redemption option
expires. Under the terms of the Special Common Stock, each holder of shares of
Special Common Stock will have the right pursuant to the Put to sell all or a
portion of such holder's shares to the Company, at a price of $60 per share,
exercisable during a thirty-day period following the expiration of the
redemption option, or under certain circumstances, during a sixty-day period
following certain insolvency events of the Company. The obligation of the
Company with respect to the Put is to be guaranteed by Roche, with Roche's
obligations guaranteed by Roche Holding Ltd. Such extension of the redemption
period and grant and guarantee of the Put are referred to herein as the
"Extension."

We further understand that as a condition to entering into the Transaction
Agreement, the Company and Roche propose to extend and modify certain governance
arrangements between the Company and Roche (the "Governance Arrangements") and
to enter into certain marketing and licensing agreements with respect to certain
of the Company's products (the "Marketing Agrement"). The Governance
Arrangements provide, among other matters, for (i) the composition of the Board
of Directors of the Company, (ii) limitations on business combinations with and
acquisitions of additional Company securities by Roche, (iii) Roche's rights and
obligations in respect of the Extension, (iv) Roche's rights in connection with
certain extraordinary transactions involving the Company, (v) voting
arrangements with respect to the Common Stock and Special Common Stock owned and
to be owned by Roche, and (vi) restrictions on the transfer of such shares by
Roche. The Marketing Agreement provides, among other matters, for the grant to
F. Hoffmann-LaRoche Ltd., an affiliate of Roche, of certain product rights and
options with respect to certain other product rights of the Company, outside the
United States. The Extension, the Governance Arrangements and the commercial
arrangements contemplated by the Marketing Agreement are herein referred to
together as the "Proposed Transactions" and the terms and conditions of the
Proposed Transactions are set forth in more detail in the Transaction Agreement.

We also understand that the Company and Roche may, if the timing of the
consummation of the Proposed Transactions so requires, enter into an agreement
and plan of merger (the "Contingent Merger Agreement") among the Company, Roche
and a subsidiary of Roche ("Merger Sub"). We further understand that the
Contingent Merger Agreement would provide for the merger of Merger Sub with and
into
<PAGE> 139

Special Committee of the Board of Directors
Genentech, Inc.
April 30, 1995
Page 2

the Company, the effect of which would be the same to the Company and its
stockholders as the consummation of the transactions contemplated by the
Transaction Agreement and that all of the transactions contemplated by the
Contingent Merger Agreement would be effected in a manner that would put the
Company, Roche and the holders of Redeemable Common Stock in the same position
(with the same rights and obligations) as they would have been had the Proposed
Transactions been consummated pursuant to the Transaction Agreement.
Accordingly, our opinion set forth herein with respect to the Proposed
Transactions also would constitute an opinion with respect to the transactions
contemplated by the Contingent Merger Agreement, in the event that such an
agreement is entered into by the parties.

We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the holders of the Redeemable
Common Stock (other than Roche) of the consideration to be received by such
holders and the Company in connection with the Proposed Transactions.

In arriving at our opinion, we have reviewed and analyzed: (1) the
Transaction Agreement, (2) the Certificate of Incorporation and By-Laws of the
Company, (3) the Merger Agreement dated February 2, 1990 between Roche and the
Company, (4) the existing governance arrangements between the Company and Roche,
(5) publicly available information concerning the Company which we believe to be
relevant to our inquiry including, but not limited to, the latest annual report
on Form 10-K of the Company dated December 31, 1994 and the draft of the latest
quarterly report on Form 10-Q of the Company dated March 31, 1995, (6) financial
and operating information with respect to the business, operations and prospects
of the Company furnished to us by the Company, (7) a trading history of the
Company's common stock from 1991 to the present and a comparison of that trading
history with those of other companies which we deemed relevant, (8) a comparison
of the historical financial results and present financial condition of the
Company with those of other companies which we deemed relevant, (9) the
financial terms of certain other recent transactions which we deemed relevant,
(10) reports of research analysts with respect to the Company and the potential
effect of the expiration of Roche's current option on the price of the
Redeemable Common Stock, (11) valuations of the Redeemable Common Stock using
various methodologies, (12) the financial terms of certain other commercial
arrangements between biotechnology and pharmaceutical companies which we deemed
relevant, and (13) analyses of the potential pro forma effects on the Company of
the commercial arrangements contemplated by the Marketing Agreement. In
addition, we have held discussions with the management of the Company concerning
its business, operations, assets, financial condition and prospects and
undertook such other studies, analyses and investigations as we deemed
appropriate.

In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial projections of the Company, upon
advice of the Company we have assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of the Company and that the Company will perform substantially in
accordance with such projections. In arriving at our opinion, we have not made
nor obtained any evaluations or appraisals of the assets or liabilities of the
Company. Our opinion is necessarily based upon market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this
letter. In addition, we do not express any opinion as to the actual prices at
which shares of the Special Common Stock will trade following the consummation
of the Proposed Transactions.

Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
received by the holders of shares of the Redeemable Common Stock (other than
Roche) and the Company in connection with the Proposed Transactions is fair to
such holders.
<PAGE> 140

Special Committee of the Board of Directors
Genentech, Inc.
April 30, 1995
Page 3

We have acted as financial advisor to the Company in connection with the
Proposed Transactions, have received a fee for the rendering of this opinion and
will receive an additional fee for our services which is contingent upon the
consummation of the Extension. In addition, the Company has agreed to indemnify
us for certain liabilities which may arise out of the rendering of this opinion.
We also have performed various investment banking services for the Company in
the past (including acting as advisor to the Company with respect to the 1990
transaction between Roche and the Company) and have received customary fees for
such services. In the ordinary course of our business, we actively trade in the
Redeemable Common Stock and the debt and equity securities of Roche for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.

This opinion is for the use and benefit of the Special Committee of the
Board of Directors of the Company. This opinion is not intended to be and does
not constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the proposed amendment to the Company's
certificate of incorporation.

Very truly yours,

LEHMAN BROTHERS
<PAGE> 141

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

The Registrant's Certificate of Incorporation empowers the Registrant to
indemnify any director, officer, employee or agent of the Registrant or any
other person who is serving at the Registrant's request in any such capacity
with another corporation, partnership, joint venture, trust or other enterprise
(including, without limitation, an employee benefit plan) to the fullest extent
permitted under the Delaware General Corporation Law (the "DGCL") as the same
exists or may be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Registrant to provide broader
indemnification rights than said law permitted the Registrant to provide prior
to such amendment), and any such indemnification shall continue as to any person
who has ceased to be a director, officer, employee or agent and may inure to the
benefit of the heirs, executors and administrators of such a person.

The Registrant's Certificate of Incorporation also empowers the Registrant
to purchase and maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Registrant or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Registrant would have the power to
indemnify any such person against such expense, liability or loss under the
DGCL.

In addition, the By-laws of the Registrant provide that the Registrant may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Registrant or is or was serving at
the request of the Registrant as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Registrant
would have the power to indemnify him against such liability under the
provisions of the DGCL.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following exhibits are filed herewith or incorporated herein by
reference:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated May 23, 1995 among Roche Holdings, Inc., HLR
(U.S.) II, Inc. and the Registrant (incorporated by reference to Annex A to the
Proxy Statement/ Prospectus forming a part of this Registration Statement).
4.1 -- Form of Article THIRD of the Amended Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit C to Annex A to the Proxy
Statement/Prospectus forming a part of this Registration Statement).
5.1 -- Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the securities
being registered.*
5.2 -- Opinion of Wachtell, Lipton, Rosen & Katz as to certain federal income tax
consequences.*
10.1 -- Amended and Restated Governance Agreement to be dated as of the effective date of
the merger contemplated by the Merger Agreement included as Exhibit 2.1 hereof,
between Roche Holdings, Inc. and the Registrant (incorporated by reference to
Exhibit A to Annex A to the Proxy Statement/Prospectus forming a part of this
Registration Statement).
10.2 -- Guaranty of Roche Holding Ltd and certain subsidiaries of the Registrant
(incorporated by reference to Exhibit B to Annex A to the Proxy
Statement/Prospectus forming a part of this Registration Statement).
10.3 -- Licensing Agreement, to be dated as of the effective date of the merger
contemplated by the Merger Agreement included as Exhibit 2.1 hereof, among F.
Hoffmann-LaRoche Ltd, the Registrant and certain subsidiaries of the Registrant.
15.1 -- Letter re: Unaudited Interim Financial Information.
23.1 -- Consent of Wachtell, Lipton, Rosen & Katz (included as part of Exhibit 5.1).*
23.2 -- Consent of Ernst & Young LLP, independent auditors.
</TABLE>

- ---------------
* To be filed by amendment

II-1
<PAGE> 142

<TABLE>
<S> <C> <C>
24.1 -- Powers of Attorney.
27.1 -- Financial Data Schedule.
99.1 -- Form of proxy for Special Meeting of Stockholders of the Registrant.
</TABLE>

- ---------------
* To be filed by amendment.

(b) The following Financial Statement Schedule is incorporated herein by
reference:

Schedule II -- Valuation and Qualifying Accounts for each of the three years
in the period ended December 31, 1994 (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994).

ITEM 22. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

(2) That for the purpose of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) 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 Exchange Act; and, where interim financial information
required to be presented by Article 3 of 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.

(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.

(5) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes

II-2
<PAGE> 143

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

(6) To respond to requests for information that are incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.

(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.

II-3
<PAGE> 144

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of South San Francisco,
State of California, on June 5, 1995.

GENENTECH, INC.

By: /s/ G. KIRK RAAB
---------------------------------
Name: G. Kirk Raab
Title: President and Chief
Executive Officer

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

<TABLE>
<S> <C>
PRINCIPAL EXECUTIVE OFFICER:

By: /s/ G. KIRK RAAB President and Chief Executive Officer
- ---------------------------------------------
G. Kirk Raab

PRINCIPAL FINANCIAL OFFICER:

By: /s/ LOUIS J. LAVIGNE, JR. Senior Vice President and Chief Financial
- --------------------------------------------- Officer
Louis J. Lavigne, Jr.

PRINCIPAL ACCOUNTING OFFICER:

By: /s/ BRADFORD S. GOODWIN Vice President and Controller
- ---------------------------------------------
Bradford S. Goodwin

DIRECTORS:

G. Kirk Raab

By: /s/ G. KIRK RAAB
-----------------------------------------
G. Kirk Raab

Herbert W. Boyer
Jurgen Drews
Armin M. Kessler
Linda Fayne Levinson
J. Richard Munro
Donald L. Murfin*
John T. Potts, Jr.*
C. Thomas Smith, Jr.*
Robert A. Swanson*
David S. Tappan, Jr.*

*By: /s/ JOHN P. MCLAUGHLIN
----------------------------------------
Attorney-in-fact
</TABLE>

June 5, 1995

II-4
<PAGE> 145

(a) The following exhibits are filed herewith or incorporated herein by
reference:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated May 23, 1995 among Roche Holdings, Inc., HLR
(U.S.) II, Inc. and the Registrant (incorporated by reference to Annex A to the
Proxy Statement/Prospectus forming a part of this Registration Statement).
4.1 -- Form of Article THIRD of the Amended Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit C to Annex A to the Proxy
Statement/Prospectus forming a part of this Registration Statement).
5.1 -- Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the securities
being registered.*
5.2 -- Opinion of Wachtell, Lipton, Rosen & Katz as to certain federal income tax
consequences.*
10.1 -- Amended and Restated Governance Agreement to be dated as of the effective date of
the merger contemplated by the Merger Agreement included as Exhibit 2.1 hereof,
between Roche Holdings, Inc. and the Registrant (incorporated by reference to
Exhibit A to Annex A to the Proxy Statement/Prospectus forming a part of this
Registration Statement).
10.2 -- Guaranty of Roche Holding Ltd to be dated as of the effective date of the merger
contemplated by the Merger Agreement included as Exhibit 2.1 hereof (incorporated
by reference to Exhibit B to Annex A to the Proxy Statement/Prospectus forming a
part of this Registration Statement).
10.3 -- Licensing Agreement, dated as of the effective date of the merger contemplated by
the Merger Agreement included as Exhibit 2.1 hereof, among F. Hoffmann-LaRoche
Ltd., the Registrant, and certain subsidiaries of the Registrant.
15.1 Letter re: Unaudited Interim Financial Information.
23.1 -- Consent of Wachtell, Lipton, Rosen & Katz (included as part of Exhibit 5.1)*
23.2 -- Consent of Ernst & Young LLP, independent auditors.
24.1 -- Powers of Attorney.
27.1 -- Financial Data Schedule.
99.1 -- Form of Proxy for Special Meeting of Stockholders of the Registrant.
</TABLE>

- ---------------
* To be filed by amendment.

<PAGE> 1
Exhibit 10.3
------------

AGREEMENT BETWEEN

GENENTECH, INC. AND

F. HOFFMANN-LA ROCHE LTD

REGARDING COMMERCIALIZATION

OF GENENTECH'S PRODUCTS

OUTSIDE THE UNITED STATES

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<S> <C>
Whereas Clauses

Article I - Definitions

1. Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Canada Products . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Clinical Requirements . . . . . . . . . . . . . . . . . . . . . . . 3
6. Collaborative Countries . . . . . . . . . . . . . . . . . . . . . . 3
7. Commercial Requirements . . . . . . . . . . . . . . . . . . . . . . 4
8. DNase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
9. Dossier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
10. Financial Appendix . . . . . . . . . . . . . . . . . . . . . . . . . 4
11. First Commercial Introduction . . . . . . . . . . . . . . . . . . . 4
12. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
13. GENENTECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
14. Genentech Canada Ltd. . . . . . . . . . . . . . . . . . . . . . . . 4
15. Genentech Europe Limited . . . . . . . . . . . . . . . . . . . . . . 4
16. GENENTECH's Fully Burdened Manufacturing Cost . . . . . . . . . . . 5
17. Genentech Product . . . . . . . . . . . . . . . . . . . . . . . . . 5
18. Governance Agreement . . . . . . . . . . . . . . . . . . . . . . . . 5
19. IDEC Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
20. IDEC Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
21. In-Licensed Product . . . . . . . . . . . . . . . . . . . . . . . . 5
22. Know-How . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
23. Manufacturing Technology . . . . . . . . . . . . . . . . . . . . . . 6
24. Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
25. Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
26. Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
27. Phase II Completion Date . . . . . . . . . . . . . . . . . . . . . . 6
28. Phase III Trial . . . . . . . . . . . . . . . . . . . . . . . . . . 6
29. Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
30. Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
31. ROCHE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
32. Roche Territory . . . . . . . . . . . . . . . . . . . . . . . . . . 7
33. Scios Nova Agreement . . . . . . . . . . . . . . . . . . . . . . . . 7
34. Scios Product . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
35. Small Molecule Product . . . . . . . . . . . . . . . . . . . . . . . 7
36. Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
37. Valid Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>

<PAGE> 3

<TABLE>
<S> <C>
Article II - Licenses, Options, Know-How and Trademarks

1. Licenses for Canada Products and DNase . . . . . . . . . . . . . . . 7
2. Option for License for Other Products . . . . . . . . . . . . . . . 8
3. Exercise of Option for License for Other Products . . . . . . . . . 9
4. License to Know-How and Option for License to
Know-How . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. License to Trademark and Option for License to
Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. Standard of Effort . . . . . . . . . . . . . . . . . . . . . . . . . 11
7. Reporting on Commercialization Progress . . . . . . . . . . . . . . 11
8. License to Genentech . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Future In-Licenses . . . . . . . . . . . . . . . . . . . . . . . . . 13
10. IIbIIIa and Ras Farnesyltransferase Collaborations . . . . . . . . . 13

Article III - Commercialization Committees

1. Commercialization Committee . . . . . . . . . . . . . . . . . . . . 13
2. Management Committee . . . . . . . . . . . . . . . . . . . . . . . . 14
3. Development Committee . . . . . . . . . . . . . . . . . . . . . . . 14
4. Finance Committee . . . . . . . . . . . . . . . . . . . . . . . . . 14

Article IV - Development and Marketing

1. Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2. Development Costs . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Article V - Production and Supply

1. Production of Product . . . . . . . . . . . . . . . . . . . . . . . 15
2. Supply of Clinical Requirements . . . . . . . . . . . . . . . . . . 15
3. Supply of Commercial Requirements . . . . . . . . . . . . . . . . . 16
4. Supply Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. Amendments to DNase Supply Agreement . . . . . . . . . . . . . . . . 16
6. Supply of Scios Product . . . . . . . . . . . . . . . . . . . . . . 18
7. Supply of IDEC Product . . . . . . . . . . . . . . . . . . . . . . . 19
8. Supply of In-Licensed Product . . . . . . . . . . . . . . . . . . . 19
9. Supply of Small Molecule Product . . . . . . . . . . . . . . . . . . 19
10. Manufacturing Process and Facilities . . . . . . . . . . . . . . . . 19
11. Additional Capital Requirements . . . . . . . . . . . . . . . . . . 20
12. Term of Supply Obligation . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>

<PAGE> 4

<TABLE>
<S> <C>
Article VI - Payments, Margins and Royalties

1. Payment for Product Requirements . . . . . . . . . . . . . . . . . . 20
2. Invoices and Method of Payment of GENENTECH'S
Fully Burdened Manufacturing Cost and Margin . . . . . . . . . . 21
3. Royalties on Sales of DNase . . . . . . . . . . . . . . . . . . . . 21
4. Royalties and Other Payments on Sale of Canada
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5. Royalties on Sale of Genentech Products . . . . . . . . . . . . . . 22
6. Royalties and Other Payments on Sale of Scios
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7. Royalties and Other Payments on Sale of IDEC
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8. Royalties and Other Payments on Sale of In-Licensed
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9. Calculation of Aggregate Net Sales . . . . . . . . . . . . . . . . . 24
10. Timing of Royalty Payments . . . . . . . . . . . . . . . . . . . . . 24
11. Restrictions on Transfer of Funds . . . . . . . . . . . . . . . . . 25
13. Records Regarding Royalties . . . . . . . . . . . . . . . . . . . . 26
14. Royalty for Use of Trademark . . . . . . . . . . . . . . . . . . . . 26

Article VII - Transaction Provisions

1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2. Personnel of Genentech Canada Ltd., Genentech
Europe Limited and Genentech Ltd. (Japan) . . . . . . . . . . . 27
3. Records and Property Leases . . . . . . . . . . . . . . . . . . . . 27
4. Transfer of Dossier and Registration . . . . . . . . . . . . . . . . 27

Article IX - Patents, Inventions and Trademarks

1. Sole Inventions . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2. Joint Inventions . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3. Patent Infringement . . . . . . . . . . . . . . . . . . . . . . . . 29
4. Third Party Patents . . . . . . . . . . . . . . . . . . . . . . . . 30
5. Reporting on Patent Status . . . . . . . . . . . . . . . . . . . . . 30
6. Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Article X - Confidentiality and Publications

1. Confidential Information . . . . . . . . . . . . . . . . . . . . . . 31
2. Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3. Restrictions on Transfer of Proprietary Materials . . . . . . . . . 32
</TABLE>

<PAGE> 5

<TABLE>
<S> <C>
Article XI - Liability

1. No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2. Indemnification by ROCHE . . . . . . . . . . . . . . . . . . . . . . 32
3. Indemnification By GENENTECH . . . . . . . . . . . . . . . . . . . . 32

Article XII - Term and Termination

1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2. Termination By ROCHE . . . . . . . . . . . . . . . . . . . . . . . . 33
3. Termination By GENENTECH . . . . . . . . . . . . . . . . . . . . . . 34
4. Termination of Development/Commercialization . . . . . . . . . . . . 34
5. Termination for Breach . . . . . . . . . . . . . . . . . . . . . . . 35
6. Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 36
7. Termination For Change in Ownership . . . . . . . . . . . . . . . . 36
8. Survival of Terms . . . . . . . . . . . . . . . . . . . . . . . . . 36

Article XIII - Miscellaneous

1. Disclaimer of Certain Warranties . . . . . . . . . . . . . . . . . . 36
2. Entire Agreement, Amendment . . . . . . . . . . . . . . . . . . . . 36
3. Failure to Enforce . . . . . . . . . . . . . . . . . . . . . . . . . 37
4. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7. Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 39
9. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13. Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Appendix A - Financial Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Appendix B - Article II Countries . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>

<PAGE> 6

A G R E E M E N T

Effective as of the Effective Date

Among

F. Hoffmann-La Roche Ltd, Grenzacherstrasse 124, CH 4002 Basel, Switzerland
and

Genentech, Inc., 460 Point San Bruno Boulevard, South San Francisco,
California, USA 94080, Genentech Europe Limited, Reid House, 31 Church Street,
Hamilton, Bermuda HM FXV, Genentech Biopharmaceuticals Limited, Reid House, 31
Church Street, Hamilton, Bermuda HM FXV and Genentech International Limited,
Reid House, 31 Church Street, Hamilton, Bermuda HM FXV

WHEREAS, GENENTECH possesses rights outside the United States in and
to certain pharmaceutical products;

WHEREAS, GENENTECH wishes to have certain pharmaceutical products
developed and marketed outside the United States;

WHEREAS, GENENTECH currently sells pharmaceutical products in Canada
and promotes pharmaceutical products in Germany, Ireland, Netherlands and the
United Kingdom.

WHEREAS, ROCHE has considerable knowledge in developing, registering,
manufacturing, formulating and filling, promoting, detailing, distributing and
marketing pharmaceutical products in all of the significant countries outside
the United States that utilize pharmaceutical products, has in place in those
countries a well-experienced staff for performing these activities, and can
perform these activities in a diligent and aggressive manner for Genentech's
pharmaceutical products;

WHEREAS, GENENTECH and ROCHE believe that this Agreement covering the
development, registration, manufacture, supply, formulation and filling,
promotion, detailing, distribution and marketing of certain of Genentech's
products outside the United States will be desirable and compatible with both
GENENTECH's and ROCHE's business objectives with respect to such products;

1
<PAGE> 7

WHEREAS, GENENTECH believes that this Agreement would provide a
economic benefit to GENENTECH and speed up availability of unmarketed
pharmaceutical products of GENENTECH outside the United States and assist
GENENTECH in defraying the substantial costs associated with the development of
such products in the United States;

WHEREAS, GENENTECH and ROCHE intend that this Agreement should cover
the development, marketing and supply of certain GENENTECH pharmaceutical
products outside the United States and that this Agreement supersedes the
following agreements: Agreement Between F. Hoffmann-La Roche Ltd, Genentech,
Inc. and Genentech Europe Limited Regarding Commercialization of DNase in
Collaborative Countries; and Agreement Between F. Hoffmann-La Roche Ltd,
Genentech, Inc., and Genentech Europe Limited Regarding Commercialization of
DNase in Rest Of World; Agreement Among F. Hoffmann-La Roche Ltd, Nippon Roche
K.K., Genentech, Inc., and Genentech Biopharmaceuticals Limited Regarding
Commercialization of DNase in Japan.

WHEREAS, GENENTECH and ROCHE intend that this Agreement should not
cover the development, marketing and supply of certain GENENTECH or jointly
developed pharmaceutical products and that this Agreement does not supersede
the following Agreements: Supply Agreement Between F. Hoffmann-La Roche Ltd,
Genentech, Inc. and Genentech Europe Limited Regarding DNase in Collaborative
Countries, Rest of World and Japan ("DNase Supply Agreement") except that the
terms of such Agreement shall be expanded to include the supply of DNase in
Canada; Joint Research and Development Agreement Between F. Hoffmann-La Roche
Ltd, Hoffmann-La Roche, Inc. and Genentech, Inc. Regarding LFA/ICAM
Antagonists; the TNF-Receptor Fusion Protein Agreement Between Genentech, Inc.,
F.Hoffmann-La Roche Ltd, and Hoffmann-La Roche, Inc. and the Development
Agreement Between Genentech, Inc. and Hoffmann-La Roche, Inc., dated January 6,
1980 concerning interferon alpha and beta; Joint Research and Development
Agreement Between F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche, Inc. and
Genentech, Inc. Regarding IL-8 Molecules; and the Small Molecule Screening and
Collaboration Agreement Between F. Hoffmann-La Roche Ltd. and Genentech, Inc.

WHEREAS, Roche Holding Ltd, a corporation organized under the laws of
Switzerland, and Genentech, Inc. concluded, effective September 8, 1990, a
Mutual Confidentiality Agreement (the "Mutual Confidentiality Agreement")
covering the ongoing disclosure of all confidential scientific, financial,
technical and business information of any nature in any tangible form of
expression among Genentech, Inc. on the one hand and Roche Holding Ltd and its
subsidiaries and affiliates throughout the world, except Genentech, Inc., on
the other hand.

NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:

2
<PAGE> 8

ARTICLE I - DEFINITIONS

1. The term "AFFILIATE" shall mean --

(a) an organization fifty (50%) percent or more of the voting
stock of which is owned and/or controlled directly or indirectly by
either Party;

(b) an organization which directly or indirectly owns and/or
controls fifty percent (50%) or more of the voting stock of either
Party;

The foregoing notwithstanding, neither Party shall be considered an
Affiliate of the other Party or of any other Party's Affiliates.

2. The term "AGREEMENT" shall mean this Agreement, including all
Appendices hereto, together with any valid amendments or modifications
of the foregoing, and any agreements or plans entered into in
connection with this Agreement.

3. The term "ASIA" shall mean the countries of Japan, Bangladesh,
Myanmar, Cambodia, Indonesia, People's Republic of China, Hong Kong,
Republic of Korea, Laos, Malaysia, Papua New Guinea, Philippines,
Singapore, Sri Lanka, Republic of China (Taiwan) and Thailand and the
territories and possessions of each.

4. The term "CANADA PRODUCTS" shall mean the pharmaceutical products
Activase(R) tissue plasminogen activator, Protropin(R) and Nutropin(R)
human growth hormone, Actimmune(R) interferon gamma and Pulmozyme(R)
dornase alpha each as sold in Canada.

5. The term "CLINICAL REQUIREMENTS" shall mean those quantities of a
Product reasonably required by a Party for the conduct of preclinical
and clinical studies of such Product in that Party's Territory. The
term Clinical Requirements as used herein with respect to a Party
shall also include the Clinical Requirements of that Party's
licensees, if any.

6. The term "COLLABORATIVE COUNTRIES" shall mean Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Italy, Ireland,
Luxembourg, Netherlands, Norway, Portugal, Spain, Switzerland, Sweden,
United Kingdom and any additional countries that may subsequently
become members of the EEC.

<PAGE> 9

7. The term "COMMERCIAL REQUIREMENTS" shall mean those quantities of a
Product reasonably required by a Party for promotion and sale of such
Product in the its Territory. The term Commercial Requirements as
used herein with respect to a Party shall also include the Commercial
Requirements of that Party's licensees, if any.

8. The term "DNASE" shall mean the protein, DNase, as defined in the
DNase Supply Agreement.

9. The term "DOSSIER" shall mean the document or documents filed with and
approved by the government or health authority in a country in the
Roche Territory for purposes of registration of a Product for sale in
such country.

10. The term "FINANCIAL APPENDIX" shall mean Appendix A to this Agreement.

11. The term "FIRST COMMERCIAL INTRODUCTION" shall mean the first date
upon which a Product is shipped commercially by ROCHE to an
independent third party in a country in the Roche Territory, after
formal marketing approval in that country, including any required
price approval, has been granted from the relevant authority in that
country for that Product.

12. The term "EFFECTIVE DATE" shall mean the date that the Amendment and
Restatement of Article Third of the Certificate of Incorporation of
Genentech, Inc. amending the terms of the Redeemable Common Stock, par
value $0.02, of GENENTECH becomes effective.

13. The term "GENENTECH" shall mean Genentech, Inc. and its Affiliates.

14. The term "GENENTECH CANADA LTD." shall mean that Affiliate of
Genentech, Inc. located at 1100 Burbank Drive, Fifth Floor,
Burlingame, Ontario L7L 6B2 and organized as Genentech Canada Ltd.
under the laws of Canada.

15. The term "GENENTECH EUROPE LIMITED" shall mean that Affiliate of
Genentech, Inc. located at 31 Church Street, Hamilton, Bermuda HM FX
and organized as Genentech Europe Limited under the laws of Bermuda.
The term shall include the headquarters office of Genentech Europe
Limited located at Klingental 17, CH-4002 Basel, Switzerland and
registered under the laws of Switzerland. The term shall also include
the following Affiliates of Genentech, Inc.: Genentech, GmbH, located
at Jechtinger Strasse 11, D-79111 Freiburg i Br., Germany and
organized under the laws of Germany; Genentech (U.K.) Ltd., located
at Verulam Point, Station Way, St. Albans, Herts AL1 5HE, United
Kingdom and organized under the laws of the United Kingdom; Genentech
B.V., located at Planetenweg 67, 2132 HM Hoofddorp, Netherlands and
organized under the laws of the Netherlands and Genentech (Ireland)
Limited, organized under the laws of the Republic of Ireland.

<PAGE> 10

16. The term "GENENTECH'S FULLY BURDENED MANUFACTURING COST" shall have
the meaning set forth in the Financial Appendix.

17. The term "GENENTECH PRODUCT" shall mean a human pharmaceutical
formulation for which GENENTECH (i) has an ownership interest outside
the United States as of April 12, 1995 or (ii) thereafter has or
acquires an ownership interest during the term of this Agreement but
does not include Canada Products, DNase, IDEC Product, Scios Product
and In-Licensed Products, human growth hormone products, tissue
plasminogen activator products and interferon gamma products.

18. The term "GOVERNANCE AGREEMENT" shall mean the Governance Agreement
entered into between Roche Holdings, Inc., a Delaware corporation, and
Genentech, Inc. on September 7, 1990 as amended and restated on the
date hereof and as the same may be further amended by the Parties.

19. The term "IDEC AGREEMENT" shall mean the Collaboration Agreement
between Genentech, Inc. and IDEC Pharmaceuticals Corporation,
effective as of March 16, 1995.

20. The term "IDEC PRODUCT" shall mean all of those products which are the
subject of the IDEC Agreement.

21. The term "IN-LICENSED PRODUCT" shall mean any human pharmaceutical
formulation to which, subsequent to April 12, 1995, Genentech acquires
rights in the Roche Territory by means of a patent and/or knowhow
license from a third party.

22. The term "KNOW-HOW" shall mean proprietary technical information,
know-how, data, test results, knowledge, techniques, discoveries,
inventions, specifications, designs, regulatory filings, and other
information (whether or not patentable) which are now and, unless
specified otherwise, hereafter during the term of this Agreement are
in the possession or control of a Party and are specifically related
to a Product or to the development, manufacture, use or sale of a
Product of that Party; provided, however, that Know-How shall not
include any of the foregoing (i) which are now or hereafter in the
possession or control of a Party as a result of a license taken from a
third party and which a Party is not free to transfer or license to
the other Party or which a Party may transfer or license but such
transfer or license would necessitate the payment of a fee or royalty
to the licensor (unless provision is made hereunder for the payment of

<PAGE> 11
such fee or royalty) or (ii) which are generally ascertainable from
publicly available information.

23. The term "MANUFACTURING TECHNOLOGY" shall mean all Know-How of a Party
then existing which is necessary to make or have made a Product in the
manner that such Product is then manufactured by the Party to produce
Clinical Requirements or to produce Commercial Requirements, as
applicable.

24. The term "NET SALES" shall have the meaning set forth in the Financial
Appendix.

25. The term "PARTY" shall mean either GENENTECH or ROCHE, and when used
in the plural, shall mean both of them.

26. The term "PATENTS" shall mean any and all patent applications and
patents (including inventor's certificates), including any
substitutions, extensions, reissues, renewals, divisions,
continuations or continuations-in-part thereof or therefor covering a
Product, its administration, formulation or clinical use, which a
Party now or hereafter during the term of this Agreement owns or
controls or with respect to which a Party has the right to grant
licenses or sublicenses without the payment of a fee or royalty
(unless provision is made hereunder for the payment of such fee or
royalty) to the licensor, but only to the extent they specifically
cover a Product or the manufacture, use or sale of a Product.

27. The term "PHASE II COMPLETION DATE" shall mean the date by which
GENENTECH determines that it has clinical trial data and other
information sufficient to undertake a Phase III Trial.

28. The term "PHASE III TRIAL" shall mean a controlled study in humans of
the efficacy and safety of a Product which is prospectively designed
to demonstrate statistically whether the Product is effective for use
in a particular indication in a manner sufficient to obtain regulatory
approval to market that Product or which is sufficient to permit a
filing with the U.S. Food and Drug Administration for a Registration.

29. The term "PRODUCT" shall mean any human pharmaceutical formulation for
which a Party has an ownership interest as of April 12, 1995 or
thereafter acquires an ownership interest or rights by means of a
patent or knowhow license during the term of this Agreement. In the
case of GENENTECH, the term Product shall include Canada Products,
Genentech Products, IDEC Product, Scios Product, In-Licensed Products
and DNase. The term Product shall also include: (a) all bulk forms of
a Product ("BULK PRODUCT"); (b) Product which has been vialed but

<PAGE> 12
is not finished or packaged ("VIALED PRODUCT"); and (c) finished,
packaged final dosage units of a Product ("FINISHED PRODUCT"). The
term Product shall include not only the specific molecule involved but
molecules derived from that molecule whether by addition or deletion
of other chemical subunits.

30. The term "REGISTRATION" shall mean the official approval by the
government or health authority or similar entity in one or more
countries in the Roche Territory which is required for a Product to be
offered for sale in that country or those countries, including such
authorizations as may be required for the production, importation,
pricing and sale of that Product to the extent they are needed for
that Product to be offered for sale in that country or those
countries.

31. The term "ROCHE" shall mean F. Hoffmann-La Roche Ltd and its
Affiliates unless otherwise specified in this Agreement.

32. The term "ROCHE TERRITORY" mean all countries of the world except the
United States and its territories and possessions.

33. The term "SCIOS NOVA AGREEMENT" shall mean the Collaboration Agreement
between Genentech, Inc. and Scios Nova, Inc. effective as of December
30, 1994.

34. The term "SCIOS PRODUCT" shall mean all of those products which are
the subject of the Scios Nova Agreement.

35. The term "SMALL MOLECULE PRODUCT" shall mean a synthetic molecule that
is not a protein or peptide.

36. The term "TRADEMARK" shall mean the trademarks owned, registered,
maintained or used by GENENTECH in connection with a Product.

37. The term "VALID CLAIM" shall mean a subsisting claim of an issued and
unexpired Patent that has not been held invalid, unpatentable or
unenforceable by a decision of a governmental body or court of
competent jurisdiction, that is unappealable or unappealed within the
time allowed for appeal, and that has not been rendered unenforceable
through disclaimer or otherwise.

ARTICLE II - LICENSES, OPTIONS, KNOW-HOW AND TRADEMARKS

1. License for Canada Products and DNase.

(a) Subject to the terms and conditions of this Agreement,
GENENTECH hereby grants to ROCHE a sole and exclusive right and
license under

<PAGE> 13
GENENTECH's Patents, including the right to sublicense others with
GENENTECH's prior consent, which consent shall not be unreasonably
withheld, to register, use, sell and market (including the right to
detail and promote) Canada Products in Canada and DNase in the Roche
Territory.

(b) Subject to the terms and conditions of this Agreement,
GENENTECH hereby grants to ROCHE a sole and exclusive right and
license under GENENTECH's Patents, including the right to sublicense
others with GENENTECH's prior consent, which consent shall not be
unreasonably withheld, for each Canada Product in Canada and DNase in
the Roche Territory, dependent on the Parties' mutual agreement as to
whether GENENTECH will supply Vialed Product or Bulk Product (i) to
make and/or have made Finished Product from Vialed Product or (ii) to
make and/or have made Vialed Product from Bulk Product.

2. Option for License for Other Products.

(a) Subject to the terms and conditions of this Agreement,
GENENTECH hereby grants to ROCHE an option on a Product-by-Product
basis, for a sole and exclusive (to the extent available) right and
license in the Roche Territory under GENENTECH's Patents and, to the
extent sublicenseable by GENENTECH, patents of third parties licensed
to GENENTECH, including where available the right to sublicense others
with GENENTECH's prior consent, which consent shall not be
unreasonably withheld, to register, use, sell and market (including
the right to detail and promote) each Genentech Product and, subject
to the terms and conditions of the relevant license agreement,
In-Licensed Product and IDEC Product or Scios Product. Such option
shall be exercisable only once for each Product.

(b) Subject to the terms and conditions of this Agreement,
GENENTECH hereby grants to ROCHE, an option, exercisable only once for
each Product, for a sole and exclusive (to the extent available) right
and license in the Roche Territory, under GENENTECH's Patents and, to
the extent sublicenseable by GENENTECH, patents of third parties
licensed to GENENTECH, including where available, the right to
sublicense others with GENENTECH's prior consent, which consent shall
not be unreasonably withheld, for Genentech Product and, subject to
the terms and conditions of the relevant license agreement,
In-Licensed Product and IDEC Product to the extent GENENTECH is
contractually able to do so under the IDEC Agreement and to Scios
Product to the extent GENENTECH is contractually able to do so under
the Scios Nova Agreement, to make Vialed Product from Bulk Product.
Such option shall be exercisable only once for each Product.

<PAGE> 14

(c) The options described above may be exercised earlier than
the time periods described if the Parties mutually agree. The options
described above shall expire ten (10) years from the Effective Date.

(d) The foregoing notwithstanding, if at any time prior to the
completion of the first Phase II Completion Date investigating a
Genentech Product or In-Licensed Product, Genentech decides to
discontinue sole development of such a Product and to license a third
party the rights to that Product, that Product shall be subject to the
provisions of Section 3.07 of the Governance Agreement and shall no
longer be subject to the provisions of this Agreement.

3. Exercise of Option for License for Other Products.

(a) Upon the occurrence of the Phase II Completion Date for a
GENENTECH Product or an In-Licensed Product, GENENTECH shall so notify
ROCHE's primary contact on the Commercialization Committee
established in Article III. In connection with such notice, GENENTECH
shall provide ROCHE with reasonable summary information regarding the
Product including results of preclinical and clinical studies. Within
thirty (30) days of such notification, the Commercialization Committee
shall meet to review the results of such Trial and any other
reasonable information developed by or possessed by GENENTECH
regarding that Product which ROCHE may request. Within thirty (30)
days of the commencement of such meeting, ROCHE shall either exercise
in writing its option for a license for such Product under Section 2
of this Article II or if ROCHE fails to so exercise, it shall be
deemed to have irrevocably waived the option. If ROCHE waives its
option for a license for such Product under Section 2 of this Article
II, GENENTECH thereafter shall be free to develop, make, have made,
use, sell and market (including the right to promote and detail) such
Product in the Roche Territory in any manner it chooses including by
means of a license to one or more third parties and free of any
restrictions under Section 3.07 of the Governance Agreement.

(b) (1) Within forty-five (45) days of the Effective Date of
this Agreement, the Commercialization Committee shall meet to review
summary results of clinical data for any Genentech Product and
In-Licensed Product for which there has been a Phase II Completion
Date of the Effective Date and for IDEC Product and Scios Product.
Within ninety (90) days of the commencement of such meeting, ROCHE
shall either exercise in writing its option for a license for each
such Product under Section 2 of this Article II or if ROCHE fails to
so exercise, it shall be deemed to have irrevocably waived such
option. If ROCHE waives its option for a license for a Product under
Section 2 of this Article II, GENENTECH shall be free to develop,
make, have made, use, sell and market (including the right to detail
and promote) such Product in the Roche Territory in any manner it

<PAGE> 15
chooses including by means of a license to one or more third parties
and free of any restrictions of Section 3.07 of the Governance
Agreement. If ROCHE waives its option for a license for either IDEC
Product or Scios Product pursuant to the foregoing, ROCHE shall have
no further rights to any IDEC Product or Scios Product, as the case
may be.

(2) The right of ROCHE to any license hereunder to IDEC
Product is subject to ROCHE's agreement to comply with all appropriate
obligations of the IDEC Agreement for IDEC Product and any required
consent of IDEC. The right of ROCHE to any license hereunder to Scios
Product is subject to ROCHE's agreement to comply with all appropriate
obligations of the Scios Nova Agreement for Scios Product and any
required consent of Scios Nova.

(c) Any information provided by GENENTECH to ROCHE for its
evaluation with respect to exercising an option under this Article
shall be returned to GENENTECH promptly if ROCHE not to exercise such
option and such information shall be subject to the provisions of
Article X below.

4. License to Know-How and Option for License to Know-How.

(a) Subject to the terms and conditions of this Agreement,
GENENTECH hereby grants to ROCHE, for the term of this Agreement, a
right and license, including the right to sublicense others with
GENENTECH's prior consent, which consent shall not be unreasonably
withheld, to use in Canada, GENENTECH Know-How specifically related to
Canada Products and to use in the Roche Territory, GENENTECH Know-How
specifically related to DNase (i) to register, use, sell and market
(Including the right to detail and promote) such Products; and
dependent on the Parties' mutual agreement as to whether GENENTECH
will supply Vialed Product or Bulk Product (ii) to make and/or have
made Finished Product from Vialed Product, or (iii) to make and/or
have made Vialed Product from Bulk Product.

(b) Subject to the terms and conditions of this Agreement and
the exercise of the option for such Product under Section 2 of this
Article II, GENENTECH hereby grants to ROCHE, for the term of this
Agreement, a right and license, including the right to sublicense
others with GENENTECH's prior consent, which consent shall not be
unreasonably withheld, to use in the Roche Territory, GENENTECH
Know-How specifically related to GENENTECH Products, In-Licensed
Products, Scios Product or IDEC Product (i) to register, use, sell and
market (Including the right to detail and promote) such Product; and
dependent on the Parties mutual agreement as to whether GENENTECH will
supply Vialed Product or Bulk Product (ii) to make and/or have made
such Finished Product from such Vialed Product or (iii) to make
and/or have made such Vialed Product from such Bulk Product.

<PAGE> 16

5. License to Trademark and Option for License to Trademark.

(a) Subject to the terms and conditions of this Agreement,
GENENTECH grants to ROCHE a sole and exclusive right and license to
use the appropriate Trademarks in Canada for Canada Products and in
the Roche Territory for DNase including the right to sublicense others
with GENENTECH's prior consent, which consent shall not be
unreasonably withheld. ROCHE and its Affiliates shall use the
appropriate Trademarks for such Products in Canada in the case of
Canada Products or in each country in the Roche Territory in the case
of DNase unless the Trademark is not available in such country. If
the appropriate Trademark for such Product is not available in such
country, ROCHE shall obtain GENENTECH's prior consent before using any
other trademark for such Product in such country, which consent shall
not be unreasonably withheld.

(b) Subject to the terms and conditions of this Agreement and
the exercise of the option for a Product under Section 2 of this
Article II, GENENTECH grants to ROCHE a sole and exclusive right and
license to use the Trademark for such Product in the Roche Territory
including the right to sublicense others with GENENTECH's prior
consent, which consent shall not be unreasonably withheld. ROCHE and
its Affiliates shall use the Trademark for such Product in each
country in the Roche Territory unless the Trademark is not available
in such country. If the Trademark for such Product is not available
in such country, ROCHE shall obtain GENENTECH's prior consent before
using any other trademark for the Product in such country, which
consent shall not be unreasonably withheld.

6. Standard of Effort. ROCHE acknowledges that for those Products
licensed to ROCHE hereunder, GENENTECH's sole opportunity to receive
maximum potential revenue from sales of those Products in each country
in the Roche Territory is solely dependent on ROCHE's efforts and that
a failure to provide the level of effort specified herein is likely to
have a significant adverse effect on potential revenues to GENENTECH
which would be inimical to the purposes of this Agreement.
Therefore, the exclusive licenses granted to ROCHE under this Article
shall be conditioned on ROCHE using its "best efforts" in each country
in the Roche Territory to take all steps necessary in an expeditious
fashion to obtain regulatory approval to sell the Product and
thereafter to sell the Product in a manner so as to maximize its
revenue potential. "Best efforts" shall mean efforts, including the
commitment of all necessary personnel and financial resources, in a
timeframe equivalent to that used by ROCHE to develop, promote and
sell ROCHE's major pharmaceutical products.

7. Reporting on Commercialization Progress. ROCHE shall keep GENENTECH
informed of the progress of its efforts to develop, register, and
market the

<PAGE> 17

Product licensed by it hereunder in each country in the Roche
Territory. Such progress reports shall be made annually by November
30th of each year. For each country listed on Appendix B hereto, such
progress reports shall specifically include information on --

(a) the status of, and plans for, clinical trials needed for
registration of the Product,

(b) the status of, and plans for, registering the Product
for sale, and

(d) the Net Sales of the Product included in the business
plan for the Product; and

(e) summaries of promotional plans and market research.

In addition, GENENTECH may make reasonable requests for, and ROCHE
shall provide, specific information about efforts to register and sell
the Products in countries in the Roche Territory other than those set
forth in Appendix B and about the aggregate Net Sales budgeted or
included in the business plan for Products for all countries in the
Roche Territory.

8. License to GENENTECH. Subject to the terms and conditions of this
Agreement, ROCHE hereby grants, and shall cause Hoffmann-La Roche,
Inc. to grant, to GENENTECH in the United States, a perpetual
royalty-free, nonexclusive right and license under ROCHE's Patents and
Know-How, to register, make, have made, use, sell and market
(including the right to promote) in the United States

(a) the Canada Products and DNase; and

(b) any Genentech Product, In-Licensed Product, IDEC Product
or Scios Product for which ROCHE exercises its option under Section 2
of this Article II.

ROCHE shall not grant to any third party, and ROCHE shall cause
Hoffmann-La Roche, Inc. not to grant to any third party, any license
under ROCHE's Patents and Know-How in the United States to register,
make, have made, use, sell and market (including the right to promote)
any Product which is described in subsection (a) or (b) of this
Section 8 without GENENTECH's prior written consent.

<PAGE> 18

9. Future In-Licenses. With respect to future prospective in-licenses
from third parties where GENENTECH is the prospective licensee and the
license involves Products with rights in the Roche Territory, the
Parties shall discuss in advance the nature of reasonable terms for
the Roche Territory. Any final license agreement with respect to the
Roche Territory shall be on terms mutually acceptable to both Parties,
and the Parties shall discuss and agree to a worldwide development and
commercialization strategy with respect to such a Product.

10. IIbIIIa and Ras Farnesyltransferase Collaborations. With respect to
the Parties current collaborations on IIbIIIa antagonists and ras
farnesyltransferase inhibitors, GENENTECH will have the sole right in
the United States and ROCHE shall have the sole right in the Roche
Territory to register, use, sell and market (including the right to
detail and promote) all products resulting from such collaborations.
All research efforts for these products shall be shared in an equal
manner. GENENTECH's Development Costs for such products shall be
subject to the provisions of Section 2 of Article IV. Neither Party
shall pay the other royalties for sales of any of these products in
its Territory. Subsequent to the Effective Date, the Parties shall
revise the existing Agreements relating to these collaborations to
make the terms of those Agreements consistent with this Section 10 of
Article II.

ARTICLE III - COMMERCIALIZATION COMMITTEES

1. Commercialization Committee. Within fifteen (15) days of the
Effective Date, the Parties shall form a Commercialization Committee.
The Commercialization Committee shall be the (a) forum for
communicating to ROCHE information about Products, including the
results for a Product as of the Phase II Completion Date as well as
any other reasonable information about that Product in GENENTECH's
possession at the time of such communication which is specifically
relevant to ROCHE's decision whether to exercise its option for that
Product (e.g., cost information, market research, etc.) and (b) for
communicating to GENENTECH information about Products for which ROCHE
has a license. The Commercialization Committee shall meet initially
with respect to a Product when that Product enters a Phase I safety
trial or earlier if the Parties mutually agree. The Commercialization
Committee shall also be the forum for ROCHE's communications, pursuant
to Section 7 of Article II, above about its development and sales and
marketing efforts for each Product for which it has a license
hereunder. The Commercialization Committee shall be comprised of five
nominees of ROCHE and five nominees of GENENTECH appointed by their
respective organizations. The chairman of the Commercialization
Committee will be designated by GENENTECH. The chairman will call and
chair meetings of

<PAGE> 19

the Commercialization Committee which will be held at GENENTECH's
facilities unless mutually agreed otherwise or by videoconference
where feasible.

2. Management Committee. Within ninety (90) days of the Effective Date,
the Parties shall form a Management Committee comprised of three
representatives from ROCHE, including its Chief Operating Officer or
Head of the Pharma Division and three representatives from GENENTECH,
including its Chief Executive Officer or Chief Operating Officer. The
Management Committee shall meet at least once per year to review the
development and commercialization status of all Products which are
then subject to this Agreement and any other matters brought to the
Committee's attention by the Commercialization Committee or the
Finance Committee.

3. Development Committee. Within sixty (60) days of the Effective Date,
the Parties shall form a Development Committee comprised of three
representatives from ROCHE and three representatives from GENENTECH.
The Development Committee shall meet on an as needed basis to discuss
the development of Products for which ROCHE has exercised its option
under Article II. The Development Committee shall direct and
coordinate development efforts on a global basis for a Product
consistent with development of the Product in the United States.
GENENTECH will lead the planning of world-wide development strategies
for the Product. All decisions related to GENENTECH's development
efforts for a Product and GENENTECH's filings for approval of a
Registration shall be solely those of GENENTECH.

4. Finance Committee. Within sixty (60) days of the Effective Date, the
Parties shall form a Finance Committee comprised of two
representatives from ROCHE and two representatives from GENENTECH.
The Finance Committee shall meet on an as needed basis to review and
discuss financial activities and issues relating to this Agreement.

ARTICLE IV - DEVELOPMENT AND MARKETING

1. Development. GENENTECH shall be solely responsible for, and have full
autonomy with respect to, the development of its Products in the
United States and in the Roche Territory with respect to Products not
licensed to ROCHE hereunder. Subject to the terms and conditions of
this Agreement, ROCHE shall be solely responsible for the development
in the Roche Territory of those Products for which it has been granted
a license under Section 2 of Article II and has exercised its option
for a license under Section 3 of Article II.

<PAGE> 20

2. Development Costs. Except as noted below, GENENTECH shall be
reimbursed by ROCHE for fifty percent (50%) of all of GENENTECH's
Development Costs incurred in connection with any development of a
Product for which ROCHE has been granted a license under Section 2 of
Article II and has exercised its option for a license under Section 3
of Article II or which is subject to Section 10 of Article II. With
respect to Canada Products, GENENTECH shall be reimbursed by ROCHE for
ten percent (10%) of all of GENENTECH's Development Costs incurred in
connection with any development of a Product for which ROCHE has been
granted a license under Section 1 of Article II. The determination of
the amount of the Development Costs and the timing and mechanism for
payment thereof is set forth in the Financial Appendix.

3. Marketing. GENENTECH shall be solely responsible for and have full
autonomy with respect to the marketing of its products in the United
States and in the Roche Territory with respect to Products not
licensed to ROCHE hereunder. Subject to the terms and conditions of
this Agreement, ROCHE shall be solely responsible for the marketing in
the Roche Territory of those Products for which it has been granted a
license under Section 2 of Article II and has exercised its option for
a license under Section 3 of Article II and for Canada Products and
DNase.

ARTICLE V - PRODUCTION AND SUPPLY

1. Production of Product. Except as provided in Sections 6, 7 and 8 of
this Article V, GENENTECH shall be responsible for the manufacture of
Clinical Requirements and Commercial Requirements of Bulk Product,
Vialed Product or Finished Product, as the case may be, for which
ROCHE has a license, for the Roche Territory.

2. Supply of Clinical Requirements. Except as provided in Sections 5, 6,
7 and 8 of this Article, GENENTECH shall use its best efforts to
supply ROCHE with ROCHE's Clinical Requirements pursuant to a mutually
agreeable and reasonable production schedule. GENENTECH shall not be
obligated to supply Clinical Requirements to ROCHE other than in
accordance with the quantities mutually agreed to and at the
approximate dates of delivery mutually agreed to. All transportation
and packing and similar costs shall be borne by ROCHE. Title and risk
of loss shall pass to ROCHE upon delivery by GENENTECH FOB origin.
The Parties shall agree on specifications for the Clinical
Requirements, and the Clinical Requirements delivered by GENENTECH
shall meet those specifications. GENENTECH shall not favor the supply
of its own clinical requirements of a Product to it or its other
licensees over ROCHE's Clinical Requirements.

<PAGE> 21

3. Supply of Commercial Requirements. Except as provided in Sections 5,
6, 7 and 8 of this Article, GENENTECH shall supply ROCHE with ROCHE's
Commercial Requirements pursuant to a mutually agreeable and
reasonable production schedule for ROCHE's Commercial Requirements,
and ROCHE agrees to purchase its Commercial Requirements from
GENENTECH. GENENTECH shall not be obligated to supply Commercial
Requirements to ROCHE other than in accordance with the quantities
mutually agreed to and at the approximate dates of delivery mutually
agreed to. All transportation and packing and similar costs shall be
borne by ROCHE. Title and risk of loss shall pass to ROCHE upon
delivery by GENENTECH to ROCHE, FOB origin. The Parties shall agree
on specifications and procedures for the Commercial Requirements, and
the Commercial Requirements delivered by GENENTECH shall meet those
specifications and procedures. GENENTECH shall not favor the supply
of its own commercial requirements of Product to it or its other
licensees over ROCHE's Commercial Requirements.

4. Supply Agreement.

(a) Except as provided in Sections 5, 6, 7 and 8 of this
Article, at the time that ROCHE exercises its option for a license for
a Product under Section 2 of Article II, the Parties agree to
negotiate and enter into a definitive Supply Agreement for such
Product on a basis consistent with this Article and the other terms
and conditions of this Agreement.

(b) For Canada Products other than DNase, the Parties will
negotiate and enter into a Supply Agreement consistent with this
Article V and the other terms and conditions of this Agreement.

5. Amendments to DNase Supply Agreement. (a) GENENTECH's obligation to
supply ROCHE with ROCHE's Clinical Requirements and Commercial
Requirements of DNase in the Roche Territory, and ROCHE's agreement to
purchase such Requirements from GENENTECH shall be governed by the
Supply Agreement Between F. Hoffmann-La Roche Ltd, Genentech, Inc. and
Genentech Europe Limited Regarding DNase in Collaborative Countries,
Rest of World and Japan ("DNase Supply Agreement") as amended by this
Section 5. The DNase Supply Agreement is amended as follows.

(a) The definition of Collaborative Countries is amended to
include Canada by striking Section 4 of Article I in its entirety and
inserting in lieu thereof:

<PAGE> 22

"4. The term "COLLABORATIVE COUNTRIES" shall include those
countries listed in Appendix D of the Collaborative
Agreement and Canada.".

(b) The definition of Rest of World Countries is amended to
include Japan by striking Section 19 of Article I and inserting in
lieu thereof:

"19. The term "ROW COUNTRIES" shall include all countries
except the Collaborative Countries and the United
States.".

(c) The inclusion of Canada and Japan in the DNase Supply
Agreement and its effect on the provisions allocating DNase in the
event of a product shortfall shall be addressed by striking Section
9(c)(i) of Article II and inserting in lieu thereof:

"(i) the United States,".

(d) In light of the changed marketing arrangement for DNase
and to provide for an arm's length margin on GENENTECH's manufacture
of DNase, Section 1 of Article III is stricken in its entirety and a
new Section 1 is inserted in lieu thereof:

"1. Payment for Clinical Requirements and Commercial
Requirements. (a) All Vialed Product for Clinical
Requirements shall be supplied by GENENTECH EUROPE to
ROCHE at GENENTECH EUROPE's Fully Burdened Manufacturing
Cost.

(b) All Bulk Product for Commercial
Requirements shall be supplied by GENENTECH EUROPE to
ROCHE at GENENTECH EUROPE's Fully Burdened
Manufacturing Cost plus a margin of twenty percent
(20%) on such Cost and all Vialed Product for
Commercial Requirements shall be supplied by
GENENTECH EUROPE to ROCHE at GENENTECH EUROPE's Fully
Burdened Manufacturing Cost plus a margin of twenty
percent (20%) and --

(1) in the case of Commercial
Requirements for use in a Collaborative
Country, such other amounts as specified in
Section 3 of Article VI of the Agreement
Between Genentech, Inc. and F. Hoffmann-La
Roche Ltd Regarding the Commercialization of
Genentech's Products in the Roche Territory;
or

<PAGE> 23

(2) in the case of Commercial
Requirements for use in a ROW country, such
other amounts as specified in Section 3 of
Article VI of the Agreement Between
Genentech, Inc. and F. Hoffmann-La Roche Ltd
Regarding the Commercialization of
Genentech's Products in the Roche Territory."

(e) In light of the changed marketing arrangement for DNase
and to extend GENENTECH's supply obligation to reflect such change,
Section 1 of Article IV is stricken in its entirety and a new Section
1 is inserted in lieu thereof:

"1. Term. (a) This Agreement shall enter into force and
effect as of February 11, 1992.

(b) The term of GENENTECH EUROPE's
obligation to supply ROCHE with Product and ROCHE's
obligation to purchase Product from GENENTECH EUROPE
for use in each of the Collaborative Countries and
ROW Countries shall continue only for so long as
ROCHE is obligated to pay royalties under Section 3
of Article VI of the Agreement Between Genentech, Inc
and F. Hoffmann-La Roche Ltd Regarding the
Commercialization of Genentech's Products in the
Roche Territory; provided, however, that when such
term ends with respect to a Collaborative or ROW
Country, ROCHE and GENENTECH EUROPE shall discuss in
good faith terms and conditions for a continuing
supply of Product from GENENTECH EUROPE to ROCHE at a
world market price for use and sale in the Roche
Territory.".

6. Supply of Scios Product. If ROCHE exercises its option for Scios
Product under Section 2 of Article II of this Agreement, Scios Product
will be supplied by Scios Nova (or a third party contractor of Scios
Nova) to ROCHE, and ROCHE agrees to purchase such Product from Scios
Nova (or a third party contractor of Scios Nova), under the terms and
conditions specified in the Scios Nova Agreement and such other terms
and conditions as may be agreed to by GENENTECH and Scios Nova in a
supply agreement yet to be negotiated. In the event that ROCHE has
exercised its option for a license for the Scios Product prior to the
negotiation and execution of such supply agreement, GENENTECH shall
keep ROCHE fully informed of the negotiations regarding such supply
agreement and shall invite a representative of ROCHE to participate in
such discussions.

<PAGE> 24

7. Supply of IDEC Product. If ROCHE exercises its option for IDEC
Product under Section 2 of Article II of this Agreement, IDEC Product
will be supplied in a manner consistent with the IDEC Agreement.

8. Supply of In-Licensed Product. If ROCHE exercises its option for a
license for an In-Licensed Product under Section 2 of Article II of
this Agreement and if the terms and conditions of the agreement
between GENENTECH and the licensor covering the manufacture and supply
of such In-Licensed Product provide that such licensor (or a third
party contractor of such licensor) will be responsible for the
manufacture and supply of such In-Licensed Product, then such
In-Licensed Product will be supplied by such licensor (or a third
party contractor of such licensor) to ROCHE, and ROCHE agrees to
purchase such In-Licensed Product from such licensor (or a third party
contractor of such licensor) under the terms and conditions specified
in the agreement between GENENTECH and the licensor. In the event
that ROCHE has exercised its option for such In-Licensed Product and a
supply agreement has yet to be negotiated between Genentech and the
licensor of such In-Licensed Product, GENENTECH shall keep ROCHE fully
informed of the negotiations regarding such supply agreement and shall
invite a representative of ROCHE to participate in discussions
regarding a supply agreement.

9. Supply of Small Molecule Product. If ROCHE exercises its option for a
license for a Product under Section 2 of Article II of this Agreement
and if such Product is a Small Molecule Product, ROCHE shall be
responsible for the manufacture and supply of GENENTECH's Clinical
Requirements and Commercial Requirements of such Small Molecule
Product. In such case, the terms and conditions herein applicable to
GENENTECH when it is manufacturing and supplying Product to ROCHE
shall be equally applicable to ROCHE when it is manufacturing and
supplying Small Molecule Product to GENENTECH including, without
limitation, those terms and conditions set forth in Sections 2, 3, 4,
9 and 10 of this Article and the Section 1 of Article VI.

10. Manufacturing Process and Facilities..

(a) Except as provided in Sections 6, 7, 8 and 9 of this
Article, GENENTECH shall be solely responsible for the development of
a manufacturing process and facilities for Products for which ROCHE
has a license except Small Molecule Products. The fully burdened
costs associated with the development of a manufacturing process
specifically for such Product shall be considered part of the
Development Costs and shall be shared as set forth in Section 3 of the
Financial Appendix.

<PAGE> 25

(b) ROCHE shall be solely responsible for the development of a
manufacturing process and facilities for Small Molecule Products for
which ROCHE has a license. The fully burdened costs associated with
the development of a manufacturing process specifically for such Small
Molecule Product shall be shared by the Parties in proportion to their
expected share of the worldwide market, in terms of revenues, for the
Small Molecule Product for their Territory. For example, if
GENENTECH's expected proportionate share in terms of revenues of the
worldwide market is 33%, it shall bear 33% of the expense of
developing a manufacturing process for that Small Molecule Product.

11. Additional Capital Requirements. Except as provided in Sections 6, 7
and 8 of this Article, if GENENTECH or ROCHE determines that additional
dedicated manufacturing equipment, expansion or adaption of the then
existing manufacturing facilities or manufacturing equipment, or
construction of an additional manufacturing facility is needed to
manufacture a Product to meet Clinical Requirements or Commercial
Requirements for the other Party as provided herein, the manufacturing
Party shall be solely responsible for the capital costs associated with
such project.

12. Term of Supply Obligation. Except as provided in Sections 5, 6, 7 and
8 of this Article, each Party's obligation to provide the other Party
with Product for use and sale in that Party's Territory shall continue
only for so long as that Party is obligated to pay royalties hereunder
for such Product. Thereafter ROCHE and GENENTECH shall discuss in
good faith terms and conditions for a continuing supply of such
Product from the manufacturing Party to other Party at a mutually
agreeable market price for use and sale in that Party's Territory.

ARTICLE VI - PAYMENTS, MARGINS AND ROYALTIES

1. Payment for Product Requirements.

(a) Except for IDEC Product and Scios Product, unless the
terms and conditions applicable to an In-Licensed Product provide
otherwise, all Clinical Requirements shall be supplied by one Party to
the other at the manufacturing Party's Fully Burdened Manufacturing
Cost.

(b) Except for IDEC Product and Scios Product, unless the
terms and conditions applicable to an In-Licensed Product provide
otherwise, all Commercial Requirements in the form of Vialed Product
shall be supplied by GENENTECH to ROCHE at GENENTECH's Fully Burdened
Manufacturing Cost plus a margin of twenty (20%) on such Cost. Except
for IDEC Product and Scios

<PAGE> 26

Product, unless the terms and conditions applicable to an In-Licensed
Product provide otherwise, if ROCHE is producing Vialed Product
pursuant to the licenses granted in Sections 1 and 3 of Article II,
then Bulk Product, necessary for the manufacture of Vialed Product and
Finished Product for Commercial Requirements outside the United
States, shall be supplied by GENENTECH to ROCHE at GENENTECH's Fully
Burdened Manufacturing Cost plus a margin of twenty (20%) on such
Cost.

2. Invoices and Method of Payment of GENENTECH's Fully Burdened
Manufacturing Cost and Margin. GENENTECH shall invoice ROCHE for each
shipment of Bulk Product or Vialed Product, as the case may be, and
ROCHE shall pay such invoice on the terms and conditions set forth in
the Financial Appendix.

3. Royalties on Sale of DNase.

(a) ROCHE shall pay GENENTECH a royalty of twenty percent
(20%) on Net Sales of DNase in each of the Collaborative Countries and
Canada.

(b) ROCHE shall pay GENENTECH a royalty of twelve and
one-half percent (12.5%) on the first $100 million in aggregate Net
Sales of DNase in countries other than the Collaborative Countries and
Canada and thereafter a royalty of fifteen percent (15%) on aggregate
Net Sales of DNase in such countries in excess of $100 million.

(c) The payment of royalties on DNase Net Sales in each
country of the Roche Territory in (a) and (b) above shall continue
until the latter to occur of (i) the last expiration of a Valid Claim
of a GENENTECH Patent which the sale of that Product would infringe in
that country but for the license granted herein or (ii) for a period
of 25 years from the date of First Commercial Introduction in that
country.

4. Royalties and Other Payments on Sale of Canada Products.

(a) ROCHE shall pay GENENTECH a royalty of twenty percent
(20%) on Net Sales of each Canada Product. The payment of royalties
on each Canada Product's Net Sales shall continue until the latter to
occur of (i) the last expiration of a Valid Claim of a GENENTECH
Patent which the sale of that Product would infringe in that country
but for the license granted herein or (ii) a period of 25 years from
the Effective Date.

(b) For each annual increase in Net Sales of Activase in
Canada in excess of 110% of 1994 Net Sales of Activase in Canada,
ROCHE agrees to

<PAGE> 27

make an additional payment to GENENTECH of ten percent (10%) of Net
Sales of Activase in Canada for that year in excess of 1994 Net Sales.
In no event shall the total of such annual payments exceed $27
million.

5. Royalties on Sale of Genentech Products. ROCHE shall pay GENENTECH a
royalty of twelve and one-half percent (12.5%) on the first $100
million in aggregate Net Sales of each Genentech Product in the Roche
Territory and a royalty of fifteen percent (15%) on aggregate Net
Sales of such Genentech Product in excess of $100 million. The
payment of royalties on each GENENTECH Product's Net Sales in each
country of the Roche Territory shall continue until the latter to
occur of (i) the last expiration of a Valid Claim of a GENENTECH
Patent which the sale of that Product would infringe in that country
but for the license granted herein or (ii) a period of 25 years from
the date of First Commercial Introduction in that country.

6. Royalties and Other Payments on Sale of Scios Product.

(a) ROCHE shall pay GENENTECH a royalty of twenty percent
(20%) on annual Net Sales of Scios Product in each country of the
Roche Territory for so long as GENENTECH is paying a royalty to Scios
Nova under the Scios Nova Agreement in that country. Thereafter,
ROCHE shall pay GENENTECH a royalty on Net Sales in that country of
ten percent (10%) for aggregate annual Net Sales of up to and
including $150 million in all countries in that year and of eight
percent (8%) for aggregate annual Net Sales of over $150 million in
all countries in that year, and such royalties shall be payable with
respect to each country until the latter to occur of (i) the last
expiration of a Valid Claim of a GENENTECH Patent which the sale of
that Product would infringe in that country but for the license
granted herein or (ii) a period of 25 years from the date of First
Commercial Introduction in that country.

(b) If ROCHE exercises its option pursuant to Section 2
of Article II, within thirty (30) days thereafter ROCHE shall pay
GENENTECH a one time fee of $25,000,000 in lieu of paying one-half-of
the Development Costs for Scios Product. Such amount assumes that a
second Phase III Trial will be required for Registration of Scios
Product in the United States; if only one Phase III Trial is
necessary, the Parties will negotiate a higher one time fee.
GENENTECH is obligated to make certain one time milestone payments to
Scios Nova, as set forth in the Scios Nova Agreement, upon Net Sales
of $150 million in the Licensed Territory in any 12 month period
(either $15 million or $7.5 million) or upon Regulatory Approval in
Japan (either $5 million or $2.5 million) as those terms are used in
the Scios Nova Agreement. ROCHE shall promptly reimburse GENENTECH
for each such milestone GENENTECH pays to Scios Nova.

22
<PAGE> 28

(c) With respect to Canada, the Scios Nova Agreement
provides that GENENTECH and Scios Nova will copromote Scios Product as
part of a copromotion arrangement for the United States and Canada and
that GENENTECH and Scios Nova will share Operating Profits and Losses
on the sale of Scios Product as part of an arrangement to share
Operating Profits and Losses for the United States and Canada.
ROCHE's rights with respect to Scios Product are subject to such
obligations regarding copromotion in Canada and the sharing of
Operating Profits and Losses with respect to Canada.

7. Royalties and Other Payments on Sale of IDEC Product.

(a) ROCHE shall pay GENENTECH a royalty of twenty percent
(20%) on Net Sales of IDEC Product in each country of the Roche
Territory for so long as GENENTECH is paying a royalty to IDEC under
the IDEC Agreement in that country. Thereafter, ROCHE shall pay
GENENTECH a royalty on Net Sales in that country of ten percent (10%)
for aggregate annual Net Sales of up to and including $75 million in
all countries in that year and eight percent (8%) for aggregate annual
Net Sales over $75 million in all countries in that year, and such
royalties shall be payable with respect to each country until the
latter to occur of (i) the last expiration of a Valid Claim of a
GENENTECH Patent which the sale of that Product would infringe in that
country but for the license granted herein or (ii) a period of 25
years from the date of First Commercial Introduction in that country.

(b) If ROCHE exercises its option pursuant to Section 2
of Article II, within thirty (30) days thereafter ROCHE shall pay
GENENTECH a one time fee of $10 million in lieu of paying one-half of
the Development Costs for IDEC Product incurred as of the Effective
Date. Development Costs incurred after the Effective Date shall be
subject to Section 2 of Article IV. In addition, GENENTECH is
obligated to make certain one time milestone payments to IDEC, as set
forth in the IDEC Agreement, upon Regulatory Approval in the First
Major European Country ($10 million) and upon the Patent Milestone
Event ($2.5 million) as those terms are used in the IDEC Agreement.
ROCHE shall promptly reimburse GENENTECH for each such milestone which
GENENTECH pays to IDEC.

(c) GENENTECH has an option for a co-exclusive license
for rights to IDEC Product in Asia for a payment of $2.5 million if
such co-exclusive license becomes available to GENENTECH. If ROCHE
exercises its option for a license for the IDEC Product under Section
2 of Article II and if ROCHE wishes GENENTECH to exercise the option
for a co-exclusive license to IDEC Product in Asia should such license
become available to GENENTECH, then ROCHE

23
<PAGE> 29
shall provide written notice of such to GENENTECH at the time of
exercise of its option and pay $2.5 million to GENENTECH in
conjunction therewith.

(d) With respect to Canada, the IDEC Agreement provides
that GENENTECH and IDEC will copromote IDEC Product as part of a
copromotion arrangement for the United States and Canada and that
GENENTECH and IDEC will share Operating Profits and Losses on the sale
of IDEC Product as part of an arrangement to share Operating Profits
and Losses for the United States and Canada. ROCHE's rights with
respect to IDEC Product are subject to such obligations regarding
copromotion in Canada and the sharing of Operating Profits and Losses
with respect to Canada.

8. Royalties and Other Payments on Sale of In-Licensed Product.

(a) If ROCHE exercises its option under Article II for an
In-Licensed Product, the Parties will negotiate mutually agreeable
financial terms for payments by ROCHE to GENENTECH.

(b) In general, if ROCHE exercises its option under Article II
for an In-Licensed Product, ROCHE agrees to pay to GENENTECH a license
fee or similar acquisition fee for rights in the Roche Territory and
any milestone or similar payments related to the achievement of
progress either in development, registration or sales of an
In-Licensed Product or for other achievements in the Roche Territory.

(c) The Parties acknowledge that the specific terms and
conditions related to an In-Licensed Product cannot be anticipated and
agree to negotiate in good faith the allocation of responsibility for
such terms and conditions in a fair manner reflecting the benefit to
be received by each from the In-Licensed Product.

9. Calculation of Aggregate Net Sales. The calculation of the aggregate
Net Sales for determination of the applicable royalty percentage shall
be that set forth in the Financial Appendix.

10. Timing of Royalty Payments. Payment of amounts specified in this
Article shall be made within ninety (90) days of the end of each
calendar quarter in which the sale was made except where payments are
made to GENENTECH in consideration of royalty payments to be made to
Scios Nova or IDEC in which case those payments shall be made within
sixty (60) days of the end of each calendar quarter. For purposes of
determining when a sale of a Product occurs, the sale shall be deemed
to occur when an independent third party is invoiced for the Product.
Any such payment that is not paid on or before the date such

24
<PAGE> 30
payment is due under this Agreement shall bear interest, to the extent
permitted by applicable law, at the LIBOR rate of interest as reported
by Data Stream from time to time, calculated on the number of days
such payment is delinquent. ROCHE shall make all payments hereunder
by bank wire transfer in immediately available funds to such account
as GENENTECH shall designate before such payment is due, free and
clear of any taxes, duties, levies, fees or charges, except for
withholding taxes due on behalf of GENENTECH (to the extent
applicable). ROCHE shall make any withholding payments due on behalf
of GENENTECH and shall promptly provide GENENTECH with written
documentation of any such payment sufficient to satisfy the reasonable
requirements of an appropriate tax authority with respect to an
application by GENENTECH for a foreign tax credit for such payment or
for similar treatment. At the time of remittance of each payment
described in this Article, ROCHE shall provide GENENTECH with a
statement summarizing the Net Sales of the Product in each of country
outside the United States in the reporting currency of each such
country and the rate used to convert from each such country's currency
to Swiss Francs and, in the case of the Scios Agreement and IDEC
Agreement, with such other information as those Agreements require of
GENENTECH.

11. Restrictions on Transfer of Funds.

(a) If ROCHE ships Product into a country outside the United
States for sale in that country and, at the time of shipment, such
country has legal restrictions on the transfer of funds which prevent
the prompt remittance of the part or all of the amount described in
this Article, ROCHE shall be obligated to pay such amounts in
immediately available funds to such account as GENENTECH shall
designate.

(b) If ROCHE ships Product into a country outside the United
States for sale in that country and such country subsequently imposes
legal restrictions on the transfer of funds which prevents the prompt
remittance of part or all of the amount described in this Article with
respect to that shipment of the Product in that country, ROCHE shall
be obligated to --

(i) pay such portion of such amount as
permitted by the law of such country in immediately available
funds to such account as GENENTECH shall designate, and

(ii) pay the remainder of such amount to such
account as GENENTECH shall designate in a bank in such
country.

25
<PAGE> 31

In such event, the Parties shall discuss in good faith the best means
of utilizing the funds on deposit in such country. Shipments of the
Product into such country after the imposition of legal restrictions
on the transfer of funds shall be subject to subsection (a) of this
Section.

13. Records Regarding Royalties. ROCHE agrees to keep for at least three
(3) years, records of all sales of Product on a country-by-country
basis in sufficient detail to permit GENENTECH to confirm the accuracy
of the ROCHE's calculations with respect to payment of the amounts
described in this Article. Once a year, at the request and the
expense of GENENTECH and upon at least five (5) days' prior written
notice, ROCHE shall permit its officially appointed world-wide auditor
to examine its records in a manner sufficient to report to GENENTECH
on the accuracy of ROCHE's calculations. Results of any such
examination shall be made available to both Parties. If such
examination reveals an underpayment of the amounts described in this
Article by five percent (5%) or more, ROCHE shall pay all costs of
such examination. In the event such examination concludes that
additional amounts are owed, the additional amounts shall be paid
within thirty (30) days of the date GENENTECH delivers to ROCHE such
accountant's written report so concluding. In the event such
examination concludes that there has been an overpayment with respect
to such amounts, the excess shall be credited to ROCHE against future
payment of the amounts described in this Article. This Section shall
survive any termination of royalty payments for a particular country
for a period of six (6) years.

14. Royalty for Use of Trademark. At the end of the term for the payment
of royalties as defined in this Article, ROCHE shall pay to GENENTECH
a royalty for the use of each Trademark in each country in the Roche
Territory at a rate of two percent (2%) of Net Sales by ROCHE in such
country of the Product represented by the Trademark for so long as the
Trademark is used.

ARTICLE VII - TRANSITION PROVISIONS

1. General. The Parties intend to effect a transfer of the operations of
Genentech Canada Ltd, Genentech Europe Limited and Genentech Ltd.
(Japan) to ROCHE in the manner described above and in the subsequent
provisions of this Article VII. The Parties acknowledge that a number
of actions must be taken to effect such transfers in an orderly manner
so as to minimize disruption to those operations and attendant costs
and maximize revenue receipt where such operations are generating or
involved in generating revenue. The Parties acknowledge that while
they will act expeditiously to take all such appropriate actions, a
substantial period is likely to be required to complete all of such
actions. Therefore, the Parties agree to effect such a transfer as
quickly as

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<PAGE> 32
possible but no later than January 1, 1996 and the provisions relating
to such a transfer, including license grants, supply obligation, like
relating to Canada, shall be effective when such transfer is completed
and at a date to be mutually agreed to.

2. Personnel of Genentech Canada Ltd., Genentech Europe Limited and
Genentech Ltd. (Japan). The Parties shall discuss and mutually agree
with respect to the continuing status of the employees of Genentech
Canada Ltd., Genentech Europe Limited and Genentech Ltd. (Japan).

3. Records and Property Leases.

(a) Within ninety (90) days of the Effective Date of this
Agreement, copies of the records of Genentech Canada Ltd., Genentech
Europe Limited and Genentech Ltd. (Japan) relating to their operations
and needed by ROCHE to assume those operations shall be made available
to ROCHE.

(b) Within ninety (90) days of the Effective Date of this
Agreement, information regarding the real estate property leases of
Genentech Canada Ltd., Genentech Europe Limited and Genentech Ltd.
(Japan) shall be made available to ROCHE and such leases shall
promptly be assumed by ROCHE as well as any other liabilities of these
entities which have arisen in the ordinary course of business except
for a line of credit to Genentech Canada Ltd. used to purchase
Activase rights.

(c) Within ninety (90) days of the Effective Date of this
Agreement, information regarding office equipment and the like to
ROCHE. Within thirty (30) days after such information is made
available ROCHE, ROCHE shall advise GENENTECH whether it wishes to
purchase any or all of such equipment or the like.

4. Transfer of Dossier and Registration. The Dossiers for Canada
Product, including all data, information, results, and documents with
respect to pertinent Registrations in Canada, shall be transferred by
GENENTECH to ROCHE, and ROCHE shall be entitled to use the Dossiers
and all such data, information, results, and documents for its own
purposes consistent with the terms of this Agreement. GENENTECH
shall cooperate with ROCHE in a timely manner and in every proper way
to effect the transfer of the pertinent Registration or Registrations
exclusively to ROCHE and GENENTECH shall seek, and use its best
efforts to obtain, the necessary authorization from the pertinent
governmental authorities applicable to such transfer.

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<PAGE> 33

ARTICLE IX - PATENTS, INVENTIONS AND TRADEMARKS

1. Sole Inventions. The Parties recognize that either Party may
independently and separately make inventions in the course of this
Agreement relating to a Product, its administration, formulation or
clinical use. In such event, the Party making the invention shall be
the sole owner of that invention and of any patent applications and
patents thereon (including inventor's certificates) and shall be
solely responsible for the filing, prosecution and maintenance of all
such patent applications and patents and shall have sole authority to
decide what actions in that regard it shall take. If the other Party
wishes to have the Party owning the invention undertake actions which
the Party owning the invention does not routinely undertake or which
it has decided not to undertake, the other Party may request such
Party to undertake such actions and if the other Party does undertake
such actions, it shall be reimbursed for all internal and external
costs it incurs relating to such actions.

2. Joint Inventions. Any inventions relating to a Product, its
administration, formulation or clinical use arising from the Parties'
efforts under this Agreement that are jointly made by both Parties
(i.e., an invention in which one or more inventors from each Party,
including individuals normally obliged to assign an invention to a
Party, have made an inventive contribution as determined by United
States Patent Law), and any patent applications and patents thereon,
shall be jointly owned by the Parties. With respect to any such joint
invention, the Parties intend that after consultation with each other,
the filing, prosecution and maintenance of any patent applications
thereon will be under the control of the Party from whom the majority
of the data underlying such patent application arises (the
"Controlling Party"), and the Controlling Party shall have the right
(but not the obligation) to undertake such filings, prosecutions and
maintenance at its sole expense, provided that: (a) the Controlling
Party notifies the non-Controlling Party within one (1) month after
the filing of any priority patent application by the Controlling
Party; (b) the Controlling Party informs the non-Controlling Party
within eight (8) months from the filing of the priority application
whether and in which countries it intends to file convention
applications; (c) the Controlling Party provides the non-Controlling
Party promptly with copies of all communications received from or
filed in patent offices with respect to such filings; and (d) the
Controlling Party provides the non-Controlling Party a reasonable time
prior to taking or failing to take action that would affect the scope
or validity of rights under any patent applications or patents
(including but not limited to substantially narrowing or canceling any
claim, abandoning any patent or not filing or perfecting the filing of
any patent application in any country), with notice of such proposed
action or inaction so

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<PAGE> 34
that the non-Controlling Party has a reasonable opportunity to review
and make comments. In the event that the Controlling Party breaches
the foregoing obligations regarding updating and consultation, and
such breach is not cured with thirty (30) days of a written notice
from the non-Controlling Party to the Controlling Party describing
such breach, or in the event that the Controlling Party fails to
undertake the filing of a patent application within ninety (90) days
of a written notice by the non-Controlling Party to the Controlling
Party that the non-Controlling Party believes filing of such an
application is appropriate, the non-Controlling Party may undertake
such filing, prosecution and maintenance at its sole expense, in which
case the Controlling Party shall assign all its rights to such
invention to the non-Controlling Party, and any patent application and
subsequently issued patent thereon shall be owned solely by the
non-Controlling Party.

3. Patent Infringement.

(a) In the event that GENENTECH or ROCHE become aware of any
infringement by a third party of any GENENTECH Patents in the Roche
Territory, whether solely or jointly held, each Party shall inform the
other in writing of all available evidence and details available
concerning such infringement. Before taking any action, the Parties
shall consult with each other as to the best manner in which to
proceed. Either Party which is the sole owner of a Patent shall have
the sole right but not the obligation to bring, defend, and maintain
any appropriate suit or action or to control the conduct thereof
against the infringer. However, if the Parties agree to equally share
all expenses, they shall also share the recoveries due to any such
action. If the Parties do not agree to share all expenses, the paying
Party will receive all recoveries due to any such action. If one
Party requests the other Party to join in such suit or action, the
other Party shall cooperate and execute all papers and perform such
other acts as may be reasonably required.

(b) In the event that GENENTECH and/or ROCHE are sued or
threatened with suit in the Roche Territory, by a third party who
claims that the manufacture, use or sale of a Product is an
infringement of one or more claims of a patent owned or controlled by
the third party, GENENTECH and ROCHE shall each pay its own costs in
defending such suit or threatened suit. If the settlement of a
lawsuit or threatened lawsuit or other action or a judgment arising
out of a lawsuit requires any payments to a third party or license
from a third party in order to manufacture, use or sell Product in a
country as a result of a dominating third party patent right,
GENENTECH agrees to reduce the royalty for that Product in that
country specified in this Agreement by one-half of the amount of any
such payments, up to a maximum reduction of two percent (2%) of the
royalty due on Net Sales of that Product in that country. In such
case, there

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<PAGE> 35
shall be no additional reduction in royalties on Net Sales of that
Product for that country because of dominating third party patent
rights.

4. Third Party Patents.

(a) If either Party becomes aware of any patent or other
appropriate intellectual property belonging to a third party which the
Party reasonably believes that without a license thereto GENENTECH
would infringe by virtue of its obligations under Article IV to
manufacture and supply both clinical and commercial needs for Bulk
Product or Vialed Product in the Roche Territory, the Party shall
notify the other Party of such. The Parties shall thereafter discuss
a means of resolving such potential infringement including taking a
license to such patent or other intellectual property. If as a result
of an agreement between the parties, GENENTECH acquires a license to
such patent or other intellectual property, the associated
intellectual property acquisition and licensing costs shall be deemed
to be part of the GENENTECH's Fully Burdened Manufacturing Cost.

(b) If GENENTECH insists that such a license is necessary but
ROCHE does not agree, or if ROCHE is not willing to agree to terms for
such a license that are acceptable to the third party patent or
intellectual property owner, then ROCHE shall defend, indemnify and
hold harmless GENENTECH from and against all third party costs,
claims, suits, expenses (including reasonable attorney's fees) and
damages arising out of or resulting from any infringement by GENENTECH
of such patent or intellectual property which covers the manufacture
of the Product.

(c) If ROCHE insists that such a license is necessary but
GENENTECH does not agree, or if GENENTECH is not willing to agree to
terms for such a license that are acceptable to the third party patent
or intellectual property owner, then GENENTECH shall defend, indemnify
and hold harmless ROCHE from and against all third party costs,
claims, suits, expenses (including reasonable attorney's fees) and
damages arising out of or resulting from any infringement by ROCHE of
such patent or intellectual property which covers the manufacture of
the Product.

5. Reporting on Patent Status. GENENTECH shall keep ROCHE informed of
its efforts to secure one or more Patents its owns in the Roche
Territory with one or more valid claims covering as compositions

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<PAGE> 36

(a) Canada Products and DNase, and

(b) Genentech Products, IDEC Product, Scios Product
and In-Licensed Product for which ROCHE has exercised its
option under Section 2 of Article II,

or its use or sale in the Roche Territory. Such reports shall be made
at the end of each year beginning in the year of execution of this
Agreement and shall include the expiration date of any such patent
which.

6. Trademark. GENENTECH will register in each major country in the Roche
Territory, at its own expense, at least one Trademark for each Product
for which ROCHE has exercised its option under Section 2 of Article II
and will maintain it in force. GENENTECH shall monitor for
trademarks that may infringe such Trademark at its sole expense.
ROCHE shall inform GENENTECH of any infringing trademarks in major
countries in the Roche Territory of which ROCHE becomes aware.
GENENTECH shall hold ROCHE harmless from all loss, expense or damage
such as interruption and loss of sales, destruction and reprinting of
packaging and promotional material, damages to the adverse party and
other similar consequences if a third party succeeds in enjoining
ROCHE from distributing and marketing a Product outside the United
States to the extent that such loss, expense or damage results from
the use of GENENTECH's Trademark. In such event, ROCHE shall make
best efforts to mitigate any losses both prospectively and
subsequently.

ARTICLE X - CONFIDENTIALITY AND PUBLICATIONS

1. Confidential Information. The Parties acknowledge that during the
course of this Agreement they may receive from each other information
which is proprietary and confidential and of significant commercial
value to the disclosing Party. Such information shall specifically
include all data provided to ROCHE for its evaluation in connection
the exercise of any option under Section 2 of Article II. Such
information as well as any Know-How, so long as such Know-How is not
generally ascertainable from publicly available information, to the
extent provided by the other Party, shall be deemed "Information" as
that term is used in the Mutual Confidentiality Agreement entered into
as of September 8, 1990 between Roche Holding Ltd and GENENTECH, Inc.
(the "Mutual Confidentiality Agreement"), and the Parties agree that
such Information shall be subject to the terms and provisions of the
Mutual Confidentiality Agreement.

2. Publications. Notwithstanding Section 1 of this Article, ROCHE shall
be free to publish the results of the development activities hereunder
to the extent that such publication will not result in the disclosure
of Information of GENENTECH.

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ROCHE shall submit to GENENTECH any such proposed publication at least
thirty (30) days in advance to allow GENENTECH to review such planned
publication. GENENTECH will promptly report any decisions regarding
the existence of patentable inventions, and should any patentable
inventions be identified, ROCHE agrees to delay disclosure for a
reasonable time period to allow filing of such patent applications.
In addition, GENENTECH shall have the authority to require deletion
from any such planned publication of any Information of GENENTECH.

3. Restrictions on Transfer of Proprietary Materials. Each Party agrees,
with respect to any proprietary materials, substances, reagents or the
like (except Product) received from the other Party ("Materials") that
such materials shall be subject to the provisions of Mutual Agreement
for Supply of Research Material entered into between GENENTECH Inc.
and Roche Holding Ltd as of July 17, 1991.

ARTICLE XI - LIABILITY

1. No Liability. Neither Party shall be liable to the other Party for
indirect, incidental or consequential damages arising out of the terms
and conditions of this Agreement or with respect to that Party's
performance hereunder or lack thereof.

2. Indemnification by ROCHE. ROCHE shall defend, indemnify and hold
harmless GENENTECH from and against all third party costs, claims,
suits, expenses (including reasonable attorneys' fees), assessments,
fines and damages (collectively "Claims") arising out of or resulting
from ROCHE's manufacturing (if any), formulating (if any), filling (if
any), finishing, packaging, labeling, distributing, selling or using
after title to a Product has passed to ROCHE from GENENTECH. The
foregoing indemnification shall not extend to any claims which arise
or result from any defect in GENENTECH's manufacture, formulation or
fill of the Product. The foregoing indemnification shall be
conditioned upon GENENTECH: (a) providing written notice to ROCHE
within twenty (20) days after GENENTECH has been given written notice
of such Claim; (b) permitting ROCHE the opportunity to assume full
responsibility (at ROCHE's expenses) for the investigation and defense
of any such Claim; and (c) not settling or compromising any such Claim
without ROCHE's prior written consent.

3. Indemnification by GENENTECH. GENENTECH shall defend and indemnify
and hold harmless ROCHE from and against all third party costs,
claims, suits, expenses (including reasonable attorney's fees)
assessments, fines and damages (collectively "Claims") arising out of
or resulting from its manufacture,

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<PAGE> 38
formulating, filling and testing prior to passage of title to the
Product to ROCHE from GENENTECH and which gives rise to a defect which
could not normally be detected by adequate quality control testing on
the part of ROCHE. The foregoing indemnification shall not extend to
any claims which arise or result from any defect in ROCHE's
manufacture of the Product (if such manufacture occurs). The
foregoing indemnification shall be conditioned upon ROCHE: (a)
providing written notice to GENENTECH within twenty (20) days after
ROCHE has been given written notice of such Claim, (b) permitting
GENENTECH the opportunity to assume full responsibility (at
GENENTECH's expenses) for the investigation and defense of any such
Claim; and (c) not settling or compromising any such Claim without
GENENTECH's prior written consent.

ARTICLE XII - TERM AND TERMINATION

1. Term. This Agreement shall enter into force and effect as of the
Effective Date. This Agreement shall expire as to a Product when
royalties are no longer payable by ROCHE to GENENTECH with respect to
such Product unless the Parties mutually agree to extend this
Agreement with respect to such Product.

2. Termination by ROCHE. ROCHE shall have the right to terminate its
license for a Product in the Roche Territory hereunder upon six (6)
months prior written notice to GENENTECH if ROCHE has completed at
least one Phase III Trial for that Product and such results are unable
to support a Registration of if results of other preclinical or
clinical trials establish that further development would not provide
data sufficient to support Registration of the Product in a country
set forth on Appendix B. If ROCHE terminates its license,

(a) all rights and licenses granted to ROCHE herein
with respect to such Product and supply obligations of
GENENTECH hereunder shall automatically terminate as of the
date of termination;

(b) the transfer and assignment to GENENTECH or
GENENTECH's designee of the Dossier and the Registration and
all associated data, information, results and documents for
such Product in the Roche Territory shall be done promptly and
GENENTECH shall thereafter have an nonexclusive license
thereto as well as to all ROCHE Patents and Know-How related
to such Product and generated by ROCHE under this Agreement;
and

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<PAGE> 39

(a) If ROCHE fails to exercise its "best efforts" to
commercialize a Product in a country in the Roche Territory, GENENTECH
shall have the right to request ROCHE to take remedial measures. If
GENENTECH makes such a request and ROCHE thereafter does not exercise
such "best efforts" within a period of six (6) months after GENENTECH
has requested ROCHE to take remedial measures or if ROCHE fails to
meet the requirements of Article III, Section 6, then GENENTECH shall
have the right (x) to terminate ROCHE's license hereunder with respect
to such country if Registration for the Product has not been initiated
or (y) to convert the license to a nonexclusive one if Registration
has been initiated and

(i) all rights and licenses granted to ROCHE herein
and Product supply obligations of GENENTECH with respect to
such Product in such country shall automatically terminate as
of the date of termination;

(ii) the transfer and assignment to GENENTECH or
GENENTECH's designee of the Dossier and the Registration and
all associated data, information, results and documents for
such Product in such country shall be done promptly and
GENENTECH shall thereafter have an nonexclusive license
thereto in such country as well as to all ROCHE Patents and
Know-how related to such Product and developed by ROCHE under
this Agreement; and

(iii) the Parties shall discuss and agree on a
transfer of stocks of such Product held by ROCHE with respect
to such country.

4. Termination of Development/Commercialization.

(a) GENENTECH may terminate at any time its development and/or
commercialization of Product for which ROCHE has exercised its option
under Article II. If GENENTECH so terminates its development and/or
commercialization of a Product and if GENENTECH decides to enter into
an agreement with a third party with respect to rights to such Product
in the United States, the provisions of Section 3.07 of the Governance
Agreement shall apply. In such event, GENENTECH's obligation to
manufacture and supply Clinical Requirements or Commercial
Requirements of that Product to ROCHE shall terminate in the following
manner:

(1) If GENENTECH terminates for reasons related to
the safety of the Product, such obligation shall terminate
immediately.

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<PAGE> 40

(2) If GENENTECH terminates for reasons other than
safety, eg., efficacy or cost effectiveness or the like, such
obligation shall continue until the earlier to occur of two
(2) years from the date of GENENTECH's notice to ROCHE of such
termination or on the date ROCHE advises GENENTECH that no
such further supply is required.

ROCHE thereafter shall have the royalty-free right and license to
produce and supply all of ROCHE's Clinical Requirements and Commercial
Requirements for use and sale in the Roche Territory. Upon such
termination by GENENTECH, it shall promptly transfer all of the
Manufacturing Technology for that Product to ROCHE.

(b) ROCHE may terminate at any time its development and/or
commercialization of a Small Molecule Product. In such event, ROCHE's
obligation to manufacture and supply Clinical Requirements or
Commercial Requirements of that Product to GENENTECH shall terminate
in the following manner:

(1) If ROCHE terminates for reasons related to the
safety of the Product, such obligation shall terminate
immediately.

(2) If ROCHE terminates for reasons other than
safety, eg., efficacy or cost effectiveness or the like, such
obligation shall continue until the earlier to occur of two
(2) years from the date of ROCHE's notice to GENENTECH of such
termination or on the date GENENTECH advises ROCHE that no
such further supply is required.

GENENTECH shall thereafter have the royalty-free right and
license to produce and supply all of its Clinical Requirements and
Commercial Requirements for sale in the United States. Upon such
termination by ROCHE, it shall promptly transfer all of the
Manufacturing Technology for that Product to GENENTECH.

5. Termination for Breach. Except as provided in Section 3 of this
Article, either Party may terminate this Agreement upon the failure of
the other Party to comply with any of its material obligations
contained in this Agreement or in the Governance Agreement. Such
termination shall become effective at any time after providing sixty
(60) days' written notice by the non-breaching Party specifying the
breach and its intent to terminate the Agreement; provided that the
breaching Party shall have an opportunity to cure any defect or
omission during such sixty (60) day period. Should such cure be
effected, such notice

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<PAGE> 41
shall be null and void. Any other provision of this Agreement
notwithstanding, termination of this Agreement for failure to comply
with a material obligation shall be without prejudice to --

(a) any remedies which either Party may then or
thereafter have hereunder or at law; and

(b) either Party's right to obtain performance of any
obligations provided for in this Agreement which survive
termination by their terms or by a fair interpretation of this
Agreement.

6. Certain Proceedings. In the event any action or proceeding before any
court or governmental agency or other regulatory or administrative
agency or commission, by any governmental or other regulatory or
administrative agency or commission or by any other person,
successfully challenging this Agreement or the relations or actions of
the Parties contemplated hereby or otherwise materially and adversely
affecting the business or property (including the goodwill and
business reputation and character) of a Party hereto, the Parties
shall discuss an appropriate termination of this Agreement and the
terms and conditions associated with such termination.

7. Termination For Change in Ownership. If at any time during the term
of this Agreement, ROCHE's equity ownership of GENENTECH securities is
less than fifty percent (50%) of all such securities then outstanding,
ROCHE's right to exercise any unexercised options set forth in Article
II above shall terminate immediately.

8. Survival of Terms. The foregoing notwithstanding, the provisions of
Articles IX, X, XI, XII and XIII as well as any provisions which by
their specific language or context are intended to or can be fairly
read to survive termination of this Agreement, shall survive any
termination of this Agreement for any reason.

ARTICLE XIII - MISCELLANEOUS

1. Disclaimer of Certain Warranties. Information, reagents and materials
(except Product) transferred from one Party to another in the course
of this Agreement are supplied "as is" without warranties, express or
implied, including any warranty of merchantability, title, freedom
from infringement or fitness for a particular use.

2. Entire Agreement, Amendment. (a) Except as provided in subsection
(b), this Agreement, as amended, constitutes the entire agreement
between the Parties

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<PAGE> 42
with respect to the subject matter hereof, supersede all prior
agreements, understandings and communications, oral or written,
relating to the subject matter hereof, and shall not be modified,
altered or amended except by mutual written agreement of the Parties.

(b) This Agreement shall not supersede the Supply Agreement
Between F. Hoffmann-La Roche Ltd, Genentech, Inc. and Genentech Europe
Limited Regarding DNase in Collaborative Countries, Rest of World and
Japan except that the terms of such Agreement shall be expanded to
include the supply of DNase in Canada.

3. Failure to Enforce. The failure by either Party at any time or for
any period of time to enforce any term or provision of this Agreement
shall not be construed as a waiver of such term or provision or of the
right of either Party to enforce each and every such term and
provision.

4. Force Majeure. If either Party shall be delayed, interrupted in or
prevented from the performance of any obligation hereunder by reason
of Force Majeure including an act of God, fire, flood, war (declared
or undeclared), public disaster, strike or labor differences,
governmental enactment, rule or regulation, or any other cause beyond
such Party's control, such Party shall not be liable to the other
therefor and the time for performance of such obligation shall be
extended for a period equal to the duration of the contingency which
occasioned the delay, interruption or prevention. The Party invoking
such Force Majeure rights must notify the other Party within a period
of fifteen (15) days, from the first and the last day of the Force
Majeure unless the Force Majeure renders such notification impossible
in which case notification will be made as soon as possible. If the
delay resulting from the Force Majeure exceeds six (6) months, both
Parties shall consult each other to find an appropriate solution.

5. Arbitration. In the event of any dispute, controversy or claim
arising out of or relating to this Agreement, the Parties shall try to
settle such disputes, controversies or claims amicably between
themselves including referring such dispute, controversy or claim to
the Chief Executive Officer of GENENTECH and a member of ROCHE's
Executive Committee. If the Parties are unable to so settle such
dispute, controversy or claim, then any such dispute, controversy or
claim arising out of or relating to any provision of this Agreement or
the interpretation, enforceability, performance, breach, termination
or validity hereof, including, without limitation, this arbitration
clause shall be solely and finally settled by arbitration in the
manner specified in this Section.

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<PAGE> 43

All arbitration proceedings shall be conducted in New York City. If
ROCHE requests the commencement of such proceedings, the arbitration
proceedings shall be conducted under the procedural rules of the
American Arbitration Association. If GENENTECH requests the
commencement of proceedings, arbitration proceedings shall be
conducted under the procedural rules of the International Arbitration
Rules of the Zurich Chamber of Commerce. In either case, proceedings
in the arbitration shall conducted in the English language, and all
documents not in English submitted by either party must be accompanied
by a translation into English. The Party requesting arbitration shall
serve upon the other Party a written demand for arbitration stating
the substance of the controversy, dispute or claim, and the contention
of the Party requesting arbitration. Within sixty (60) days after the
demand, the Parties shall select three (3) mutually acceptable
arbitrators. The arbitrators are to act as neutral arbitrators and
shall have no past, present or anticipated future affiliation with the
Parties or any relationship with the Parties which would unduly
influence the independence of an arbitrator. If the Parties are
unable to agree upon three (3) mutually acceptable arbitrators, the
arbitration agent under whose rules the arbitration is proceeding
shall appoint three (3) arbitrators. No more than two arbitrators
shall be citizens and/or residents of the United States or citizens
and/or residents of Switzerland. The decision of the arbitrators
shall be in writing setting forth the basis therefore. The
arbitrators shall have the authority to award such remedies as they
believe are appropriate in the circumstances, including, but not
limited to, compensatory damages, consequential and incidental
damages, interest, tort damages (but not punitive or similar damages)
and specific performance and other equitable relief. The Parties
shall abide by the award rendered in such arbitration proceeding, and
such award may be enforced and executed upon in any court having
jurisdiction over the Party against whom enforcement of such award is
sought. The Parties shall divide equally the administrative charges,
arbitrators's fees and related expenses of arbitration, but each Party
shall pay its own attorney's fees incurred in connection with such
arbitration; provided, however, if the arbitrators determine that one
Party prevailed clearly and substantially over the other Party, then
the non-prevailing party shall also pay the prevailing Party's
reasonable attorney's fees and expert witness costs and arbitration
costs.

6. Notices. Requests, notices and reports required or permitted under
this Agreement shall be in writing and shall be sent by telefax or
telecopier (with written confirmation) or express mail to the address
set forth below or such other address as a Party may designate from
time to time in accordance with this Section:

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to ROCHE: F. Hoffmann-La Roche Ltd
Corporate Law
Grenzacherstrasse 124
CH-4002 Basel, Switzerland

to GENENTECH: Genentech, Inc.
Corporate Secretary
460 Point San Bruno Boulevard
South San Francisco, California 94080
U.S.A.

7. Use of Names. Neither Party will use or refer to this Agreement in
any promotional activity, or use the marks of the other Party, without
express prior written permission of the other Party. Either Party
shall refrain from making any public announcement or disclosure of
this Agreement and its terms without the prior written consent of the
other Party except as required by law.

8. Successors and Assigns. Neither Party may assign this Agreement or
any rights hereunder in any manner, whether by virtue of law or
otherwise, without the prior written consent of the other Party,
except that GENENTECH may assign part or all of its responsibilities
and obligations under this Agreement to one or more wholly-owned
subsidiaries of GENENTECH.

9. Headings. The section headings of this Agreement are for convenience
only and are not a part of this Agreement.

10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.

11. Severability. The Parties hereby expressly state that it is not their
intention to violate any applicable rule, law or regulation. If any
of the provisions of this Agreement are held to be void or
unenforceable with regard to any particular country by a court of
competent jurisdiction, then, to the extent possible, such void or
unenforceable provision shall be replaced by a valid and enforceable
provision which will achieve as far as possible the economic business
intentions of the Parties. The provisions held to be void or
unenforceable shall remain, however, in full force and effect with
regard to all other countries.

12. Governing Law. This Agreement shall be governed by and construed for
all purposes in accordance with the laws of the State of New York.

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<PAGE> 45

13. Relationship. Neither ROCHE or GENENTECH is in any way the legal
representative or agent of the other, nor authorized or empowered to
assume any obligation of any kind, implied or expressed, on behalf of
the other, without the express written consent of the other.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as of the Effective Date.

GENENTECH, INC. F. HOFFMANN-LA ROCHE LTD.

By _____________________ By ________________________

Title____________________ Title_______________________

By________________________

Title_______________________

GENENTECH EUROPE LIMITED

By________________________

Title_______________________

GENENTECH BIOPHARMACEUTICALS LIMITED

By________________________

Title_______________________

GENENTECH INTERNATIONAL LIMITED

By________________________

Title_______________________

40
<PAGE> 46

APPENDIX A

FINANCIAL APPENDIX

41
<PAGE> 47

APPENDIX A

FINANCIAL APPENDIX TO THE LICENSE AGREEMENT

This document is the Financial Appendix to the License Agreement effective as
of the Effective Date, between F. Hoffmann-La Roche Ltd. (ROCHE) and Genentech,
Inc., Genentech Europe Limited, Genentech Biopharmaceuticals Limited and
Genentech International Limited (GENENTECH) and contains the financial
definitions and descriptions of their application to the License Agreement.

1. DEFINITIONS
Net Sales -- Shall mean the gross invoice price for sales of the product
to third parties less deductions of returns (including withdrawals and
recalls), rebates (price reductions including Medicare or similar types
of rebates), volume (quantity) discounts granted at the time of
invoicing, sales taxes and other taxes directly linked to sales, as
computed in the central ROCHE Sales Statistics (referred to as Markis)
for the countries concerned.

In addition to this above computed adjusted gross invoice price, for all
other expenses like Sales Deductions (outward freights, transportation
insurance, packing materials for dispatch of goods, custom duties), Sales
Expenses (discounts granted later than at the time for invoicing), Cash
Discounts and other direct expenses, there shall be a lump sum deduction
of three percent (3%).

Cost of Sales -- Shall mean GENENTECH's Fully Burdened Manufacturing Costs
determined in accordance with GENENTECH accounting policy which is based
on U.S. GAAP as applied by GENENTECH.

GENENTECH's Fully Burdened Manufacturing Cost -- Shall mean GENENTECH's
consolidated fully burdened manufacturing cost (as defined in GENENTECH's
Accounting Policies) of Bulk Product, Vialed Product or Finished Product,
as the case may be, which in summary shall comprise the sum of:

a) The cost of goods produced for clinical or commercial use
as determined in accordance with U.S. generally accepted
accounting principles as applied by GENENTECH including,
but not limited to, direct labor and material and product
testing costs as well as allocable overhead;

b) All of GENENTECH's allocable intellectual property
acquisition, licensing and royalty costs paid to third
parties upon the sale of Product by ROCHE to third
<PAGE> 48
parties (unless any such cost is specifically identified
as the sole cost of GENENTECH in the License Agreement);

c) Any other costs borne by GENENTECH for transport, customs
clearance and storage of product (if necessary) at the
request of ROCHE (i.e., freight, duty, insurance and
warehousing).

Development Costs -- Shall mean the development costs actually incurred by
GENENTECH after the date of GENENTECH's decision to bring a product into
development through the date of marketing approval or termination of
development efforts in the United States of the final indication for
which U.S. marketing approval is sought. Such costs shall comprise those
costs, both direct and indirect (i.e. fully burdened costs), required to
obtain the authorization and/or ability to manufacture, formulate, fill,
ship and/or sell the product in commercial quantities to third parties in
the United States. Such Development Costs shall include but are not
limited to costs of development including cost of studies on the
toxicological, pharmacokinetical, metabolical or clinical aspects of the
product conducted internally or by individual investigators, or
consultants necessary for the purpose of obtaining and/or maintaining
approval of the product in the U.S., process development and scale up
costs, qualification lots, costs for preparing, submitting, reviewing or
developing data or information for the purpose of submission to the Food
and Drug Administration or other governmental authority to obtain and/or
maintain approval in the U.S. These costs shall include expenses for
data management, statistical designs and studies, document preparation,
and other administration expenses associated with the clinical testing
program. Development Costs shall include all such Costs incurred by
GENENTECH up to the Phase II Completion Date. Development Costs after
the Phase II Completion Date shall be limited to all such Costs incurred
by GENENTECH thereafter (i) to the extent such Costs result in the
development of data, information, processes, materials or the like which
are used by ROCHE in a filing for a Registration or for the
commercialization of that Product and (ii) to the extent such costs are
incurred in any development of a process or processes used to manufacture
the Product for supply to ROCHE.

In determining Development Costs, GENENTECH will use its Project Cost
System.

Costs incurred by GENENTECH to obtain approval of a GENENTECH Product in
a ROCHE Territory shall be reimbursed by ROCHE to GENENTECH. Costs
incurred by ROCHE to obtain approval of a GENENTECH Product in a ROCHE
Territory shall be solely a cost of ROCHE.

<PAGE> 49

2. TRANSFER PRICE OF PRODUCT FROM GENENTECH TO ROCHE

Transfer Price of Product from GENENTECH to ROCHE -- The total amount due
GENENTECH for the transfer of product from GENENTECH to ROCHE shall be
the amount defined below:

The first installment payment shall be GENENTECH's Cost of Sales plus a
margin of twenty (20%) of the Cost of Sales of the Product. Such margin
shall be calculated on Cost of Sales exclusive of the sum of (a)
GENENTECH's allocable intellectual property acquisition, licensing and
royalty costs paid to third parties upon the sale of product by ROCHE to
third parties and (b) any other costs borne by GENENTECH for transport,
customs clearance and storage of product at the request of ROCHE. Such
installment will be billed to ROCHE in U.S. Dollars. Payment of the first
installment shall be made by ROCHE to GENENTECH in U.S. Dollars within 30
days after shipment.

The second installment payment to GENENTECH shall be the payment defined
in Article VI, Sections 3, 4, 5, 6, 7 and 8 of the License Agreement.

3. REIMBURSEMENT OF GENENTECH DEVELOPMENT COSTS

Development Costs incurred prior to ROCHE's exercise of its option for a
product -- Thirty days prior to the date by which ROCHE must exercise its
option for a product, GENENTECH shall choose one of the following methods
for reimbursement of Development Costs incurred prior to exercise of such
option, the choice being subject to ROCHE's consent which shall not be
unreasonably withheld:

A.) Lump sum payment equal to fifty percent (50%) of the cumulative
Development Costs incurred prior to ROCHE's exercise of such option, due
thirty days after ROCHE's exercise of such option, or

B.) Quarterly payments, due 30 days after invoicing from GENENTECH,
equal to one hundred and fifty percent (150%) of the Development Costs
incurred after ROCHE's exercise of a Product option until such the
cumulative amount paid thereunder equals fifty percent (50%) of the
cumulative Development Costs incurred prior to ROCHE's exercise of such
option plus interest at LIBOR from the date of such option exercise.
GENENTECH shall invoice ROCHE for the amount due hereunder within 30 days
of the end of each quarter.

Development Costs incurred after ROCHE's exercise of a Product option --
Quarterly payments, due 30 days after invoicing from GENENTECH, equal to
fifty percent (50%) of

3
<PAGE> 50

GENENTECH's Development Costs incurred after ROCHE's exercise of a
Product option. GENENTECH shall invoice ROCHE for the amount due
hereunder within 30 days of the end of each quarter.

For products which GENENTECH can only license Canadian rights to ROCHE,
the fifty percent (50%) reimbursement of Development Costs provided in
this section 3 of this Appendix shall be reduced to ten percent (10%).

4. BUDGET AND BUSINESS PLAN

ROCHE shall provide GENENTECH within 30 days of availability in final
form, ROCHE's budget (prepared annually and covering a one year period)
and Business Plans (prepared annually and covering a five year period)
for each Product for which ROCHE has exercised its option under Article
II of the Agreement.

5. AUDITS AND INTERIM REVIEWS
Audit work will be performed in the following manner:

If deemed necessary by either ROCHE or GENENTECH, an audit by independent
certified public accountants may be requested. Such audits will be at the
sole expense of the requesting Party and will be performed by the
officially appointed auditor of the Party audited. If GENENTECH requests
audit work of the ROCHE accounts, the audit will be performed by ROCHE's
appointed worldwide auditor which is currently Price Waterhouse, LLP. If
ROCHE requests audit work of the GENENTECH accounts, the audit will be
performed by the independent auditor appointed by GENENTECH which is
currently Ernst & Young, LLP.

6. START OF ACCOUNTING AND REIMBURSEMENT

Determination of Development Costs shall be made retroactive to the date
of GENENTECH's decision to bring each product into development for all
products other than those product indications marketed in the United
States as of June 30, 1995. There shall be no reimbursement of
Development Costs incurred prior to July 1, 1995 for any indication
marketed in the United States as of June 30, 1995 or for Pulmozyme for
COPD.

Reimbursement of Development Costs owed to GENENTECH under section 3 of
this Appendix for Products which have reached ROCHE's product option
exercise date as of the effective date of this agreement shall be due 60
days after the exercise of such option.

4
<PAGE> 51

Royalties due GENENTECH under the License Agreement will commence as set
forth in the Agreement.

Recognizing that ROCHE prepares complete accounts for its activities in
the GENRO collaboration only on June 30th and December 31st of each year,
the GENRO Finance Committee (as currently constituted) will agree on an
appropriate basis to settle profit sharing under the current arrangement
from July 1, 1995 to such time as the operations of Genentech Europe Ltd.
are transferred to ROCHE in accordance with Article VII, section 1 of the
License Agreement.

<PAGE> 52
APPENDIX B

ARTICLE II COUNTRIES

Germany
Italy
France
United Kingdom
Spain
Japan
Canada
Mexico
Brazil
Argentina
People's Republic of China
Turkey
South Korea
Australia

<PAGE> 1
Exhibit 15.1

June 5, 1995

The Board of Directors and Stockholders
Genentech, Inc.

We are aware of the incorporation by reference in the Registration Statement
(Form S-4) of Genentech, Inc. for the registration of 57,198,521 shares of its
Special Common Stock of our report dated April 10, 1995 relating to the
unaudited condensed consolidated interim financial statements of Genentech, Inc.
which are included in its Form 10-Q for the quarter ended March 31, 1995.

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

Very truly yours,

ERNST & YOUNG LLP

<PAGE> 1
Exhibit 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in
the Proxy Statement of Genentech, Inc. which is made a part of the Registration
Statement (Form S-4) and related Prospectus of Genentech, Inc. for the
registration of 57,198,521 shares of its Special Common Stock and to the
incorporation by reference therein of our reports 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
June 5, 1995

<PAGE> 1

POWER OF ATTORNEY

WHEREAS, Genentech, Inc. proposes to file with the Securities and
Exchange Commission, under the Securities Act of 1933, as amended, a
Registration Statement on Form S-4 to register shares of Special Common Stock of
Genentech, Inc.:

NOW, THEREFORE, I, in my capacity as a director of Genentech, Inc.,
hereby appoint G. Kirk Raab and John P. McLaughlin and each of them severally,
my true and lawful attorney or attorneys with power to act with or without the
other and with full power of substitution and resubstitution, to execute in my
name, place and stead, in my capacity as a director of Genentech, Inc., said
Registration Statement on Form S-4 and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys
and each of them.

IN WITNESS WHEREOF, I have executed this instrument this 26th day of
May, 1995.

/s/ Donald L. Murfin
-----------------------
Donald L. Murfin

<PAGE> 2

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument this 3rd day of
June, 1995.

/s/ John T. Potts, Jr.
-----------------------
John T. Potts, Jr.

<PAGE> 3

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument this 26th day of
May, 1995.

/s/ C. Thomas Smith, Jr.
-----------------------
C. Thomas Smith, Jr.

<PAGE> 4

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument this 5th day of
June, 1995.

/s/ Robert A. Swanson
-----------------------
Robert A. Swanson

<PAGE> 5

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument this 30th day of
May, 1995.

/s/ David S. Tappan, Jr.
-----------------------
David S. Tappan, Jr.

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets, consolidated statements of income and consolidated
statements of cash flows included in the company's Form 10-K for the year ended
December 31, 1994, and is qualified in its entirety by reference to such
financial statements and the notes thereto.
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 66713
<SECURITIES> 854187
<RECEIVABLES> 150689
<ALLOWANCES> 4422
<INVENTORY> 103200
<CURRENT-ASSETS> 997116
<PP&E> 700548
<DEPRECIATION> 215255
<TOTAL-ASSETS> 1745124
<CURRENT-LIABILITIES> 220499
<BONDS> 150358
<COMMON> 2345
0
0
<OTHER-SE> 1346439
<TOTAL-LIABILITY-AND-EQUITY> 1745124
<SALES> 601064
<TOTAL-REVENUES> 795390
<CGS> 95829
<TOTAL-COSTS> 95829
<OTHER-EXPENSES> 314322
<LOSS-PROVISION> 5583
<INTEREST-EXPENSE> 7058
<INCOME-PRETAX> 129577
<INCOME-TAX> 5183
<INCOME-CONTINUING> 124394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124394
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 0

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets, consolidated statements of income and consolidated
statements of cash flows included in the Company's Form 10-Q for the three month
period ended March 31, 1995, and is qualified in its entirety by reference to
such financial statements and the notes thereto.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 110113
<SECURITIES> 832236
<RECEIVABLES> 171689
<ALLOWANCES> 5546
<INVENTORY> 94300
<CURRENT-ASSETS> 1016203
<PP&E> 714961
<DEPRECIATION> 232844
<TOTAL-ASSETS> 1806846
<CURRENT-LIABILITIES> 205802
<BONDS> 175140
<COMMON> 2352
0
0
<OTHER-SE> 1399894
<TOTAL-LIABILITY-AND-EQUITY> 1806846
<SALES> 162067
<TOTAL-REVENUES> 238967
<CGS> 26750
<TOTAL-COSTS> 26750
<OTHER-EXPENSES> 94959
<LOSS-PROVISION> 2416
<INTEREST-EXPENSE> 1871
<INCOME-PRETAX> 51064
<INCOME-TAX> 7660
<INCOME-CONTINUING> 43404
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43404
<EPS-PRIMARY> .36
<EPS-DILUTED> 0

</TABLE>

<PAGE> 1

PRELIMINARY COPY
FOR INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY

GENENTECH, INC.
460 POINT SAN BRUNO BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby appoints G. Kirk Raab and John P. McLaughlin as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and vote all the shares of the Common Stock, $.02 par value, of the
Corporation which the undersigned would be entitled to vote if personally
present at the Special Meeting to be held on , 1995, or at any
adjournment or postponement thereof, (1) as specified below on the matter listed
and more fully described in the Notice of Special Meeting and Proxy Statement of
said meeting, receipt of which is acknowledged, and (2) in their discretion on
such matters as may properly come before the meeting or any adjournment or
postponement thereof.

The shares represented by this Proxy will be voted as directed by the
shareholder. If no direction is given, shares will be voted FOR the proposal.
Specific choices may be made on the reverse side of this Proxy.

SEE REVERSE
SIDE
(Continued and to be signed on the other side)

/X/ PLEASE MARK YOUR VOTES
AS IN THIS EXAMPLE.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE FOLLOWING
PROPOSAL:

Approval and adoption of an Agreement and Plan of Merger (the "Merger
Agreement") dated as of May 23, 1995 among Genentech, Inc. ("Genentech"), Roche
Holdings, Inc., and HLR (U.S.) II, Inc. ("Merger Sub"), which provides for,
among other matters, the merger (the "Merger") of Merger Sub with and into
Genentech upon the terms and subject to the conditions set forth in the Merger
Agreement and the exhibits thereto, as more fully described in the accompanying
Proxy Statement/Prospectus.

FOR / / AGAINST / / ABSTAIN / /

THIS PROXY WILL BE VOTED FOR THE
PROPOSAL UNLESS INSTRUCTIONS TO THE
CONTRARY ARE INDICATED. PLEASE NOTE
THAT MARKING ABSTAIN WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE
PROPOSAL.

Please sign exactly as name appears on
this Proxy. When shares are held by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by an authorized
officer. If a partnership, please sign
in partnership name by an authorized
person.

PLEASE SIGN AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.

--------------------------------------, 1995
Signature Date

--------------------------------------, 1995
Signature (if held jointly) Date