EXHIBIT 10.1
AFFILIATION AGREEMENT
AFFILIATION AGREEMENT dated as of July 22, 1999 between Genentech, Inc.,
a Delaware corporation (the "COMPANY") and Roche Holdings, Inc., a Delaware
corporation ("ROCHE").
WHEREAS, the Amended and Restated Governance Agreement dated as of
October 25, 1995 between Roche and the Company (the "TERMINATED GOVERNANCE
AGREEMENT") was terminated pursuant to its terms on June 16, 1999;
WHEREAS, Roche owns, as of the date hereof, all of the outstanding
common stock, par value $0.02 per share, of the Company (the "COMMON STOCK");
WHEREAS, Roche expects to sell shares of Common Stock representing
approximately 17.28% of the Company's equity in a registered public offering
(the "OFFERING");
WHEREAS, Roche and the Company desire to establish in this Agreement
certain terms and conditions concerning the corporate governance of the
Company after completion of the Offering; and
WHEREAS, Roche and the Company also desire to establish in this
Agreement certain terms and conditions concerning the acquisition and
disposition of securities of the Company by Roche and its Affiliates (as
defined herein) after completion of the Offering;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained herein, Roche and the Company hereby agree
as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.
(a) "AFFILIATE" and "AFFILIATE" have the meaning defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended (such Act,
including the rules and regulations promulgated thereunder, the "1934 ACT").
(b) "APPLICABLE STOCK" means, at any time, the (i) shares of Common
Stock owned by Roche and its affiliates at such time that were owned on the
date hereof, plus (ii) shares of Common Stock purchased by Roche and its
affiliates pursuant to Section 4.04 of this Agreement, plus (iii) shares of
Common Stock that were issued to Roche and its affiliates in respect of
shares described in either clause (i) or clause (ii) in any reclassification,
share combination, share subdivision, share dividend, share exchange, merger,
consolidation or similar transaction or event.
(c) "BENEFICIAL OWNERSHIP" has the meaning defined in Rule 13d-3
promulgated under the 1934 Act.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
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(e) "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.
(f) "INDEPENDENT DIRECTOR" means a director of the Company who is not
(i) an officer of the Company, (ii) an employee, director, principal
stockholder or partner of Roche or any affiliate of Roche, or (iii) an
employee, director, principal stockholder or partner of an entity (other than
the Company or any of its subsidiaries) that was dependent upon Roche or any
affiliate of Roche for more than 10% of its revenues or earnings in its most
recent fiscal year.
(g) "MARKET PRICE" of any shares of Common Stock or Other Stock, as the
case may be, on any date means (i) the average of the last sale price of such
shares on each of the five trading days immediately preceding such date on
the New York Stock Exchange, Inc. or, if such shares are not listed thereon,
on the principal national securities exchange or automated interdealer
quotation system on which such shares are traded or (ii) if such sale prices
are unavailable or such shares are not so traded, the value of such shares on
such date determined in accordance with agreed-upon procedures reasonably
satisfactory to Roche and the Company.
(h) "OTHER STOCK" means any class of the Company's capital stock other
than Common Stock, and any other security of the Company that, in the opinion
of Roche, will or is likely to be treated as stock for purposes of Section
1504 of the Code.
(i) "OWNERSHIP PERCENTAGE" means, at any time, the fraction, expressed
as a percentage and rounded to the next highest thousandth of a percent,
whose numerator is the aggregate Value of the Applicable Stock and whose
denominator is the sum of the aggregate Value of the outstanding shares of
Common Stock of the Company plus Repurchased Shares; provided, however, that
any shares of Common Stock issued by the Company in violation of its
obligations under Section 4.04 of this Agreement shall not be deemed
outstanding for the purpose of determining the Ownership Percentage.
(j) "PARENT'S VOTING INTEREST" means the percentage of the outstanding
Common Stock beneficially owned by Roche and its affiliates.
(k) "REPURCHASED SHARES" means the aggregate Value of shares of the
Company's Common Stock that are, from and after the date hereof, repurchased
by the Company from its shareholders, less the aggregate Value of shares of
Common Stock (up to the aggregate Value so repurchased) that are re-issued
from and after the date hereof upon the exercise of stock options or
otherwise.
(l) "VALUE" means, with respect to any share of stock, the value of
such share determined by Roche under principles applicable for purposes of
Section 1504 of the Code.
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ARTICLE 2
CORPORATE GOVERNANCE
SECTION 2.01. Roche Approval Required for Certain Actions. The
approval of the directors designated by Roche pursuant to the Company's
bylaws 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 other provisions hereof;
(c) the issuance of any Equity Securities or other capital stock of the
Company, except for (i) issuances of shares of the Company's Common Stock, or
options, warrants or rights to acquire, or securities convertible into or
exchangeable for, such Common Stock pursuant to any employee compensation
plan that has been approved by Roche not exceeding 5% of the voting stock,
(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;
and
(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 a majority of Directors
shall have made a contrary determination in good faith, a "substantial
portion of the business or assets of the Company" shall mean a 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.
Following the giving of a Governance Notice (as defined in Section 3.03
of the Company's bylaws), until the additional Roche designees shall have
taken office as directors of the Company, the Directors shall not take any
action, or fail to take any action, except in the ordinary course of
business, without the consent of Roche. Roche agrees to use its best efforts
to cause such designees to take office, and for any necessary filings to be
made with respect thereto to be made, as promptly as practicable following
such Governance Notice.
SECTION 2.02. Licensing and Marketing Arrangements. Except as
otherwise provided in the Amended and Restated Agreement between Genentech,
Inc. and X. Xxxxxxxx - Xx Xxxxx Ltd Regarding Commercialization of
Genentech's Products Outside of the United States dated as of July 22, 1999
(the "MARKETING AGREEMENT"), 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
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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 3
REGISTRATION RIGHTS
SECTION 3.01. Registration.
(a) The Company agrees that upon the request of Roche it will file one
or more registration statements (each a "REGISTRATION STATEMENT") under the
Securities Act of 1933, as amended (the "1933 ACT") as to the number of
shares of Common Stock specified in such request (the "REGISTERED SHARES").
Roche shall have the right to designate the underwriters for any public
offering of Registered Shares.
(b) The Company agrees to (i) 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 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").
SECTION 3.02. Registration Procedures. Subject to the provisions of
Section 3.01 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 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;
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(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;
(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 described in (x) above,
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;
(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
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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 3.03. Conditions to Offerings. The obligations of the Company
to take the actions contemplated by Sections 3.01 and 3.02 with respect to an
offering of shares of Common Stock shall be subject to the condition that
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 (all of whom may be freely designated by Roche)
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.
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 3.02(d) hereof, Roche
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
3.02(d) hereof.
SECTION 3.04. Additional Conditions. The Company's obligations
pursuant to Section 3.01 shall be suspended, for an aggregate period of up to
sixty days in any 12-month period, 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, or (ii) the Company has filed a registration
statement with respect to Equity 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. Such
obligations shall be 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), and (y) in the case of clause (ii)
above, upon the conclusion of any period (not exceeding 6 months) 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.
SECTION 3.05. 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
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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, provided that
any such expenses (other than internal expenses) of a registration shall be
paid by Roche if such registration is the third (or any greater number) that
the Company undertakes at Roche's request within a twelve month period. The
Company shall pay any registration or filing fees payable under any federal
or state securities or Blue Sky laws, provided that any such fees of a
registration shall be paid by Roche if (i) such registration is the second
(or any greater number) that the Company undertakes at Roche's request within
a twelve month period or (ii) the Company has paid such fees pursuant to this
sentence in connection with four previous registrations. The Company will
not have any responsibility 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 3.06. 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 0000 Xxx) 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 prospectus and agrees to indemnify the Company,
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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 0000 Xxx) 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
3.06(a) or Section 3.06(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 3.06(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
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3.06 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 3.06, 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,
subject to the limitations set forth in Section 3.06(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 3.06(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 0000 Xxx) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 3.06, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in Sections 3.06(a) and 3.06(b) without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 3.06(d).
SECTION 3.07. 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 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 3.08. No Inconsistent Agreements; etc. 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.
ARTICLE 4
COVENANTS
SECTION 4.01. Disposition by Roche. In the event that Roche and its
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affiliates shall dispose, in one or a series of integrally related
transactions, of all or substantially all of their beneficial ownership of
Common Stock to one or more Persons (a "SUCCESSOR"), (a) Roche shall (i) in
the event that immediately prior to such transactions Roche and its
affiliates own over 50% of the Company, either make or cause such Successor
to make adequate arrangement for the simultaneous or prompt subsequent
receipt by the holders of Common Stock of consideration for their Common
Stock which (A) in a transaction in which the consideration is composed
entirely of either (1) cash or (2) equity traded on a U.S. national
securities exchange, is in the same form and amount(s) per share of Common
Stock as that received by Roche and its affiliates, and (B) in any other type
of transaction, either (1) is in the same form(s) and amount(s) per share of
Common Stock as that received by Roche and its affiliates, or (2) has a value
per share of Common Stock not less than the weighted average value
(determined as of the time of receipt by Roche and its affiliates) per share
of Common Stock received by Roche and such affiliates, such value to be
determined by an investment bank of nationally recognized standing appointed
by a committee of Independent Directors (an "INVESTMENT BANK") and (ii) cause
such Successor to agree to be bound by the obligations of Roche under
Sections 4.01, 4.02, and 4.03 hereof; and (b) the Company shall agree that
such Successor shall succeed to the rights of Roche under Section 3.03 of the
Company's bylaws.
SECTION 4.02. Business Combinations with Roche. Roche agrees to
require, as a condition to consummation of any merger of the Company with
Roche or an affiliate of Roche or a sale of all or substantially all of the
assets of the Company to Roche or an affiliate of Roche, that (i) such merger
or sale receive the favorable vote of a majority of the shares of Common
Stock voted at any meeting or adjournment thereof not beneficially owned by
Roche and its affiliates, provided that no PERSON (as such term is defined in
Section 16(a) of the 0000 Xxx) or GROUP (as defined in Section 13(d) of the
0000 Xxx) shall be entitled to cast more than 5% of the votes cast at such
meeting, or, in the event such a favorable vote is not obtained, (ii) the
value of the consideration to be received by the holders of Common Stock
other than Roche and its affiliates in connection with such merger or sale
shall be equal to or greater than the average of the means of the ranges of
fair values for the Common Stock as determined by two Investment Banks.
Roche also agrees that in the 90 days immediately preceding any proposal by
Roche or an affiliate for a merger with the Company, it will not sell any
shares of Common Stock, and it will cause its affiliates not to sell any
shares of Common Stock. Roche further agrees that in the event of any merger
of the Company with Roche or an affiliate of Roche or a sale of all or
substantially all of the assets of the Company to Roche or an affiliate of
Roche, each unvested option then outstanding under the Company's 1990 Stock
Option/Stock Incentive Plan, as amended, the Company's 1994 Stock Option
Plan, as amended, the Company's 1996 Stock Option/Stock Incentive Plan and
the Company's 1999 Stock Option Plan or any other option plan of the Company
shall (at the election of Roche in its sole discretion) either (x) be
accelerated so that each such option shall become exerciseable immediately
prior to the consummation of such transaction for the full number of shares
of Common Stock covered by such option, (y) become exchangeable upon the
consummation of such transaction for deferred cash compensation (vesting on
the same schedule as the shares of Common Stock covered by such option)
having a value equal to the product of (A) the number of shares of Common
Stock covered by such option and (B) the amount which Roche, in its
reasonable judgment, considers to be equivalent in value to the consideration
per share received by holders of shares of Common Stock other than Roche and
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its affiliates in the transaction, minus the exercise price per share under
such option or (z) be canceled in exchange for a replacement option to
purchase stock of the surviving corporation or any successor thereto in any
such transaction with the terms of such options to provide value equivalent
to that of the canceled option, such equivalent value to be determined in the
reasonable discretion of Roche.
SECTION 4.03. Compulsory Acquisitions. If Roche and its affiliates
shall have owned, for more than two months, beneficial ownership of Common
Stock in excess of 90% of the outstanding Common Stock, then Roche shall as
soon as reasonably practicable effect a merger of the Company with Roche or
an affiliate of Roche (either with the vote provided for in clause (i) of
Section 4.02 or with the valuation provided for in clause (ii) of Section
4.02). In such event, each unvested option then outstanding under the
Company's 1990 StockOption/Stock Incentive Plan, as amended, the Company's
1994 Stock Option Plan, as amended, the Company's 1996 Stock Option / Stock
Incentive Plan and the Company's 1999 Stock Option Plan or any other option
plan of the Company shall (at the election of Roche in its sole discretion)
either be treated in the manner set forth in clause (x), clause (y) or clause
(z) under Section 4.02 above.
SECTION 4.04. Tax Consolidation Provisions.
(a) Common Stock Option. The Company hereby grants to Roche, on the
terms and conditions set forth herein, a continuing right (the "COMMON STOCK
OPTION") to purchase from the Company, at the times set forth herein, such
number of shares of Common Stock as is necessary to allow Roche and its
affiliates to maintain the then-current Ownership Percentage. The Common
Stock Option shall be assignable, in whole or in part and from time to time,
by Roche to any affiliate of Roche. The exercise price for the shares of
Common Stock purchased pursuant to the Common Stock Option shall be the
Market Price of the Common Stock as of the date of first delivery of notice
of each exercise of the Common Stock Option by Roche (or its permitted
assignee hereunder) to the Company.
(b) Other Stock Option. The Company hereby grants to Roche, on the
terms and conditions set forth herein, a continuing right (the "OTHER STOCK
OPTION" and, together with the Common Stock Option, the "OPTIONS") to
purchase from the Company, at the times set forth herein, such number of
shares of Other Stock as is necessary to allow Roche and its affiliates to
own 80 percent of each class of outstanding Other Stock. The Other Stock
Option shall be assignable, in whole or in part and from time to time, by
Roche to any affiliate of Roche. The exercise price for the shares of Other
Stock purchased pursuant to the Other Stock Option shall be the Market Price
of the Other Stock as of the date of first delivery of notice of each
exercise of the Other Stock Option by Roche (or its permitted assignee
hereunder) to the Company.
(c) Notice. At least 20 business days prior to the issuance of any
shares of Common Stock or the first date on which any event could occur that,
in the absence of a full or partial exercise of the Common Stock Option,
would result in a reduction in the Ownership Percentage, the Company will
notify Roche in writing (a "COMMON STOCK OPTION NOTICE") of any plans that
the Company has to issue such shares or the date on which such event could
first occur. At least 20 business days prior to the issuance of any shares
of Other Stock or the first date on which any event could occur that, in the
absence of a full or partial exercise of the Other Stock Option, would result
Page 11
in Roche and its affiliates owning less than 80 percent of each class of
outstanding Other Stock, the Company will notify Roche in writing (an "OTHER
STOCK OPTION NOTICE" and, together with or separate from a Common Stock
Option Notice, an "OPTION NOTICE") of any plans that the Company has to issue
such shares or the date on which such event could first occur.
Each Option Notice must specify the date on which the Company intends to
issue such additional shares or on which such event could first occur (such
issuance or event being referred to herein as an "ISSUANCE EVENT" and the
date of such issuance or event as an "ISSUANCE EVENT DATE"), the number of
shares the Company intends to issue or may issue and the other terms and
conditions of such Issuance Event.
(d) Exercise. The Common Stock Option may be exercised by Roche (or
any Roche affiliate to which all or any part of the Common Stock Option has
been assigned) for a number of shares equal to or less than the number of
shares that are necessary for Roche and its affiliates to maintain, in the
aggregate, the Ownership Percentage. The Other Stock Option may be exercised
by Roche (or any Roche affiliate to which all or any part of the Other Stock
Option has been assigned) for a number of shares equal to or less than the
number of shares that are necessary for Roche and its affiliates to own, in
the aggregate, 80 percent of each class of outstanding Other Stock. Each
Option may be exercised at any time after receipt of an applicable Option
Notice and prior to the applicable Issuance Event Date by the delivery to the
Company of a written notice to such effect specifying (i) the number of
shares of Common Stock or Other Stock (as the case may be) to be purchased by
Roche or any of its affiliates, and (ii) a calculation of the exercise price
for such shares. Upon any such exercise of either Option, the Company will,
prior to the applicable Issuance Event Date, deliver to Roche (or any Roche
affiliate designated by Roche), against payment therefor, certificates
(issued in the name of Roche or its permitted assignee hereunder, or as
directed by Roche) representing the shares of Common Stock or Other Stock (as
the case may be) being purchased upon such exercise. Payment for such shares
shall be made by wire transfer or intrabank transfer to such account as shall
be specified by the Company, for the full purchase price for such shares.
(e) Effect of Failure to Exercise. Any failure by Roche to exercise
either Option, or any exercise for less than all shares purchasable under
either Option, in connection with any particular Issuance Event shall not
affect Roche's right to exercise the relevant Option in connection with any
subsequent Issuance Event; provided, however, that, in the case of the Common
Stock Option, the Ownership Percentage following such Issuance Event in
connection with which Roche so failed to exercise such Option in full or in
part shall be recalculated as set forth in the definition thereof.
(f) Notwithstanding anything to the contrary herein, the Company and
Roche acknowledge that the procedures set forth above relating to the
exercise of the Common Stock Option shall not apply where the Company is not
capable of giving advance notice of the relevant Issuance Event. Roche and
the Company agree that, in such case, the Common Stock Option shall be
exercisable at such times and in such manner as Roche and the Company may
from time to time agree, and otherwise by Roche in a reasonable time and
manner.
(g) The Company will adopt, implement as soon as practicable (but not
more than 60 days after the Offering), and maintain a comprehensive, long-
term common stock repurchase program (the "COMMON STOCK REPURCHASE PROGRAM")
Page 12
for general corporate purposes. The Company agrees that, pursuant to the
Common Stock Repurchase Program, prior to any issuance of shares of Common
Stock by the Company, it shall have repurchased a number of shares of Common
Stock such that, immediately after such issuance, Roche's Ownership
Percentage is equal to or greater than Roche's lowest Ownership Percentage at
any time after the Offering but prior to such issuance; provided that (i)
nothing in this Section 4.04(g) shall require the Company to take any action
that would, in the Company's reasonable determination, adversely affect the
Company's accounting for its stock option and employee stock purchase plans,
and (ii) the parties shall cooperate to effect repurchases in a manner that
will not have a substantial adverse economic impact on the Company. It is
understood that any reduction in the Company's cash position as a result of
such repurchases is not a "substantial adverse economic impact."
(h) The Company shall:
(i) provide to Roche at the end of each month, and at such other
times as Roche may request, information as to (A) the total number of
shares of Common Stock repurchased by the Company in the last month and
on a year-to-date basis, (B) the total number of shares of Common Stock
previously issued to date, (C) the Company's current forecasts as to
future issuances, and (D) such other information as Roche may request in
connection with Roche's ownership and tax consolidation objectives; and
(ii) notify Roche within one business day after the date in any
month in which the total number of shares of Common Stock issued by the
Company in such month equals or exceeds 500,000.
SECTION 4.5. No Inconsistent Actions. The Company agrees not to take,
and agrees to cause its directors to refrain from taking, any action which
could impede or delay the exercise by Roche of any of its rights under this
Agreement.
Page 13
ARTICLE 5
MISCELLANEOUS
SECTION 5.01. Effectiveness. This agreement shall become effective
only upon the closing of the Offering.
SECTION 5.02. 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, to:
Genentech, Inc.
Xxx XXX Xxx
Xxxxx Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Facsimile: 000-000-0000
If to Roche, to:
Roche Holdings, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Corporate Secretary
Facsimile: 000-000-0000
with a copy to:
Roche Holding XX
XX 0000 Xxxxx
Xxxxxxxxxxx
Attention: Xx. Xxxxx X. Xxxxx
Facsimile: 011-41-61-688-5030
with a further copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
or such other address or telecopier number as such party may hereafter
specify for the purpose by notice to the other party 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 5.03. 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
Page 14
amendment, by Roche and the Company, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(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 5.04. 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.
SECTION 5.05. 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 as provided
herein.
SECTION 5.06. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware.
SECTION 5.07. Counterparts. 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.
SECTION 5.08. Termination. This Agreement (other than Article 3 and
Sections 4.01, 4.02, 4.03, 4.04(a), 4.04(b), 4.04(c), 4.04(d), 4.04(e),
4.04(f), and 4.05) will terminate at such time as Roche and its affiliates
dispose of beneficial ownership of Common Stock of the Company which
disposition has the effect of causing Parent's Voting Interest to be less
than 40% (a "TERMINATION EVENT").
Page 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first
above written.
GENENTECH, INC.
By: /S/XXXXXXX X. XXXXXXXXXX
-----------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Senior Vice President,
General Counsel and Secretary
ROCHE HOLDINGS, INC.
By: /S/XXXXX XXXXX
-----------------------------
Name: Xxxxx Xxxxx
Title: Chief Financial Officer
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