SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-12477
AMGEN INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3540776
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 DeHavilland Drive, Thousand Oaks, California 91320-1789
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 447-1000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
As of June 30, 1997, the registrant had 265,136,353 shares of Common
Stock, $.0001 par value, outstanding.
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AMGEN INC.
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1.Financial Statements .......................3
Condensed Consolidated Statements of
Operations - three and six months
ended June 30, 1997 and 1996 ....................4
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 .............5
Condensed Consolidated Statements of
Cash Flows - six months
ended June 30, 1997 and 1996 ..................6-7
Notes to Condensed Consolidated Financial
Statements ...................................8-16
Item 2.Management's Discussion and Analysis
of Financial Condition and Results of
Operations .............................17-23
PART II OTHER INFORMATION
Item 1.Legal Proceedings .........................23
Item 4.Submission of Matters to a Vote of
of Security Holders .......................27
Item 6.Exhibits and Reports on Form 8-K ..........28
Signatures........................................29
Index to Exhibits.................................30
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The information in this report for the three and six months
ended June 30, 1997 and 1996 is unaudited but includes all
adjustments (consisting only of normal recurring accruals) which
Amgen Inc. ("Amgen" or the "Company") considers necessary for a fair
presentation of the results of operations for those periods.
The condensed consolidated financial statements should be read
in conjunction with the Company's financial statements and the notes
thereto contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
Interim results are not necessarily indicative of results for
the full fiscal year.
3
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AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
Revenues:
Product sales ............... $566.7 $518.9 $1,102.7 $ 995.8
Corporate partner revenues .. 40.0 42.0 67.4 63.8
Royalty income .............. 13.8 10.5 25.9 19.7
------ ------ -------- --------
Total revenues ............ 620.5 571.4 1,196.0 1,079.3
------ ------ -------- --------
Operating expenses:
Cost of Sales ............... 76.8 68.3 148.8 135.2
Research and development .... 145.4 123.6 293.1 254.2
Marketing and selling ....... 81.8 78.5 149.9 146.1
General and administrative .. 43.7 37.8 88.1 77.0
Loss of affiliates, net ..... 12.1 14.9 20.6 28.2
------ ------ -------- --------
Total operating expenses... 359.8 323.1 700.5 640.7
------ ------ -------- --------
Operating income ............. 260.7 248.3 495.5 438.6
------ ------ -------- --------
Other income (expense):
Interest and other income ... 18.0 12.2 33.9 31.2
Interest expense, net ....... (0.4) (1.7) (0.7) (4.0)
------ ------ -------- --------
Total other income
(expense) ................ 17.6 10.5 33.2 27.2
------ ------ -------- --------
Income before income taxes ... 278.3 258.8 528.7 465.8
Provision for income taxes ... 77.8 80.1 147.9 143.5
------ ------ -------- --------
Net income ................... $200.5 $178.7 $ 380.8 $ 322.3
====== ====== ======== ========
Earnings per share:
Primary ..................... $0.72 $0.64 $1.37 $1.14
Fully diluted ............... $0.72 $0.64 $1.37 $1.14
Shares used in calculation
of earnings per share:
Primary ..................... 277.5 280.9 277.8 282.2
Fully diluted ............... 277.5 280.9 277.8 282.2
See accompanying notes.
4
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AMGEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
June 30, December 31,
1997 1996
--------- -----------
ASSETS
Current assets:
Cash and cash equivalents ............... $ 331.0 $ 169.3
Marketable securities ................... 894.0 907.7
Trade receivables, net .................. 228.8 225.4
Inventories ............................. 105.6 97.4
Other current assets .................... 86.2 102.8
-------- --------
Total current assets................. 1,645.6 1,502.6
Property, plant and equipment at cost, net 1,045.4 910.5
Investments in affiliated companies....... 111.7 109.6
Other assets.............................. 240.6 242.9
-------- --------
$3,043.3 $2,765.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................ $ 82.6 $ 75.0
Accrued liabilities ..................... 440.5 449.7
Current portion of long-term debt ....... 65.0 118.2
-------- --------
Total current liabilities............ 588.1 642.9
Long-term debt............................ 134.0 59.0
Put warrants.............................. 51.6 157.4
Commitments and contingencies
Stockholders' equity:
Common stock, and additional paid-in
capital; $.0001 par value; 750 shares
authorized; outstanding - 265.1 shares
in 1997 and 264.7 shares in 1996..... 1,114.5 1,026.9
Retained earnings ....................... 1,155.1 879.4
-------- --------
Total stockholders' equity........... 2,269.6 1,906.3
-------- --------
$3,043.3 $2,765.6
======== ========
See accompanying notes.
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AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
June 30,
1997 1996
------ ------
Cash flows from operating activities:
Net income ................................. $380.8 $322.3
Depreciation and amortization .............. 65.1 54.9
Loss of affiliates, net .................... 20.6 28.2
Cash provided by (used in):
Trade receivables, net .................... (3.4) 0.5
Inventories ............................... (8.2) (3.0)
Other current assets ...................... 16.6 8.2
Accounts payable .......................... 7.6 (1.4)
Accrued liabilities ....................... (9.2) (14.4)
------ ------
Net cash provided by operating activities 469.9 395.3
------ ------
Cash flows from investing activities:
Purchases of property, plant and equipment . (195.0) (92.7)
Proceeds from maturities of marketable
securities ............................... 184.3 129.9
Proceeds from sales of marketable securities 312.4 449.6
Purchases of marketable securities ......... (483.0) (393.7)
Decrease (increase) in investments in
affiliated companies ..................... 3.2 (5.5)
Increase in other assets ................... (2.7) (65.7)
------ ------
Net cash (used in) provided by investing
activities ............................ (180.8) 21.9
------ ------
See accompanying notes.
(Continued on next page)
6
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AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
(Unaudited)
Six Months Ended
June 30,
1997 1996
------ -------
Cash flows from financing activities:
Repayment of long-term debt ................ $(78.2) $ -
Proceeds from issuance of long-term debt ... 100.0 -
Decrease in commercial paper ............... - (69.7)
Net proceeds from issuance of common
stock upon the exercise of stock options . 59.0 45.7
Tax benefits related to stock options ...... 28.6 15.8
Repurchases of common stock ................ (210.9) (234.8)
Other ...................................... (25.9) (26.7)
------ ------
Net cash used in financing activities .... (127.4) (269.7)
------ ------
Increase in cash and cash equivalents ....... 161.7 147.5
Cash and cash equivalents at beginning of
period .................................... 169.3 66.7
------ ------
Cash and cash equivalents at end of period .. $331.0 $214.2
====== ======
See accompanying notes.
7
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AMGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
1. Summary of significant accounting policies
Business
Amgen Inc. ("Amgen" or the "Company") is a global biotechnology
company that discovers, develops, manufactures and markets human
therapeutics based on advances in cellular and molecular biology.
Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries as well as affiliated
companies for which the Company has a controlling financial interest
and exercises control over their operations ("majority controlled
affiliates"). All material intercompany transactions and balances
have been eliminated in consolidation. Investments in affiliated
companies which are 50% or less owned and where the Company exercises
significant influence over operations are accounted for using the
equity method. All other equity investments are accounted for under
the cost method. The caption "Loss of affiliates, net" includes
Amgen's equity in the operating results of affiliated companies and
the minority interest others hold in the operating results of Amgen's
majority controlled affiliates.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined in a manner which approximates the first-in, first-out
(FIFO) method. Inventories are shown net of applicable reserves and
allowances. Inventories consist of the following (in millions):
June 30, December 31,
1997 1996
------ -------
Raw materials ...... $ 14.8 $15.9
Work in process .... 49.8 56.2
Finished goods ..... 41.0 25.3
------ -----
$105.6 $97.4
====== =====
Product sales
Product sales consist of two products, EPOGEN(R) (Epoetin alfa)
and NEUPOGEN(R) (Filgrastim).
8
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Quarterly NEUPOGEN(R) sales volume in the United States is
influenced by a number of factors including underlying demand and
wholesaler inventory management practices. Wholesaler inventory
reductions tend to reduce domestic NEUPOGEN(R) sales in the first
quarter each year. In addition, the discretionary aspects of some
cancer chemotherapy administration has had a slight seasonal effect
on NEUPOGEN(R) sales.
The Company has the exclusive right to sell Epoetin alfa for
dialysis, diagnostics and all non-human uses in the United States.
The Company sells Epoetin alfa under the brand name EPOGEN(R). Amgen
has granted to Ortho Pharmaceutical Corporation, a subsidiary of
Johnson & Johnson ("Johnson & Johnson"), a license relating to
Epoetin alfa for sales in the United States for all human uses except
dialysis and diagnostics. Pursuant to this license, Amgen does not
recognize product sales it makes into the exclusive market of Johnson
& Johnson and does recognize the product sales made by Johnson &
Johnson into Amgen's exclusive market. These sales amounts, and
adjustments thereto, are derived from Company shipments and from
third-party data on shipments to end users and their usage (see Note
4, "Contingencies - Johnson & Johnson arbitrations").
Foreign currency transactions
The Company has a program to manage foreign currency risk. As
part of this program, it has purchased foreign currency option and
forward contracts to hedge against possible reductions in values of
certain anticipated foreign currency cash flows generally over the
next 12 months, primarily resulting from its sales in Europe. At
June 30, 1997, the Company had option and forward contracts to
exchange foreign currencies for U.S. dollars of $24.8 million and
$22.8 million, respectively, all having maturities of seven months or
less. The option contracts, which have only nominal intrinsic value
at the time of purchase, are designated and effective as hedges of
anticipated foreign currency transactions for financial reporting
purposes, and accordingly, the net gains on such contracts are
deferred and will be recognized in the same period as the hedged
transactions. The forward contracts do not qualify as hedges for
financial reporting purposes, and accordingly, are marked-to-market.
Net gains on option contracts (including option contracts for hedged
transactions whose occurrence are no longer probable) and changes in
market values of forward contracts are reflected in interest and
other income. The deferred premiums on option contracts and fair
values of forward contracts are included in other current assets.
The Company has additional foreign currency forward contracts to
hedge exposures to foreign currency fluctuations of certain
receivables and payables denominated in foreign currencies. At June
30, 1997, the Company had forward contracts to exchange foreign
currencies, primarily Swiss francs, for U.S. dollars of $54.6
million, all having maturities of six months or less. These
contracts are designated and effective as hedges, and accordingly,
gains and losses on these forward contracts are recognized in the
same period the offsetting gains and losses of hedged assets and
liabilities are realized and recognized. The fair values of the
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forward contracts are included in the corresponding captions of the
hedged assets and liabilities. Gains and losses on forward
contracts, to the extent they differ in amount from the hedged
receivables and payables, are included in interest and other income.
Income taxes
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109 (Note 3).
Stock option and purchase plans
The Company's stock options and purchase plans are accounted for
under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees".
Earnings per share
Primary and fully diluted earnings per share are based upon the
weighted average number of common shares and dilutive common stock
equivalents during the period in which they were outstanding. Common
stock equivalents are outstanding options under the Company's stock
option plans which are included in the earnings per share computation
under the treasury stock method. Put warrants on the Company's
common stock may also be dilutive and included in earnings per share
under the reverse treasury stock method.
In February 1997, SFAS No. 128, "Earnings Per Share" was issued
and is required to be adopted on December 31, 1997. At that time,
the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under
the new requirements, primary and fully diluted earnings per share
will be replaced with basic and diluted earnings per share. Basic
earnings per share excludes the dilutive effect of stock options and
will therefore be higher than primary earnings per share. Basic
earnings per share for the three and six months ended June 30, 1997
were $.76 and $1.44, respectively. Basic earnings per share for the
three and six months ended June 30, 1996 were $.67 and $1.21,
respectively. Diluted earnings per share under the new standard is
expected to be essentially the same as primary earnings per share
amounts calculated under principles currently used.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results may
differ from those estimates.
Basis of presentation
The financial information for the three and six months ended
June 30, 1997 and 1996 is unaudited but includes all adjustments
(consisting only of normal recurring accruals) which the Company
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considers necessary for a fair presentation of the results of
operations for these periods. Interim results are not necessarily
indicative of results for the full fiscal year.
2. Debt
During the first quarter of 1997, the Company paid off $78.2
million of maturing debt consisting of $28.2 million of promissory
notes and $50 million of debt securities.
Long-term debt consists of the following (in millions):
June 30, December 31,
1997 1996
-------- --------
Promissory notes .......... $ 40.0 $ 68.2
Debt securities ........... 159.0 109.0
------ ------
199.0 177.2
Less current portion ...... (65.0) (118.2)
------ ------
$134.0 $ 59.0
====== ======
The Company has registered $213 million of unsecured debt
securities of which $159 million were outstanding and none were
available for issuance at June 30, 1997. At June 30, 1997, $59
million of these debt securities then outstanding bear interest at
fixed rates averaging 5.8% and mature in approximately one to six
years.
In April 1997, the Company issued the remaining $100 million of
debt securities under its shelf registration which bear interest at a
fixed rate of 8.1% and mature on April 1, 2097. These securities may
be redeemed in whole or in part at the Company's option at any time
for a redemption price equal to the greater of the principal amount
to be redeemed or the sum of the present values of the principal and
remaining interest payments discounted at a determined rate plus, in
each case, accrued interest. These securities place limitations on
liens and sale/leaseback transactions.
As of June 30, 1997, $150 million was available under the
Company's line of credit for borrowing and to support the Company's
commercial paper program. No borrowings on this line of credit were
outstanding at June 30, 1997.
3. Income taxes
11
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The provision for income taxes consists of the following (in
millions):
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------ ------ ------ ------
Federal(including
U.S. possessions)... $72.3 $72.8 $137.4 $130.1
State ................ 5.5 7.3 10.5 13.4
----- ----- ------ ------
$77.8 $80.1 $147.9 $143.5
===== ===== ====== ======
The decrease in the effective tax rate in the current year is
the result of a favorable ruling received in the third quarter of
1996 from the Puerto Rican government with respect to tollgate taxes
applicable to earnings in Puerto Rico.
4. Contingencies
Johnson & Johnson arbitrations
In September 1985, the Company granted Johnson & Johnson a
license relating to certain patented technology and know-how of the
Company to sell a genetically engineered form of recombinant human
erythropoietin, called Epoetin alfa, throughout the United States for
all human uses except dialysis and diagnostics. Johnson & Johnson
sells Epoetin alfa under the brand name PROCRIT(R).
A number of disputes have arisen between Amgen and Johnson &
Johnson as to their respective rights and obligations under the
various agreements between them, including the agreement granting the
license (the "License Agreement"). These disputes have been the
subject of arbitration proceedings before Judicial Arbitration and
Mediation Services, Inc. in Chicago, Illinois commencing in January
1989. A dispute that has not yet been resolved and is the subject of
the current arbitration proceeding relates to the audit methodology
currently employed by the Company for Epoetin alfa sales. The
Company and Johnson & Johnson are required to compensate each other
for Epoetin alfa sales which either party makes into the other
party's exclusive market. The Company has established and is
employing an audit methodology to assign the proceeds of sales of
EPOGEN(R) and PROCRIT in Amgen's and Johnson & Johnson's respective
exclusive markets. Based upon this audit methodology, the Company is
seeking payment of approximately $12.6 million (excluding interest)
from Johnson & Johnson for the period 1991 through 1994. Johnson &
Johnson has disputed this methodology and is proposing an alternative
methodology for adoption by the arbitrator pursuant to which it is
seeking payment of approximately $423 million (including interest
through December 1996) for the period 1989 through 1994. If as a
result of the arbitration proceeding, a methodology different from
that currently employed by the Company is instituted to assign the
proceeds of sales between the parties, it may yield results that are
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different from the results of the audit methodology currently
employed by the Company. As a result of the arbitration, it is
possible that the Company would recognize a different level of
EPOGEN(R) sales than is currently being recognized. As a result of
the arbitration, the Company may be required to pay additional
compensation to Johnson & Johnson for sales during prior periods, or
Johnson & Johnson may be required to pay compensation to the Company
for such prior period sales. While it is impossible to predict
accurately or determine the outcome of these proceedings, based
primarily upon the merits of its claims and based upon certain
liabilities established due to the inherent uncertainty of any
arbitrated result, the Company believes that the outcome of these
proceedings will not have a material adverse effect on its financial
statements. A trial commenced in March 1996, regarding the audit
methodologies and compensation for sales by Johnson & Johnson into
Amgen's exclusive market and sales by Amgen into Johnson & Johnson's
exclusive market. In December 1996, testimony in the arbitration
ended. Final argument before the arbitrator on the parties'
respective audit methodologies and claims occurred on May 19, 1997,
whereafter the matter was fully briefed and submitted to the
arbitrator for decision.
The Company has filed a demand in the arbitration to terminate
Johnson & Johnson's rights under the License Agreement and to recover
damages for breach of the License Agreement. Johnson & Johnson
disputes Arbitrator McGarr's jurisdiction to decide the Company's
demand. A hearing before Arbitrator McGarr on the Company's demand
will be scheduled following his adjudication of the audit
methodologies for Epoetin alfa sales.
On October 2, 1995, Johnson & Johnson filed a demand for a
separate arbitration proceeding against the Company before the
American Arbitration Association ("AAA") in Chicago, Illinois.
Johnson & Johnson alleges in this demand that the Company has
breached the License Agreement. The demand also includes allegations
of various antitrust violations. In this demand, Johnson & Johnson
seeks an injunction, declaratory relief, unspecified compensatory
damages, punitive damages and costs. On October 27, 1995, the
Company filed a complaint in the Circuit Court of Cook County,
Illinois seeking an order compelling Johnson & Johnson to arbitrate
the Company's claim for termination before Arbitrator McGarr as well
as all related counterclaims asserted in Johnson & Johnson's October
2, 1995 AAA arbitration demand. The Company is unable to predict at
this time the outcome of the demand for termination or when it will
be resolved. The Company has filed a motion to stay the AAA
arbitration pending the outcome of the existing arbitration
proceedings before Judicial Arbitration and Mediation Services, Inc.
discussed above. The Company has also filed an answer and
counterclaim denying that AAA has jurisdiction to hear or decide the
claims stated in the demand, denying the allegations in the demand
and counter claiming for certain unpaid invoices.
On June 5, 1997, Ortho Biotech, Inc., a Johnson & Johnson
affiliate, filed a demand for arbitration against Kirin-Amgen, Inc.
("Kirin-Amgen"), before the American Arbitration Association ("AAA").
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The demand alleges that Amgen's novel erythropoiesis stimulating
protein ("NESP") is covered by a license granted by Kirin-Amgen to
Ortho Pharmaceutical Corporation in 1985 for the development,
manufacture and sale of Epoetin alfa in certain territories outside
the United States, Japan and China. In 1996 Kirin-Amgen acquired
exclusive worldwide rights in NESP from Amgen. Kirin-Amgen, in turn,
transferred certain rights in NESP to Kirin and certain rights to
Amgen. Ortho Biotech alleges that Ortho Pharmaceutical's 1985
license agreement with Kirin-Amgen effectively grants Ortho Biotech
the same right to develop, manufacture and sell NESP as Kirin-Amgen
previously granted to Ortho Pharmaceutical in 1985 for the
development, manufacture and sale of Epoetin alfa. On June 20, 1997
Kirin-Amgen initiated suit in the Circuit Court of Cook County,
Illinois seeking a judicial determination of Ortho Biotech's standing
to seek arbitration of claims under Kirin-Amgen's 1985 license
agreement with Ortho Pharmaceutical. At the same time, Kirin-Amgen
filed a motion with AAA to dismiss or stay the arbitration pending
judicial resolution of Ortho Biotech's standing to arbitrate claims
under Kirin-Amgen's license agreement with Ortho Pharmaceutical.
Synergen ANTRIL(TM) litigation
Lawsuits have been filed against the Company's wholly-owned
subsidiary, Amgen Boulder Inc. (formerly Synergen, Inc.), alleging
misrepresentations in connection with Synergen's research and
development of ANTRIL(TM) for the treatment of sepsis. One suit,
filed by a limited partner of the partnership with which Amgen
Boulder Inc. is affiliated, has been certified as a class action.
That suit seeks rescission of certain payments made by the limited
partners to the partnership (or unspecified damages not less than $52
million) and treble damages based on a variety of allegations
relating to state and federal law claims. The plaintiffs in that
suit also have filed a second amended complaint alleging violations
of federal securities laws. In August and September 1996, the
parties filed cross-motions for summary judgement. The Court heard
argument on November 1, 1996. Since then, the parties'
representatives have reached a tentative settlement agreement which
is subject to final approval by the Court and the approval of the
limited partners of the partnership. Under its terms, the
plaintiffs, who include present limited partners of the partnership,
will receive $14.5 million in exchange for the transfer of ownership
of their units; the suit will be dismissed with prejudice and the
parties will exchange mutual releases. In a separate matter, on June
13, 1997, the parties in the matter Susquehanna Investment Group, et
al. v. Amgen Boulder, Inc., et al., agreed to a settlement in that
matter in which Amgen Boulder, Inc. agreed to pay $1 million in
exchange for dismissal of the suit. On July 23, 1997, the lawsuit
was dismissed with prejudice.
FoxMeyer Health Corporation
On January 10, 1997, FoxMeyer Health Corporation, now known as
Avatex Corporation ("Avatex"), filed suit (the "FoxMeyer Lawsuit") in
the District Court of Dallas County, Dallas, Texas, alleging that
defendant McKesson Corporation ("McKesson") defrauded Avatex, misused
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confidential information received from Avatex about subsidiaries of
Avatex (FoxMeyer Corporation and FoxMeyer Drug Corporation,
collectively the "FoxMeyer Subsidiaries"), and attempted to
monopolize the market for pharmaceutical and health care product
distribution by attempting to injure or destroy the FoxMeyer
Subsidiaries. The Company is named as one of twelve "Manufacturer
Defendants" alleged to have conspired with McKesson Corporation in
doing, among other things, the above and (i) inducing Avatex to
refrain from seeking other suitable purchasers for the FoxMeyer
Subsidiaries and (ii) causing Avatex to believe that McKesson was
serious about purchasing Avatex's assets at fair value, when, in
fact, McKesson was not. The Manufacturer Defendants and McKesson are
also alleged to have intentionally and tortiously interfered with a
number of business expectancies and opportunities. The complaint
seeks from the Manufacturer Defendants and McKesson compensatory
damages of at least $400 million and punitive damages in an
unspecified amount, as well as Avatex's costs and attorney's fees.
On January 31, 1997, the Company filed an answer denying Avatex's
allegations. On February 4, 1997, a Notice of Removal was filed in
the Federal District Court for Dallas, Texas (the "District Court"),
which was referred by the District Court to the Federal Bankruptcy
Court in Dallas, Texas (the "Texas Bankruptcy Court"). Subsequently,
on February 7, 1997, a Motion to Transfer Venue was filed in the
Texas Bankruptcy Court requesting that this matter be transferred to
the Federal Bankruptcy Court in Delaware (the "Delaware Bankruptcy
Court"), where the FoxMeyer Subsidiaries' Chapter 7 bankruptcy action
is pending. The Company is a creditor in such bankruptcy proceeding.
Avatex had moved to remand the case to state court. On March 18,
1997, the Manufacturer Defendants filed in the Delaware Bankruptcy
Court a Motion to Intervene in the creditors' committee (the "Chapter
11 Committee") action that asserted that the Delaware Bankruptcy
Court should enjoin the FoxMeyer Lawsuit. Also on March 18, 1997,
the Delaware Bankruptcy Court converted the FoxMeyer Subsidiaries'
Chapter 11 bankruptcy action to a liquidation proceeding under
Chapter 7. The order converting the FoxMeyer Subsidiaries'
bankruptcy to a Chapter 7 proceeding also stayed all adversary
proceedings and other proceedings filed in the bankruptcy until a
permanent trustee was elected. As of August 1, 1997, although the
issues are fully briefed, no ruling has been made by the Dallas
Bankruptcy Court with respect to either the Motion to Transfer Venue
to the Delaware Bankruptcy Court or the Avatex Motion to Remand to
state court. The trustee has moved to intervene as plaintiff in the
Dallas Bankruptcy Court action, has filed a memorandum supporting
transfer and has also filed a memorandum opposing remand or
abstention. McKesson has intervened in the Delaware Bankruptcy Court
action to enjoin the Avatex lawsuit and has moved for partial summary
judgment in that proceeding, asserting that Avatex is not the owner
of the alleged causes of action. The Manufacturer Defendants have
also intervened in that Delaware Bankruptcy Court action and have
joined in McKesson's summary judgment motion. The trustee has
substituted for the Chapter 11 Committee as the plaintiff in that
action and has also filed its motion for partial summary judgment
also asserting that Avatex does not own the causes of action. Avatex
has moved to file its response to McKesson's motion for partial
summary judgment under seal by reason of various deposition materials
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originally taken pursuant to a confidentiality order which materials
are being utilized in connection with the partial summary judgment.
McKesson has objected. Avatex has filed its answer and affirmative
defenses to the McKesson complaint for injunction. To date, no
discovery has occurred in either the Dallas Bankruptcy Court
adversary proceedings or the Delaware Bankruptcy Court adversary
proceeding for injunction. There are no pleadings yet on file by
either the trustee, McKesson or the Manufacturer Defendants
concerning the issue whether McKesson owns the alleged causes of
action rather than the Chapter 7 trustee.
While it is not possible to predict accurately or determine the
eventual outcome of the above described legal matters or various
other legal proceedings (including patent disputes) involving Amgen,
the Company believes that the outcome of these proceedings will not
have a material adverse effect on its financial statements.
5. Stockholders' equity
During the six months ended June 30, 1997, the Company
repurchased 3.5 million shares of its common stock at a total cost of
$210.9 million under its common stock repurchase program. The Board
of Directors has authorized the Company to repurchase up to $450
million of shares during 1997. Stock repurchased under the program
is retired.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Cash provided by operating activities has been and is expected
to continue to be the Company's primary source of funds. During the
six months ended June 30, 1997, operations provided $469.9 million of
cash compared with $395.3 million during the same period last year.
The Company had cash, cash equivalents and marketable securities of
$1,225 million at June 30, 1997, compared with $1,077 million at
December 31, 1996.
Capital expenditures totaled $195 million for the six months
ended June 30, 1997, compared with $92.7 million for the same period
a year ago. The Company anticipates spending approximately $350
million to $400 million on capital projects and equipment to expand
the Company's global operations in 1997. Thereafter over the next
few years, capital expenditures are expected to average approximately
$350 million per year.
The Company receives cash from the exercise of employee stock
options. During the six months ended June 30, 1997, stock options
and their related tax benefits provided $87.6 million of cash
compared with $61.5 million for the same period last year. Proceeds
from the exercise of stock options and their related tax benefits
will vary from period to period based upon, among other factors,
fluctuations in the market value of the Company's stock relative to
the exercise price of such options.
The Company has a stock repurchase program to offset the
dilutive effect of its employee stock option and stock purchase
plans. During the six months ended June 30, 1997, the Company
purchased 3.5 million shares of its common stock at a cost of $210.9
million compared with 4 million shares purchased at a cost of $234.8
million during the same period last year. The Company expects to
repurchase up to $450 million of its stock under the program in 1997.
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During the six months ended June 30, 1997, the Company repaid
$50 million of debt securities that had been issued under the
Company's former shelf registration statement (the "Shelf"). At June
30, 1997, an aggregate of $159 million was issued and outstanding
under the Shelf, with no additional issuances remaining under the
Shelf. Of these debt securities outstanding under the Shelf, $59
million bear interest at fixed rates averaging 5.8% and mature in
approximately one to six years. In April 1997, the Company issued
$100 million of debt securities under the Shelf which bear interest
at a fixed rate of 8.1% and mature on April 1, 2097. These debt
securities were issued to refinance a portion of debt that has
matured or will mature in 1997 (see Note 2 to the Condensed
Consolidated Financial Statements). The Company also repaid $28.2
million of promissory notes during the six months ended June 30,
1997.
The Company also has sources of debt financing in order to
provide for financial flexibility and increased liquidity. The
Company has a commercial paper program which provides for short-term
borrowings up to an aggregate face amount of $200 million. The
Company also has a $150 million revolving line of credit for
borrowings and to support the commercial paper program. As of June
30, 1997, no amounts were outstanding under either source.
The primary objectives for the Company's investment portfolio
are liquidity and safety of principal. Investments are made to
achieve the highest rate of return to the Company, consistent with
these two objectives. The Company's investment policy limits
investments to certain types of instruments issued by institutions
with investment grade credit ratings and places restrictions on
maturities and concentration by type and issuer. The Company invests
its excess cash in securities with varying maturities to meet
projected cash needs.
The Company believes that existing funds, cash generated from
operations and existing sources of debt financing are adequate to
satisfy its working capital and capital expenditure requirements for
the foreseeable future, as well as to support its stock repurchase
program. However, the Company may raise additional capital from time
to time to take advantage of favorable conditions in the markets or
in connection with the Company's corporate development activities.
Results of Operations
Product sales
Product sales increased 9% and 11% for the three and six months
ended June 30, 1997, respectively, compared with the same periods
last year.
NEUPOGEN(R) (Filgrastim)
Worldwide NEUPOGEN(R) sales were $271.8 million and $516.2
million for the three and six months ended June 30, 1997,
respectively. These amounts represent increases of $17.1 million and
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$28.7 million or 7% and 6%, respectively, over the same periods last
year. These increases are primarily due to demand growth in domestic
and, to a lesser extent, international markets. Unfavorable foreign
currency effects and tight European government budget issues reduced
growth in European Union ("EU") sales. In addition, the Company
believes that the use of protease inhibitors as a supportive therapy
in various AIDs-related therapies has reduced domestic sales of
NEUPOGEN(R) for off-label use in this setting. NEUPOGEN(R) is not
approved or promoted for such use.
Quarterly NEUPOGEN(R) sales volume in the United States is
influenced by a number of factors including underlying demand and
wholesaler inventory management practices. Wholesaler inventory
reductions tend to reduce domestic NEUPOGEN(R) sales in the first
quarter each year. In addition, the discretionary aspects of some
cancer chemotherapy administration has had a slight seasonal effect
on NEUPOGEN(R) sales.
Cost containment pressures in the health care marketplace have
contributed to the slowing of growth in domestic NEUPOGEN(R) usage
over the past several years. These pressures are expected to
continue to influence such growth for the foreseeable future.
The growth of the colony stimulating factor ("CSF") market in
the EU in which NEUPOGEN(R) competes has slowed, and is expected to
continue to slow, principally due to cost controls resulting from
government budget issues in EU countries. Additionally, the Company
faces competition from another granulocyte CSF product. Although the
Company's CSF market share in the EU has remained relatively constant
over the last several quarters, the Company does not expect the
competitive intensity to subside in the near future.
EPOGEN(R) (Epoetin alfa)
EPOGEN(R) sales were $294.9 million and $586.5 million for the
three and six months ended June 30, 1997, respectively. These
amounts represent increases of $30.7 million and $78.2 million or 12%
and 15%, respectively, over the same periods last year. For the six
months ended June 30, 1997, the increase was primarily due to
continued increases in the U.S. dialysis patient population and, to a
lesser extent, the administration of higher doses. Although sales in
the three months ended June 30, 1997, did benefit from increases in
the U.S. dialysis patient population, EPOGEN(R) sales in this period
were adversely affected by reimbursement changes announced by the
Health Care Finance Administration ("HCFA"). Prior to this change,
Fiscal Intermediaries under contract to HCFA were authorized to pay
reimbursement claims for patients whose hematocrits were above the
FDA approved level of 36 percent with adequate medical justification.
Under the new rules, medical justification will no longer be accepted
for payment of claims above 36 percent, and reimbursement will be
denied if the current month's hematocrit is 36 or above and the
patient's hematocrit exceeds 36.5 percent on a 90-day "rolling
average" basis. It has been and remains difficult to predict
EPOGEN(R) usage during initial implementation of this new policy
because individual patient hematocrit variability is high, the timing
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and nature of dialysis center actions varies widely, and the twice
postponed implementation date has lengthened the duration of the
implementation period. Implementation, originally set for July 1,
1997, is now scheduled for September 1, 1997. The Company initially
experienced an impact on EPOGEN(R) sales of withheld and lowered
doses in the three months ended June 30, 1997, as some dialysis
providers attempted to reduce hematocrits to avoid future claim
denials. The Company anticipates that because patient hematocrits
can vary significantly from month to month, physicians will withhold
doses and administer reduced doses to patients to maintain
hematocrits at a level which, in their judgment, is sufficiently low
to avoid a claim denial. Amgen is aggressively providing information
and guidance to dialysis providers on changes in their practices to
both maximize patient outcomes to the greatest extent permitted by
the new policy and minimize the potential that claims will be denied.
It is not possible to predict which recommendations will be adopted
by each dialysis center or when they will do so.
Corporate partner revenues
Corporate partner revenues decreased by $2 million, or 5%, and
increased $3.6 million, or 6%, during the three and six months ended
June 30, 1997, respectively, compared with the same periods last
year. During the three months ended June 30, 1997 a $20 million
milestone payment was received from Yamanouchi Pharmaceutical Co.,
Ltd. ("Yamanouchi") compared with a $15 million licensing payment
earned from Yamanouchi during the second quarter of 1996. Despite
this increase in funding from Yamanouchi, corporate partner revenues
decreased during the three months ended June 30, 1997 compared with
the same period last year primarily due to a reduction in funding
from Kirin-Amgen, Inc.
Cost of sales
Cost of sales as a percentage of product sales was 13.6% and
13.5% for the three and six months ended June 30, 1997, respectively,
compared to 13.2% and 13.6% for the same periods last year. In 1997,
cost of sales as a percentage of product sales is expected to range
from 13%-14% reflecting continuing efficiencies of the Puerto Rican
operations.
Research and development
During the three and six months ended June 30, 1997, research
and development expenses increased $21.8 million and $38.9 million,
or 18% and 15%, respectively, compared with the same periods last
year. These increases are primarily due to staff-related expenses
for clinical and preclinical activities necessary to support ongoing
product development activities. In 1997, annual research and
development expenses are expected to increase at a rate exceeding the
Company's product sales growth rate. This increase is planned for
internal efforts on development of product candidates, for discovery,
and for licensing efforts.
Marketing and selling/General and administrative
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Marketing and selling expenses increased $3.3 million and $3.8
million, or 4% and 3%, respectively, during the three and six months
ended June 30, 1997 compared with the same periods last year. These
increases were relatively small because higher staff-related costs
and higher outside marketing expenses were substantially offset by
lower European marketing expenses resulting from the favorable
effects of foreign currency exchange rates, and lower expenses
related to the Johnson & Johnson arbitration.
General and administrative expenses increased $5.9 million and
$11.1 million, or 16% and 14%, respectively, during the three and six
months ended June 30, 1997 compared with the same periods last year
These increases were primarily due to higher legal and staff-related
expenses.
In 1997, marketing and selling expenses combined with general
and administrative expenses are expected to have an aggregate annual
growth rate lower than the anticipated annual product sales growth
rate due in part to the favorable impact of foreign currency exchange
rates on European expenses and reduced expenses related to the
Johnson & Johnson arbitration.
Interest and other income
Interest and other income increased $5.8 million and $2.7
million, or 48% and 9%, respectively, during the three and six months
ended June 30, 1997 compared with the same periods last year. These
increases are primarily due to gains on foreign currency denominated
contracts and interest income from higher cash balances. These
increases were partially offset by investment portfolio capital
losses realized in the current year periods while capital gains were
realized in the first quarter of 1996. Interest and other income is
expected to fluctuate from period to period primarily due to changes
in cash balances and interest rates.
Income taxes
The Company's effective tax rate for both the three and six
months ended June 30, 1997 was 28.0% compared with 31.0% and 30.8%,
respectively, for the same periods last year. These decreases in the
tax rate resulted from a favorable ruling received in the third
quarter of 1996 from the Puerto Rican government with respect to
tollgate taxes applicable to earnings in Puerto Rico. In 1998, the
Company expects the tax rate to increase to approximately 31%, due to
a change in the U.S. federal tax law which limits the tax benefits
related to manufacturing in Puerto Rico, the location of the
Company's fill-and-finish facility.
Foreign currency transactions
The Company has a program to manage certain portions of its
exposure to fluctuations in foreign currency exchange rates arising
from international operations. The Company generally hedges the
receivables and payables with foreign currency forward contracts,
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which typically mature within six months. The Company uses foreign
currency option and forward contracts which generally expire within
12 months to hedge certain anticipated future sales and expenses. At
June 30, 1997, outstanding foreign currency option and forward
contracts totaled $24.8 million and $77.4 million, respectively.
Financial Outlook
Worldwide NEUPOGEN(R) (Filgrastim) sales for 1997 are expected
to grow at a rate lower than the 1996 growth rate. Future
NEUPOGEN(R) sales increases are dependent primarily upon further
penetration of existing markets, the timing and nature of additional
indications for which the product may be approved and the effects of
competitive products. Although not approved or promoted for use in
Amgen's domestic or foreign markets, except for Australia, the
Company believes that approximately 10% of its worldwide NEUPOGEN(R)
sales are from off-label use as a supportive therapy in various AIDS-
related treatments. Changes in AIDS therapies, including therapies
that may be less myelosuppressive, are believed to have adversely
affected and are expected to continue to adversely affect such sales.
NEUPOGEN(R) usage is expected to continue to be affected by cost
containment pressures on health care providers worldwide. In
addition, international NEUPOGEN(R) sales will continue to be subject
to changes in foreign currency exchange rates and government budgets.
The Company believes that the EPOGEN(R) (Epoetin alfa) year-
over-year sales growth rate for the second half of 1997 will be less
than the 15% growth rate reported in the first half of this year.
The Company also anticipates that increases in the U.S. dialysis
patient population, and, to a lesser extent, dosing, will continue to
drive EPOGEN(R) sales in future years.
The Company anticipates that the total product sales growth rate
in 1997 will be somewhat less than double digits. Earnings are
expected to grow at a double digit rate in 1997, however, Amgen has
advised analysts that it is no longer comfortable with the current
range of their estimates of earnings per share. Estimates of future
product sales and earnings, however, are necessarily speculative in
nature and are difficult to predict with accuracy.
Except for the historical information contained herein, the
matters discussed herein are by their nature forward-looking. For
reasons stated, or for various unanticipated reasons, actual results
may differ materially. Amgen operates in a rapidly changing
environment that involves a number of risks, some of which are beyond
the Company's control. Future operating results and matters which
may affect the Company's stock price may be affected by a number of
factors, certain of which are discussed elsewhere herein and are
discussed in the sections appearing under the heading "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Factors That May Affect Future Results" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996,
which sections are incorporated herein by reference and filed as an
exhibit hereto.
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Legal Matters
The Company is engaged in arbitration proceedings with one of
its licensees and various other legal proceedings. For a discussion
of these matters, see Note 4 to the Condensed Consolidated Financial
Statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is engaged in arbitration proceedings with one of
its licensees. For a complete discussion of these matters see Note 4
to the Condensed Consolidated Financial Statements - "Contingencies -
Johnson & Johnson arbitrations". Other legal proceedings are also
reported in Note 4 to the Condensed Consolidated Financial Statements
and in the Company's Form 10-K for the year ended December 31, 1996,
with material developments since that report described below. While
it is not possible to predict accurately or to determine the eventual
outcome of these matters, the Company believes that the outcome of
these legal proceedings will not have a material adverse effect on
the financial statements of the Company.
False Claims Act matter
As previously reported, Amgen was named as a defendant in a
civil lawsuit initiated by a former employee of Amgen in the United
States District Court for the Eastern District of Pennsylvania. This
suit, United States ex rel. Eric Zwick v. Amgen Inc., et al., was
filed under the qui tam provisions of the Federal False Claims Act.
On June 11, 1997, after a full review of the allegations, the United
States Department of Justice filed a Notice of Election to Decline
Intervention in the lawsuit. In addition, on June 28, 1997, the
Court granted the former employee's motion to dismiss the action
without prejudice.
Synergen ANTRIL(TM) litigation
On June 13, 1997, the parties in the matter Susquehanna
Investment Group, et al. v. Amgen Boulder, Inc., et al., agreed to a
settlement in that matter in which Amgen Boulder, Inc. agreed to pay
$1 million in exchange for dismissal of the suit. On July 23, 1997,
the lawsuit was dismissed with prejudice.
NESP Matter
On June 5, 1997, Ortho Biotech, Inc. ("Ortho Biotech"), a
Johnson & Johnson affiliate, filed a demand for arbitration against
Kirin-Amgen, Inc. ("Kirin-Amgen"), before the American Arbitration
Association ("AAA"). The demand alleges that Amgen's novel
erythropoiesis stimulating protein ("NESP") is covered by a license
granted by Kirin-Amgen to Ortho Pharmaceutical Corporation in 1985
for the development, manufacture and sale of Epoetin alfa in certain
territories outside the United States, Japan and China. In 1996
Kirin-Amgen acquired exclusive worldwide rights in NESP from Amgen.
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Kirin-Amgen, in turn, transferred certain rights in NESP to Kirin and
certain rights to Amgen. Ortho Biotech alleges that Ortho
Pharmaceutical's 1985 license agreement with Kirin-Amgen effectively
grants Ortho Biotech the same right to develop, manufacture and sell
NESP as Kirin-Amgen previously granted to Ortho Pharmaceutical in
1985 for the development, manufacture and sale of Epoetin alfa. On
June 20, 1997 Kirin-Amgen initiated suit in the Circuit Court of Cook
County, Illinois seeking a judicial determination of Ortho Biotech's
standing to seek arbitration of claims under Kirin-Amgen's 1985
license agreement with Ortho Pharmaceutical. At the same time,
Kirin-Amgen filed a motion with AAA to dismiss or stay the
arbitration pending judicial resolution of Ortho Biotech's standing
to arbitrate claims under Kirin-Amgen's license agreement with Ortho
Pharmaceutical.
Transkaryotic Therapies and Hoechst litigation
On April 15, 1997, Amgen filed suit in the United States
District Court in Boston Massachusetts against Transkaryotic
Therapies Inc. ("TKT") and Hoechst Marion Roussel alleging
infringement of several U.S. patents owned by Amgen that claim an
erythropoietin product and processes for making erythropoietin. The
suit seeks an injunction preventing the defendants from making,
importing, using or selling erythropoietin in the U.S. On July 9,
1997, the Court denied TKT's motion to dismiss the lawsuit on the
pleadings.
Biogen litigation
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On March 10, 1995, Biogen Inc. ("Biogen"), filed suit in the
United States District Court for the District of Massachusetts
alleging infringement by the Company of certain claims of U.S. Patent
4,874,702 (the "`702 Patent"), relating to vectors for expressing
cloned genes. Biogen alleges that Amgen has infringed its patent by
manufacturing and selling NEUPOGEN(R). On March 28, 1995, Biogen
filed an amended complaint further alleging that the Company is also
infringing the claims of two additional patents allegedly assigned to
Biogen, U.S. Patent 5,401,642 (the "`642 Patent") and U.S. Patent No.
5,401,658 (the "`658 Patent"), relating to vectors, methods for
making vectors and expressing closed genes. The amended complaint
seeks injunctive relief, unspecified compensatory damages and treble
damages. On April 24, 1995, the Company answered Biogen's amended
complaint, denying its material allegations and pleading
counterclaims for declaratory judgment of non-infringement, patent
invalidity and unenforceability. On January 19, 1996, the Court
decided, upon Biogen's motion to dismiss certain of Amgen's
counterclaims, that it will exert jurisdiction over claims 9 and 17
of the `702 Patent, and dismissed all claims and counterclaims
relating to any other claims of the `702 Patent. Amgen moved (the
"Summary Adjudication Motion") for summary judgment of invalidity of
claim 9 of the `702 Patent. On July 7, 1997, the Company's Summary
Adjudication Motion was denied. This denial is not dispositive of
the case, and the effect of the ruling may be to reserve certain
issues for trial. Discovery is substantially complete. No trial
date has been set.
In a separate matter, on July 30, 1997, Biogen filed a complaint
in the United States District Court for the District of Massachusetts
in Boston alleging that Amgen infringes claims 9 and 17 of the `702
Patent, and the `642 Patent and `658 Patent by making and using the
claimed subject matter in the United States in the manufacture of
INFERGEN(R), the Company's consensus interferon product. As of July
31, 1997, Amgen had not been served with the complaint.
Consensus interferon litigation
On December 3, 1996, Schering Corporation filed suit in the U.S.
District Court for the District of Delaware (the "Delaware Court")
against the Company alleging infringement of U.S. Patent No.
4,530,901 (the "`901 Patent") by the manufacture and use of the
Company's Consensus Interferon product. The complaint seeks
unspecified damages and injunctive relief. The Company filed a
motion to dismiss (the "Motion to Dismiss") the action on January 24,
1997. On January 22, 1997, the Company filed an action for
declaratory relief in the United States District Court for the
Central District of California in Los Angeles (the "California
Court") naming Biogen Inc. and Schering Corporation as parties. The
action seeks a declaration that the `901 Patent is not infringed by
the Company's use of INFERGEN(R) and/or that the `901 Patent is
invalid. By agreement between the parties, the Motion to Dismiss was
withdrawn and a motion to transfer the case to California was filed
on March 10, 1997. On June 24, 1997, the Delaware Court denied
Amgen's motion to transfer and the case is now proceeding in
Delaware. Pursuant to an agreement between the parties, Amgen
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withdrew its complaint filed in California. Biogen has been added as
a plaintiff in the Delaware action.
FoxMeyer Health Corporation
On January 10, 1997, FoxMeyer Health Corporation, now known as
Avatex Corporation ("Avatex"), filed suit (the "FoxMeyer Lawsuit") in
the District Court of Dallas County, Dallas, Texas, alleging that
defendant McKesson Corporation ("McKesson") defrauded Avatex, misused
confidential information received from Avatex about subsidiaries of
Avatex (FoxMeyer Corporation and FoxMeyer Drug Corporation,
collectively the "FoxMeyer Subsidiaries"), and attempted to
monopolize the market for pharmaceutical and health care product
distribution by attempting to injure or destroy the FoxMeyer
Subsidiaries. The Company is named as one of twelve "Manufacturer
Defendants" alleged to have conspired with McKesson Corporation in
doing, among other things, the above and (i) inducing Avatex to
refrain from seeking other suitable purchasers for the FoxMeyer
Subsidiaries and (ii) causing Avatex to believe that McKesson was
serious about purchasing Avatex's assets at fair value, when, in
fact, McKesson was not. The Manufacturer Defendants and McKesson are
also alleged to have intentionally and tortiously interfered with a
number of business expectancies and opportunities. The complaint
seeks from the Manufacturer Defendants and McKesson compensatory
damages of at least $400 million and punitive damages in an
unspecified amount, as well as Avatex's costs and attorney's fees.
On January 31, 1997, the Company filed an answer denying Avatex's
allegations. On February 4, 1997, a Notice of Removal was filed in
the Federal District Court for Dallas, Texas (the "District Court"),
which was referred by the District Court to the Federal Bankruptcy
Court in Dallas, Texas (the "Texas Bankruptcy Court"). Subsequently,
on February 7, 1997, a Motion to Transfer Venue was filed in the
Texas Bankruptcy Court requesting that this matter be transferred to
the Federal Bankruptcy Court in Delaware (the "Delaware Bankruptcy
Court"), where the FoxMeyer Subsidiaries' Chapter 7 bankruptcy action
is pending. The Company is a creditor in such bankruptcy proceeding.
Avatex had moved to remand the case to state court. On March 18,
1997, the Manufacturer Defendants filed in the Delaware Bankruptcy
Court a Motion to Intervene in the creditors' committee (the "Chapter
11 Committee") action that asserted that the Delaware Bankruptcy
Court should enjoin the FoxMeyer Lawsuit. Also on March 18, 1997,
the Delaware Bankruptcy Court converted the FoxMeyer Subsidiaries'
Chapter 11 bankruptcy action to a liquidation proceeding under
Chapter 7. The order converting the FoxMeyer Subsidiaries'
bankruptcy to a Chapter 7 proceeding also stayed all adversary
proceedings and other proceedings filed in the bankruptcy until a
permanent trustee was elected. As of August 1, 1997, although the
issues are fully briefed, no ruling has been made by the Dallas
Bankruptcy Court with respect to either the Motion to Transfer Venue
to the Delaware Bankruptcy Court or the Avatex Motion to Remand to
state court. The trustee has moved to intervene as plaintiff in the
Dallas Bankruptcy Court action, has filed a memorandum supporting
transfer and has also filed a memorandum opposing remand or
abstention. McKesson has intervened in the Delaware Bankruptcy Court
action to enjoin the Avatex lawsuit and has moved for partial summary
26
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judgment in that proceeding, asserting that Avatex is not the owner
of the alleged causes of action. The Manufacturer Defendants have
also intervened in that Delaware Bankruptcy Court action and have
joined in McKesson's summary judgment motion. The trustee has
substituted for the Chapter 11 Committee as the plaintiff in that
action and has also filed its motion for partial summary judgment
also asserting that Avatex does not own the causes of action. Avatex
has moved to file its response to McKesson's motion for partial
summary judgment under seal by reason of various deposition materials
originally taken pursuant to a confidentiality order which materials
are being utilized in connection with the partial summary judgment.
McKesson has objected. Avatex has filed its answer and affirmative
defenses to the McKesson complaint for injunction. To date, no
discovery has occurred in either the Dallas Bankruptcy Court
adversary proceedings or the Delaware Bankruptcy Court adversary
proceeding for injunction. There are no pleadings yet on file by
either the trustee, McKesson or the Manufacturer Defendants
concerning the issue whether McKesson owns the alleged causes of
action rather than the Chapter 7 trustee.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on
May 8, 1997.
(b) Omitted pursuant to Instruction 3 to Item 4 of Form 10-Q.
(c) The two matters voted upon at the meeting were to elect two
directors to hold office until the Annual Meeting of
Stockholders in the year 2000 and to ratify the selection
of Ernst & Young LLP as the independent auditors of the
Company for the year ending December 31, 1997.
(i) The following votes were cast for or were withheld
with respect to each of the nominees for director:
Mr. Gordon M. Binder: 223,424,399 votes for and
1,923,447 votes withheld; and Mr. Franklin P. Johnson,
Jr.: 223,431,735 votes for and 1,916,111 votes
withheld. All nominees were declared to have been
elected as directors to hold office until the Annual
Meeting of Stockholders in the year 2000. No
abstentions or broker non-votes were cast for the
election of directors.
(ii) With respect to the proposal to ratify the selection
of Ernst & Young LLP as the Company's independent
auditors, 224,423,943 votes were cast for the
proposal, 344,215 votes were cast against the proposal
and 579,678 votes abstained. No broker non-votes were
cast in connection with the proposal. The selection
of Ernst & Young LLP as the Company's independent
auditors for the year ending December 31, 1997 was
declared to have been ratified.
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(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Reference is made to the Index to Exhibits included herein.
(b) Reports on Form 8-K
The Company filed two Current Reports on Form 8-K during the
three months ended June 30, 1997. The report filed on April 8, 1997
reported under Item 5 that the Company entered into an underwriting
agreement pursuant to the sale of its debt securities and reported
under Item 7 the list of related exhibits. The report filed on June
13, 1997 reported under Item 5 an update to certain litigation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Amgen Inc.
(Registrant)
Date: 8/11/97 By:/s/ Robert S. Attiyeh
- ------------------ ---------------------------------
Robert S. Attiyeh
Senior Vice President, Finance
and Corporate Development, and
Chief Financial Officer
Date: 8/11/97 By:/s/ Kathryn E. Falberg
- ------------------ ---------------------------------
Kathryn E. Falberg
Vice President, Corporate
Controller and Chief
Accounting Officer
29
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AMGEN INC.
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Restated Certificate of Incorporation as amended. (26)
*3.2 Amended and Restated Bylaws.
4.1 Indenture dated January 1, 1992 between the Company and
Citibank N.A., as trustee. (11)
4.2 Forms of Commercial Paper Master Note Certificates. (14)
4.3 First Supplement to Indenture, dated February 26, 1997
between the Company and Citibank N.A., as trustee. (23)
4.4 Officer's Certificate pursuant to Sections 2.1 and 2.3
of the Indenture, as supplemented, establishing a series
of securities "8-1/8% Debentures due April 1, 2097."
(25)
4.5 8-1/8% Debentures due April 1, 2097. (25)
4.6 Form of stock certificate for the common stock, par
value $.0001 of the Company. (26)
10.1 Company's Amended and Restated 1991 Equity Incentive
Plan. (24)
10.2 Company's Amended and Restated 1984 Stock Option Plan.
(21)
10.3 Shareholder's Agreement of Kirin-Amgen, Inc., dated May
11, 1984, between the Company and Kirin Brewery Company,
Limited (with certain confidential information deleted
therefrom). (1)
10.4 Amendment Nos. 1, 2, and 3, dated March 19, 1985, July
29, 1985 and December 19, 1985, respectively, to the
Shareholder's Agreement of Kirin-Amgen, Inc., dated May
11, 1984 (with certain confidential information deleted
therefrom). (3)
10.5 Product License Agreement, dated September 30, 1985, and
Technology License Agreement, dated, September 30, 1985
between the Company and Ortho Pharmaceutical Corporation
(with certain confidential information deleted
therefrom). (2)
10.6 Product License Agreement, dated September 30, 1985, and
Technology License Agreement, dated September 30, 1985
between Kirin-Amgen, Inc. and Ortho Pharmaceutical
Corporation (with certain confidential information
deleted therefrom). (3)
10.7 Company's Amended and Restated Employee Stock Purchase
Plan. (21)
10.8 Research, Development Technology Disclosure and License
Agreement PPO, dated January 20, 1986, by and between
the Company and Kirin Brewery Co., Ltd. (4)
10.9 Amendment Nos. 4 and 5, dated October 16, 1986
(effective July 1, 1986) and December 6, 1986 (effective
July 1, 1986), respectively, to the Shareholders
Agreement of Kirin-Amgen, Inc. dated May 11, 1984 (with
certain confidential information deleted therefrom). (5)
30
<PAGE>
10.10 Assignment and License Agreement, dated October 16,
1986, between the Company and Kirin-Amgen, Inc. (with
certain confidential information deleted therefrom). (5)
10.11 G-CSF European License Agreement, dated December 30,
1986, between Kirin-Amgen, Inc. and the Company (with
certain confidential information deleted therefrom). (5)
10.12 Research and Development Technology Disclosure and
License Agreement: GM-CSF, dated March 31, 1987, between
Kirin Brewery Company, Limited and the Company (with
certain confidential information deleted therefrom). (5)
10.13 Company's Amended and Restated 1987 Directors' Stock
Option Plan. (24)
10.14 Company's Amended and Restated 1988 Stock Option Plan.
(21)
10.15 Company's Amended and Restated Retirement and Savings
Plan. (21)
10.16 Amendment, dated June 30, 1988, to Research,
Development, Technology Disclosure and License
Agreement: GM-CSF dated March 31, 1987, between Kirin
Brewery Company, Limited and the Company. (6)
10.17 Agreement on G-CSF in the EU, dated September 26, 1988,
between Amgen Inc. and F. Hoffmann-La Roche & Co.
Limited Company (with certain confidential information
deleted therefrom). (8)
10.18 Supplementary Agreement to Agreement dated January 4,
1989 to Agreement on G-CSF in the EU, dated September
26, 1988, between the Company and F. Hoffmann-La Roche &
Co. Limited Company, (with certain confidential
information deleted therefrom). (8)
10.19 Agreement on G-CSF in Certain European Countries, dated
January 1, 1989, between Amgen Inc. and F. Hoffmann-La
Roche & Co. Limited Company (with certain confidential
information deleted therefrom). (8)
10.20 Rights Agreement, dated January 24, 1989, between Amgen
Inc. and American Stock Transfer and Trust Company,
Rights Agent. (7)
10.21 First Amendment to Rights Agreement, dated January 22,
1991, between Amgen Inc. and American Stock Transfer and
Trust Company, Rights Agent. (9)
10.22 Second Amendment to Rights Agreement, dated April 2,
1991, between Amgen Inc. and American Stock Transfer and
Trust Company, Rights Agent. (10)
10.23 Agency Agreement, dated November 21, 1991, between Amgen
Manufacturing, Inc. and Citicorp Financial Services
Corporation. (12)
10.24 Agency Agreement, dated May 21, 1992, between Amgen
Manufacturing, Inc. and Citicorp Financial Services
Corporation. (12)
10.25 Guaranty, dated July 29, 1992, by the Company in favor
of Merck Sharp & Dohme Quimica de Puerto Rico, Inc. (13)
10.26 936 Promissory Note No. 01, dated December 11, 1991,
issued by Amgen Manufacturing, Inc. (12)
10.27 936 Promissory Note No. 02, dated December 11, 1991,
issued by Amgen Manufacturing, Inc. (12)
10.28 936 Promissory Note No. 001, dated July 29, 1992, issued
by Amgen Manufacturing, Inc. (12)
31
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10.29 936 Promissory Note No. 002, dated July 29, 1992, issued
by Amgen Manufacturing, Inc. (12)
10.30 Guaranty, dated November 21, 1991, by the Company in
favor of Citicorp Financial Services Corporation. (12)
10.31 Partnership Purchase Agreement, dated March 12, 1993,
between the Company, Amgen Clinical Partners, L.P.,
Amgen Development Corporation, the Class A limited
partners and the Class B limited partner. (13)
10.32 Amgen Supplemental Retirement Plan dated June 1, 1993.
(15)
10.33 Promissory Note of Mr. Kevin W. Sharer, dated June 4,
1993. (15)
10.34 Promissory Note of Mr. Larry A. May, dated February 24,
1993. (16)
10.35 Amgen Performance Based Management Incentive Plan. (24)
10.36 Agreement and Plan of Merger, dated as of November 17,
1994, among Amgen Inc., Amgen Acquisition Subsidiary,
Inc. and Synergen, Inc. (17)
10.37 Third Amendment to Rights Agreement, dated as of
February 21, 1995, between Amgen Inc. and American Stock
Transfer Trust and Trust Company (18)
10.38 Credit Agreement, dated as of June 23, 1995, among Amgen
Inc., the Borrowing Subsidiaries named therein, the
Banks named therein, Swiss Bank Corporation and ABN AMRO
Bank N.V., as Issuing Banks, and Swiss Bank Corporation,
as Administrative Agent. (19)
10.39 Promissory Note of Mr. George A. Vandeman, dated
December 15, 1995. (20)
10.40 Promissory Note of Mr. George A. Vandeman, dated
December 15, 1995. (20)
10.41 Promissory Note of Mr. Stan Benson, dated March 19,
1996. (20)
10.42 Amendment No. 1 to the Company's Amended and Restated
Retirement and Savings Plan. (21)
10.43 Amendment Number 5 to the Company's Amended and Restated
Retirement and Savings Plan dated January 1, 1993. (24)
10.44 Amendment Number 2 to the Company's Amended and Restated
Retirement and Savings Plan dated April 1, 1996. (24)
10.45 First Amendment to Credit Agreement, dated as of
December 12, 1996, among Amgen Inc., the Borrowing
Subsidiaries named therein, and Swiss Bank Corporation
as Administrative Agent. (24)
10.46 Fourth Amendment to Rights Agreement, dated February 18,
1997 between Amgen Inc. and American Stock Transfer and
Trust Company, Rights Agent. (22)
10.47 Preferred Share Rights Agreement, dated February 18,
1997, between Amgen Inc. and American Stock Transfer and
Trust Company, Rights Agent. (22)
10.48 Consulting Agreement, dated November 15, 1996, between
the Company and Daniel Vapnek. (24)
10.49 Agreement, dated May 30, 1995, between the Company and
George A. Vandeman. (24)
*10.50 First Amendment, effective January 1, 1998, to the
Company's Amended and Restated Employee Stock Purchase
Plan.
32
<PAGE>
*10.51 Third Amendment, effective January 1, 1997, to the
Company's Amended and Restated Retirement and Savings
Plan dated April 1, 1996.
*10.52 Heads of Agreement dated April 10, 1997, between the
Company and Kirin Amgen, Inc., on the one hand, and F.
Hoffmann-La Roche Ltd., on the other hand (with certain
confidential information deleted therefrom).
*11 Computation of per share earnings.
*27 Financial Data Schedule.
*99 Sections appearing under the heading "Management's
Discussion and Analysis of Financial Condition and
Results of Operations-Factors That May Affect Future
Results" in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
- ----------------
* Filed herewith.
(1) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended March 31, 1984 on June 26, 1984 and incorporated
herein by reference.
(2) Filed as an exhibit to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1985 on November 14, 1985 and
incorporated herein by reference.
(3) Filed as an exhibit to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1985 on February 3, 1986 and
incorporated herein by reference.
(4) Filed as an exhibit to Amendment No. 1 to Form S-1 Registration
Statement (Registration No. 33-3069) on March 11, 1986 and
incorporated herein by reference.
(5) Filed as an exhibit to the Form 10-K Annual Report for the year
ended March 31, 1987 on May 18, 1987 and incorporated herein by
reference.
(6) Filed as an exhibit to Form 8 amending the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988 on August 25, 1988
and incorporated herein by reference.
(7) Filed as an exhibit to the Form 8-K Current Report dated January
24, 1989 and incorporated herein by reference.
(8) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended March 31, 1989 on June 28, 1989 and incorporated
herein by reference.
(9) Filed as an exhibit to the Form 8-K Current Report dated January
22, 1991 and incorporated herein by reference.
(10) Filed as an exhibit to the Form 8-K Current Report dated April
12, 1991 and incorporated herein by reference.
(11) Filed as an exhibit to Form S-3 Registration Statement dated
December 19, 1991 and incorporated herein by reference.
(12) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1992 on March 30, 1993 and incorporated
herein by reference.
(13) Filed as an exhibit to the Form 8-A dated March 31, 1993 and
incorporated herein by reference.
(14) Filed as an exhibit to the Form 10-Q for the quarter ended March
31, 1993 on May 17, 1993 and incorporated herein by reference.
33
<PAGE>
(15) Filed as an exhibit to the Form 10-Q for the quarter ended
September 30, 1993 on November 12, 1993 and incorporated herein
by reference.
(16) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1993 on March 25, 1994 and incorporated
herein by reference.
(17) Filed as an exhibit to the Form 8-K Current Report dated
November 18, 1994 on December 2, 1994 and incorporated herein by
reference.
(18) Filed as an exhibit to the Form 8-K Current Report dated
February 21, 1995 on March 7, 1995 and incorporated herein by
reference.
(19) Filed as an exhibit to the Form 10-Q for the quarter ended
June 30, 1995 on August 11, 1995 and incorporated herein by
reference.
(20) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1995 on March 29, 1996 and incorporated
herein by reference.
(21) Filed as an exhibit to the Form 10-Q for the quarter ended
September 30, 1996 on November 5, 1996 and incorporated herein
by reference.
(22) Filed as an exhibit to the Form 8-K Current Report dated
February 18, 1997 on February 28, 1997 and incorporated herein
by reference.
(23) Filed as an exhibit to the Form 8-K Current Report dated March
14, 1997 on March 14, 1997 and incorporated herein by reference.
(24) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1996 on March 24, 1997 and incorporated
herein by reference.
(25) Filed as an exhibit to the Form 8-K Current Report dated April
8, 1997 on April 8, 1997 and incorporated herein by reference.
(26) Filed as an exhibit to the Form 10-Q for the quarter ended March
31, 1997 on May 13, 1997.
34
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
AMGEN INC.
(AS AMENDED THROUGH MAY 8, 1997)
INDEX
Page
ARTICLE I Offices 1
Section 1. Registered Office 1
Section 2. Other Offices 1
ARTICLE II Corporate Seal 1
Section 3. Corporate Seal 1
ARTICLE III Stockholders' Meetings 1
Section 4. Place of Meetings 1
Section 5. Annual Meeting 1
Section 6. Special Meetings 1
Section 7. Notice of Meetings 2
Section 8. Quorum 2
Section 9. Adjournment and Notice of Adjourned
Meetings 2
Section 10. Voting Rights 3
Section 11. Joint Owners of Stock 3
Section 12. List of Stockholders 3
Section 13. No Action Without Meeting 4
Section 14. Organization 4
Section 15. Notifications of Nominations and
Proposed Business 4
ARTICLE IV Directors 5
<PAGE>
Section 16. Number 5
Section 17. Classes of Directors 5
Section 18. Newly Created Directorships and
Vacancies 5
Section 19. Powers 6
Section 20. Resignation 6
Section 21. Removal 6
Section 22. Meetings 6
(a) Annual Meetings 6
(b) Regular Meetings 6
(c) Special Meetings 7
(d) Telephone Meetings 7
(e) Notice of Meetings 7
(f) Waiver of Notice 7
Section 23. Quorum and Voting 7
(a) Quorum 7
(b) Majority Vote 7
Section 24. Action without Meeting 8
Section 25. Fees and Compensation 8
Section 26. Committees 8
(a) Executive Committee 8
(b) Other Committees 8
(c) Term 9
(d) Meetings 9
Section 27. Organization 9
ARTICLE V Officers 10
Section 28. Officers Designated 10
Section 29. Tenure and Duties of Officers 10
<PAGE>
(a) General 10
(b) Duties of Chairman of the Board 10
(c) Duties of Chief Executive Officer 10
(d) Duties of President and Chief Operating
Officer 11
(e) Duties of Vice Presidents 11
(f) Duties of Chief Financial Officer 11
(g) Duties of Secretary 11
Section 30. Resignations 12
Section 31. Removal 12
Section 32. Compensation 12
ARTICLE VI Execution of Corporate Instruments and
Voting of Securities Owned by the
Corporation 12
Section 33. Execution of Corporate Instruments 12
Section 34. Voting of Securities Owned by the
Corporation 13
ARTICLE VII Shares of Stock 13
Section 35. Form and Execution of
Certificates 13
Section 36. Lost Certificates 13
Section 37. Transfers 14
Section 38. Fixing Record Dates 14
Section 39. Registered Stockholders 14
Section 40. Issuance, Transfer and Resignation of
Shares 14
ARTICLE VIII Other Securities of the Corporation 15
Section 41. Execution of Other Securities 15
ARTICLE IX Dividends 15
Section 42. Declaration of Dividends 15
Section 43. Dividend Reserve 15
<PAGE>
ARTICLE X Fiscal Year 16
Section 44. Fiscal Year 16
ARTICLE XI Indemnification of Directors, Officers,
Employees and Other Agents 16
Section 45. Indemnification of Directors,Officers,
Employees and Other Agents 16
(a) Directors and Officers 16
(b) Other Employees and Other Agents 16
(c) Expenses 16
(d) Enforcement 17
(e) Non-Exclusivity of Rights 18
(f) Survival of Rights 18
(g) Insurance 18
(h) Amendments 18
(i) Savings Clause 18
(j) Certain Definitions 18
ARTICLE XII Notices 19
Section 46. Notices 20
(a) Notice to Stockholders 20
(b) Notice to Directors 20
(c) Address Unknown 20
(d) Affidavit of Mailing 20
(e) Time Notices Deemed Given 20
(f) Methods of Notice 20
(g) Failure to Receive Notice 20
(h) Notice to Person with Whom
Communication Is Unlawful 20
ARTICLE XIII Amendments 21
Section 47. Amendments 21
ARTICLE XIV Loans of Officers and Others 21
<PAGE>
Section 48. Certain Corporate Loans and
Guaranties 21
<PAGE>
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the
corporation in the State of Delaware shall be in the City of Dover,
County of Kent. (Del. Code Ann., tit. 8, Section 131)
Section 2. Other Offices. The corporation also shall have
and maintain an office or principal place of business at such place
as may be fixed by the Board of Directors, and also may have offices
at such other places, both within and without the State of Delaware
as the Board of Directors may from time to time determine or the
business of the corporation may require. (Del. Code Ann., tit. 8,
Section 122(8))
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. The corporate seal shall consist
of a die bearing the name of the corporation and the inscription,
"Corporate Seal-Delaware." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or
otherwise. (Del. Code Ann., tit. 8, Section 122(3))
ARTICLE III
Stockholders' Meetings
Section 4. Place of Meetings. Meetings of the stockholders
of the corporation shall be held at such place, either within or
without the State of Delaware, as may be designated from time to time
by the Board of Directors, or, if not so designated, then at the
office of the corporation required to be maintained pursuant to
Section 2 hereof. (Del. Code Ann., tit. 8, Section211(a))
Section 5. Annual Meeting. The annual meeting of the
stockholders of the corporation shall be held on any date and time
which may from time to time be designated by the Board of Directors.
At such annual meeting, directors shall be elected and any other
business may be transacted that may properly come before the meeting.
(Del. Code Ann., tit. 8, Section 211(b))
Section 6. Special Meetings. Special meetings of the
stockholders of the corporation may be called, for any purpose or
purposes, by the Chairman of the Board of Directors ("Chairman of the
Board"), the Chief Executive Officer, the President, or the Board of
Directors at any time. Upon written request of any stockholder or
stockholders holding in the aggregate 20% or more of the voting power
of all stockholders delivered in person or sent by registered mail to
the Chief Executive Officer, the President or Secretary, the
Secretary shall call a special meeting of stockholders to be held at
the office of the corporation required to be maintained pursuant to
Section 2 hereof, or at such other place as may be designated by the
Secretary, at such time as the Secretary may fix, such meeting to be
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held not less than ten (10) nor more than sixty (60) days after the
receipt of such request, and if the Secretary shall neglect or refuse
to call such meeting, within seven (7) days after the receipt of such
request, the stockholder making such request may do so. (Del. Code
Ann., tit. 8, Section 211(d))
Section 7. Notice of Meetings. Except as otherwise provided
by law or the Certificate of Incorporation, written notice of each
meeting of stockholders shall be given not less than ten (10) nor
more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting, such notice to specify
the place, date and hour and purpose or purposes of the meeting.
Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice
thereof, either before or after such meeting, and will be waived by
any stockholder by his attendance thereat in person or by proxy,
except when the stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened.
Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice
thereof had been given. (Del. Code Ann., tit. 8, Secs. 222, 229)
Section 8. Quorum. At all meetings of stockholders, except
where otherwise provided by statute or by the Certificate of
Incorporation, or by these Bylaws, the presence, in person or by
proxy duly authorized, of the holders of a majority of the
outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. Any shares, the voting of
which at said meeting has been enjoined, or which for any reason
cannot be lawfully voted at such meeting, shall not be counted to
determine a quorum at such meeting. In the absence of a quorum any
meeting of stockholders may be adjourned, from time to time, by vote
of the holders of a majority of the shares represented thereat, but
no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a
quorum is present, may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the voting power represented at any meeting
at which a quorum is present shall be valid and binding upon the
corporation. (Del. Code Ann., tit. 8, Section 216)
Section 9. Adjournment and Notice of Adjourned Meetings.
Any meeting of stockholders, whether annual or special, may be
adjourned from time to time by the vote of a majority of the shares,
the holders of which are present either in person or by proxy. When
a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of
2
<PAGE>
record entitled to vote at the meeting. (Del. Code Ann., tit. 8,
Section 222(c))
Section 10. Voting Rights. For the purpose of determining
those stockholders entitled to vote at any meeting of the
stockholders, except as otherwise provided by law, only persons in
whose names shares stand on the stock records of the corporation on
the record date, as provided in Section 12 of these Bylaws, shall be
entitled to vote at any meeting of stockholders. Every person
entitled to vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by a written
proxy executed by such person or his duly authorized agent, which
proxy shall be filed with the Secretary at or before the meeting at
which it is to be used. An agent so appointed need not be a
stockholder. No proxy shall be voted on after three (3) years from
its date of creation unless the proxy provides for a longer period.
All elections of Directors shall be by written ballot, unless
otherwise provided in the Certificate of Incorporation. (Del. Code
Ann., tit. 8, Secs. 211(e), 212(b))
Section 11. Joint Owners of Stock. If shares or other
securities having voting power stand of record in the names of two
(2) or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary is
given written notice to the contrary and is furnishedwith a copy of
the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall
have the following effect: (a) if only one (1) votes, his act binds
all; (b) if more than one (1) votes, the act of the majority so
voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the
securities in question proportionally, or may apply to the Delaware
Court of Chancery for relief as provided in the General Corporation
Law of Delaware, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a
majority or even-split for the purpose of this subsection (c) shall
be a majority or even-split in interest. (Del. Code Ann., tit. 8,
Section 217(b))
Section 12. List of Stockholders. The Secretary shall
prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at
said meeting, arranged in alphabetical order, showing the address of
each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting,
or, if not specified, at the place where the meeting is to be held.
The list shall be produced and kept at the time and place of meeting
during the whole time thereof, and may be inspected by any
stockholder who is present. (Del. Code Ann., tit. 8, Section 219(a))
3
<PAGE>
Section 13. No Action Without Meeting. Any action required
or permitted to be taken by the stockholders of the corporation must
be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such
holders.
Section 14. Organization. At every meeting of stockholders,
the Chairman of the Board, or, if the Chairman of the Board is
absent, the Chief Executive Officer, or, if the Chief Executive
Officer is absent, the President, or, if the President is absent, the
most senior Vice President present, or in the absence of any such
officer, a chairman of the meeting chosen by a majority in interest
of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the Chief Executive Officer,
shall act as secretary of the meeting.
Section 15. Notifications of Nominations and Proposed
Business. Subject to the rights of holders of any class or series
of stock having a preference over the Common Stock as to dividends or
upon liquidation,
(x) nominations for the election of directors, and
(y) business proposed to be brought before any stockholder
meeting, may be made by the Board of Directors or a proxy committee
appointed by the Board of Directors or by any stockholder entitled to
vote in the election of directors generally. However, any such
stockholder may nominate one or more persons for election as
directors at a meeting or propose business to be brought before a
meeting, or both, only if such stockholder has given timely notice in
proper written form of his intent to make such nomination or
nominations or to propose such business. To be timely, a
stockholder's notice must be delivered to or mailed and received by
the Secretary of the corporation not later than 90 days prior to such
meeting; provided, however, that in the event that less than 100
days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely
must be received not later than the close of business on the 10th day
following the date on which such notice of the date of such meeting
was mailed or such public disclosure was made. To be in proper
written form, a stockholder's notice to the Secretary shall set
forth:
(a) the name and address of the stockholder who intends to make
the nominations or propose the business and, as the case may be, of
the person or persons to be nominated or of the business to be
proposed;
(b) a representation that the stockholder is a holder of record
of stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(c) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
4
<PAGE>
person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder;
(d) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had the nominee
been nominated, or intended to be nominated, or the matter been
proposed, or intended to be proposed by the Board of Directors; and
(e) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance
with the foregoing procedure.
ARTICLE IV
Directors
Section 16. Number. The authorized number of directors of
the corporation shall be fixed from time to time by the Board of
Directors. The number of directors presently authorized is eight.
Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause the directors shall
not have been elected at an annual meeting, they may be elected as
soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these
Bylaws. (Del. Code Ann., tit. 8, Secs. 141(b), 211(b), (c))
Section 17. Classes of Directors. The Board of Directors
shall be divided into three classes: Class I, Class II and Class
III, which shall be as nearly equal in number as possible. Each
director shall serve for a term ending on the date of the third
annual meeting of stockholders following the annual meeting at which
the director was elected. Notwithstanding the foregoing provisions
of this section, each director shall serve until his successor is
duly elected and qualified or until his death, resignation or
removal. (Del. Code Ann., tit. 8, Section141(d))
Section 18. Newly Created Directorships and Vacancies. In
the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of
Directors among the three classes of directors so as to maintain such
classes as nearly equal in number as possible. No decrease in the
number of directors constituting the Board of Directors shall shorten
the term of any incumbent director. Newly created directorships
resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled
by the affirmative vote of a majority of the remaining directors then
in office (and not by stockholders), even though less than a quorum
of the authorized Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the
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remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such
director's successors shall have been elected and qualified.
Section 19. Powers. The powers of the corporation shall be
exercised, its business conducted and its property controlledby the
Board of Directors, except as may be otherwise provided by statute or
by the Certificate of Incorporation (Del. Code Ann., tit. 8, Section
141(a))
Section 20. Resignation. Any director may resign at any time
by delivering his written resignation to the Secretary, such
resignation to specify whether it will be effective at a particular
time, upon receipt by the Secretary or at the pleasure of the Board
of Directors. If no such specification is made, it shall be deemed
effective at the pleasure of the Board of Directors. When one or
more directors shall resign from the Board of Directors, effective at
a future date, a majority of the directors then in office, including
those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen
shall hold office for the unexpired portion of the term of the
director whose place shall be vacated and until his successor shall
have been duly elected and qualified. (Del. Code Ann., tit. 8, Secs.
141(b), 223(d))
Section 21. Removal. At a special meeting of stockholders
called for the purpose in the manner hereinabove provided, the Board
of Directors, or any individual director, may be removed from office,
(a) with cause, and one or more new directors may be elected, by a
vote of stockholders holding a majority of the outstanding shares
entitled to vote at an election of Directors or (b), without cause,
by a vote of stockholders holding at least 66.67% of the outstanding
shares entitled to vote at an election of directors. (Del. Code
Ann., tit. 8, Section 141(k))
Section 22. Meetings.
(a) Annual Meetings. The annual meeting of the Board of
Directors shall be held on the date of the annual meeting of
stockholders and at the place where such meeting is held. No notice
of an annual meeting of the Board of Directors shall be necessary and
such meeting shall be held for the purpose of electing officers and
transacting such other business as may lawfully come before it.
(b) Regular Meetings. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in
the office of the corporation required to be maintained pursuant to
Section 2 hereof. Unless otherwise restricted by the Certificate of
Incorporation, regular meetings of the Board of Directors also may be
held at any place within or without the State of Delaware which has
been designated by resolution of the Board of Directors or the
written consent of all Directors. (Del. Code Ann., tit. 8, Section
141(g))
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(c) Special Meetings. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of
Directors may be held at any time and place within or without the
State of Delaware whenever called by the Chairman of the Board, the
Chief Executive Officer, the President or a majority of the
Directors. (Del. Code Ann., tit. 8, Section 141(g))
(d) Telephone Meetings. Any member of the Board of
Directors, or of any committee thereof, may participate in a meeting
by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear
each other, and participation in a meeting by such means shall
constitute presence in person at such meeting. (Del. Code Ann., tit.
8, Section 141(i))
(e) Notice of Meetings. Written notice of the time and
place of all regular and special meetings of the Board of Directors
shall be given at least one (1) day before the date of the meeting.
Notice of any meeting may be waived in writing at any time before or
after the meeting and will be waived by any director by attendance
thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully
called or convened. (Del. Code Ann., tit. 8, Section 229)
(f) Waiver of Notice. The transaction of all business at
any meeting of the Board of Directors, or any committee thereof,
however called or noticed, or wherever held, shall be as valid as
though taken at a meeting duly held after regular call and notice, if
a quorum is present and if, either before or after the meeting, each
of the Directors not present sign a written waiver of notice, or a
consent to holding such meeting, or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
(Del. Code Ann., tit. 8, Section 229)
Section 23. Quorum and Voting.
(a) Quorum. Unless the Certificate of Incorporation
requires a greater number, a quorum of the Board of Directors shall
consist of a majority of the exact number of Directors fixed from
time to time in accordance with Section 16 of these Bylaws, but not
less than one (1); provided, however, at any meeting whether a quorum
is present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by
announcement at the meeting. (Del. Code Ann., tit. 8, Section
141(b))
(b) Majority Vote. At each meeting of the Board of
Directors at which a quorum is present all questions and business
shall be determined by a vote of a majority of the Directors present,
unless a different vote is required by law, the Certificate of
Incorporation or these Bylaws. (Del. Code Ann., tit. 8, Section
141(b))
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Section 24. Action without Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of
Directors or committee. (Del. Code Ann., tit. 8, Section 141(f))
Section 25. Fees and Compensation. Directors shall not
receive any stated salary for their services as Directors, but by
resolution of the Board of Directors a fixed fee, with or without
expense of attendance, may be allowed for serving on the Board of
Directors and/or attendance at each meeting and at each meeting of
any committee of the Board of Directors. Nothing herein contained
shall be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, consultant,
employee, or otherwise and receiving compensation therefor. (Del.
Code Ann., tit. 8, Section 141(h))
Section 26. Committees.
(a) Executive Committee. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors,
appoint an Executive Committee to consist of one (1) or more members
of the Board of Directors. The Executive Committee, to the extent
permitted by law and specifically granted by the Board of Directors,
shall have and may exercise when the Board of Directors is not in
session all powers of the Board of Directors in the management of the
business and affairs of the corporation, including, without
limitation, the power and authority to declare a dividend or to
authorize the issuance of stock, except such committee shall not have
the power or authority to amend the Certificate of Incorporation
(except that the committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of
stock adopted by the Board of Directors as provided by law, fix any
of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares
for shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation), to
adopt an agreement of merger or consolidation, to recommend to the
stockholders the sale, lease or exchange of all or substantially all
of the corporation's property and assets, to recommend to the
stockholders a dissolution of the corporation or a revocation of a
dissolution or to amend these Bylaws. (Del. Code Ann., tit. 8,
Section 141(c))
(b) Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from
time to time appoint such other committees as may be permitted by
law. Such other committees appointed by the Board of Directors shall
consist of one (1) or more members of the Board of Directors, and
shall have such powers and perform such duties as may be prescribed
by the resolution or resolutions creating such committees, but in no
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event shall such committee have the powers denied to the Executive
Committee in these Bylaws. (Del. Code Ann., tit. 8, Section 141(c))
(c) Term. Each member of a committee of the Board of
Directors shall serve a term on the committee coexistent with such
member's term on the Board of Directors. The Board of Directors,
subject to the provisions of subsections (a) or (b) of this Section
26, may at any time increase or decrease the number of members of a
committee or terminate the existence of a committee. The membership
of a committee member shall terminate on the date of his death or
voluntary resignation. The Board of Directors may at any time for
any reason remove any individual committee member and the Board of
Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the
committee. The Board of Directors may designate one or more
Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee, and,
in addition, in the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member. (Del. Code Ann., tit. 8, Section141(c))
(d) Meetings. Unless the Board of Directors shall
otherwise provide, regular meetings of the Executive Committee or any
other committee appointed pursuant to this Section 26 shall be held
at such times and places as are determined by the Board of Directors,
or by any such committee, and when notice thereof has been given to
each member of such committee, no further notice of such regular
meetings need be given thereafter. Special meetings of any such
committee may be held at the principal office of the corporation
required to be maintained pursuant to Section 2 hereof, or at any
place which has been designated from time to time by resolution of
such committee or by written consent of all members thereof, and may
be called by any director who is a member of such committee, upon
written notice to the members of such committee of the time and place
of such special meeting given in the manner provided for the giving
of written notice to members of the Board of Directors of the time
and place of special meetings of the Board of Directors. Notice of
any special meeting of any committee may be waived in writing at any
time before or after the meeting and will be waived by any director
by attendance thereat, except when the director attends such special
meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is
not lawfully called or convened. A majority of the authorized number
of members of any such committee shall constitute a quorum for the
transaction of business, and the act of a majority of those present
at any meeting at which a quorum is present shall be the act of such
committee. (Del. Code Ann., tit. 8, Secs. 141(c), 229)
Section 27. Organization. At every meeting of the directors,
the Chairman of the Board, or, if the Chairman of the Board is
absent, the Chief Executive Officer, or if the Chief Executive
Officer is absent, the President, or if the President is absent, the
most senior Vice President, or, in the absence of any such officer, a
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chairman of the meeting chosen by a majority of the directors
present, shall preside over the meeting. The Secretary, or in his
absence, an Assistant Secretary directed to do so by the Chief
Executive Officer, shall act as secretary of the meeting.
ARTICLE V
Officers
Section 28. Officers Designated. The officers of the
corporation shall be the Chairman of the Board, the Chief Executive
Officer, the President and Chief Operating Officer, one or more Vice
Presidents, the Chief Financial Officer and the Secretary, all of
whom shall be elected at the annual meeting of the Board of
Directors. The Board of Directors also may appoint such other
officers and agents with such powers and duties as it shall deem
necessary. The order of the seniority of the Vice Presidents shall be
in the order of their nomination, unless otherwise determined by the
Board of Directors. The Board of Directors may assign such
additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom
by law. The salaries and other compensation of the officers of the
corporation shall be fixed by or in the manner designated by the
Board of Directors.
Section 29. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the
pleasure of the Board of Directors and until their successors shall
have been duly elected and qualified, unless sooner removed. Any
officer elected or appointed by the Board of Directors may be removed
at any time by the Board of Directors. If the office of any officer
becomes vacant for any reason, the vacancy may be filled by the Board
of Directors.
(b) Duties of Chairman of the Board. The Chairman of the
Board, subject to the control of the Board of Directors, shall
perform such duties and functions as are necessary to further the
strategic direction of the corporation. Unless the Board of
Directors designates another person, the Chairman of the Board shall
preside at all meetings of the stockholders, the Board of Directors
and of the Executive Committee.
(c) Duties of Chief Executive Officer. The Chief
Executive Officer, at the request of the Chairman of the Board or
upon his absence or disability, or in the event of a vacancy in the
office of Chairman of the Board, shall exercise all the powers of
Chairman of the Board as provided in Subsection 29(b). The Chief
Executive Officer shall, subject to the control of the Board of
Directors, exercise general management and supervision over the
property, affairs and business of the corporation and shall authorize
officers of the corporation, other than the Chairman of the Board, to
exercise such powers as he, in his discretion, may deem to be in the
best interests of the corporation. The Chief Executive Officer shall
in general perform all duties incident to general management and
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supervision of the corporation and such other duties as the Board of
Directors shall designate from time to time.
(d) Duties of President and Chief Operating Officer. The
President and Chief Operating Officer, at the request of the Chief
Executive Officer or upon his absence or disability, or in the event
of a vacancy in the office of Chief Executive Officer, shall exercise
all the powers of Chief Executive Officer as provided in Subsection
29(c). The President and Chief Operating Officer shall, subject to
the control of the Chief Executive Officer and the Board of
Directors, exercise general management and supervision over the
operating functions of the corporation, and shall authorize officers
of the corporation, other than the Chairman of the Board and the
Chief Executive Officer, to exercise such powers with respect to the
operating function of the corporation as he, in his discretion, may
deem to be in the best interests of the corporation. The President
and Chief Operating Officer shall perform such other duties and have
such other powers as the Board of Directors shall designate from time
to time.
(e) Duties of Vice Presidents. The Vice Presidents, in
the order of their seniority, may assume and perform the duties of
the President and Chief Operating Officer in the absence or
disability of the Chief Executive Officer and the President and Chief
Operating Officer or whenever the offices of Chief Operating Officer
and President and Chief Operating Officer are vacant. The Vice
Presidents shall perform other duties commonly incident to their
office and also shall perform such other duties and have such other
powers as the Board of Directors, the Chief Executive Officer, or the
President and Chief Operating Officer shall designate from time to
time.
(f) Duties of Chief Financial Officer. The Chief
Financial Officer shall keep or cause to be kept the books of account
of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form
and as often as required by the Board of Directors or the Chief
Executive Officer. The Chief Financial Officer, subject to the order
of the Board of Directors, shall have the custody of all funds and
securities of the corporation. The Chief Financial Officer shall
perform other duties commonly incident to his office and also shall
perform such other duties and have such other powers as the Board of
Directors or the Chief Executive Officer shall designate from time to
time. The Chief Executive Officer may direct any Assistant Chief
Financial Officer to assume and perform the duties of the Chief
Financial Officer in the absence or disability of the Chief Financial
Officer, and each Assistant Chief Financial Officer shall perform
other duties commonly incident to his office and also shall perform
such other duties and have such other powers as the Board of
Directors or the Chief Executive Officer shall designate from time to
time.
(g) Duties of Secretary. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors, and shall
record all acts and proceedings thereof in the minute books of the
corporation. The Secretary shall give notice in conformity with
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these Bylaws of all meetings of the stockholders, and of all meetings
of the Board of Directors and any committee thereof requiring notice.
The Secretary shall perform all other duties given him in these
Bylaws and other duties commonly incident to his office and also
shall perform such other duties and have such other powers as the
Board of Directors shall designate from time to time. The Chief
Executive Officer may direct any Assistant Secretary to assume and
perform the duties of the Secretary in the absence or disability of
the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and also shall perform such
other duties and have such other powers as the Board of Directors or
the Chief Executive Officer shall designate from time to time.
Section 30. Resignations. Any officer may resign at any time
by giving written notice to the Board of Directors or to the Chief
Executive Officer or to the President or to the Secretary. Any such
resignation shall be effective when received by the person or persons
to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at
such later time. Unless otherwise specified in such notice, the
acceptance of any such resignation shall not be necessary to make it
effective. (Del. Code Ann., tit. 8, Section 142(b))
Section 31. Removal. Any officer may be removed from office
at any time, with or without cause, by the vote or written consent of
a majority of the directors in office at the time, or by any
committee or superior officers upon whom such power of removal may
have been conferred by the Board of Directors.
Section 32. Compensation. The compensation of the officers
shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving such compensation by reason
of the fact that such officer is also a director of the corporation.
ARTICLE VI
Execution of Corporate Instruments and Voting
of Securities Owned by the Corporation
Section 33. Execution of Corporate Instruments. The Board of
Directors may, in its discretion, determine the method and designate
the signatory officer or officers, or other person or persons, to
execute on behalf of the corporation any corporate instrument or
document, or to sign on behalf of the corporation the corporate name
without limitation, or to enter into contracts on behalf of the
corporation, except where otherwise provided by law or these Bylaws,
and such execution or signature shall be binding upon the
corporation. (Del. Code Ann., tit. 8, Secs. 103(a), 142(a), 158)
Unless otherwise specifically determined by the Board
of Directors or otherwise required by law, promissory notes, deeds of
trust, mortgages and other evidences of indebtedness of the
corporation, and other corporate instruments or documents requiring
the corporate seal, and certificates of shares of stock owned by the
corporation, shall be executed, signed or endorsed by the Chairman of
the Board, or the Chief Executive Officer, or the President or any
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Vice President, and by the Secretary or Treasurer or any Assistant
Secretary or Assistant Treasurer. All other instruments and
documents requiring the corporate signature, but not requiring the
corporate seal, may be executed as aforesaid or in such other manner
as may be directed by the Board of Directors. (Del. Code Ann., tit.
8, Secs. 103(a), 142(a), 158)
All checks and drafts drawn on banks or other
depositaries on funds to the credit of the corporation or in special
accounts of the corporation shall be signed by such person or persons
as the Board of Directors shall authorize so to do. (Del. Code Ann.,
tit. 8, Secs. 103(a), 142(a), 158)
Section 34. Voting of Securities Owned by the Corporation.
All stock and other securities of other corporations owned or held by
the corporation for itself, or for other parties in any capacity,
shall be voted, and all proxies with respect thereto shall be
executed, by the person authorized to do so by resolution of the
Board of Directors, or, in the absence of such authorization, by the
Chairman of the Board, the Chief Executive Officer, the President, or
any Vice President. (Del. Code Ann., tit. 8, Section 123)
ARTICLE VII
Shares of Stock
Section 35. Form and Execution of Certificates. The shares
of the corporation shall be represented by certificates, provided
that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or
series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate
until such certificate is surrendered to the corporation.
Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon
request every holder of uncertificated shares shall be entitled to
have a certificate signed by, or in the name of the corporation by,
the Chairman of the Board or any vice-chairman of the Board of
Directors, or the Chief Executive Officer, or the President or any
Vice-President, and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the corporation
representing the number of shares registered in certificate form.
Any or all the signatures on the certificate may be a facsimile. In
case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or
registrar at the date of issue. (Del. Code Ann., tit. 8, Section158)
Section 36. Lost Certificates. The corporation may issue a
new certificate of stock or uncertificated shares in place of any
certificate theretofore issued by the corporation alleged to have
been lost, stolen or destroyed, and the corporation may require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to
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indemnify it against any claim that may be made against the
corporation on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate or
uncertificated shares. (Del. Code Ann., tit. 8, Section 167)
Section 37. Transfers. Transfers of record of shares of
stock of the corporation shall be made only upon its books by the
holders thereof, in person or by attorney duly authorized, and upon
the surrender of a properly endorsed certificate or certificates for
a like number of shares. (Del. Code Ann., tit. 6, Section 8-401(1))
Section 38. Fixing Record Dates. In order that the
corporation may determine the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof, or
to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to any other action. If no record date is
fixed: (a) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held; and (b) the
record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting
of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting. (Del. Code Ann., tit. 8, Section
213)
Section 39. Registered Stockholders. The corporation shall
be entitled to recognize the exclusive right of a person registered
on its books as the owner of shares to receive dividends, and to vote
as such owner, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any
other person whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware. (Del.
Code Ann., tit. 8, Secs. 213(a), 219)
Section 40. Issuance, Transfer and Resignation of Shares.
The Board of Directors may make such rules and regulations, not
inconsistent with law or with these Bylaws, as it may deem advisable
concerning the issuance, transfer and registration of certificates
for shares of the capital stock of the corporation. The Board of
Directors may appoint a transfer agent or registrar of transfers, or
both, and may require all certificates for shares of the corporation
to bear the signature of either or both.
ARTICLE VIII
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Other Securities of the Corporation
Section 41. Execution of Other Securities. All bonds,
debentures and other corporate securities of the corporation, other
than stock certificates, may be signed by the Chairman of the Board,
the Chief Executive Officer, the President or any Vice President, or
such other person as may be authorized by the Board of Directors, and
the corporate seal impressed thereon or a facsimile of such seal
imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Treasurer or an Assistant Treasurer;
provided, however, that where any such bond, debenture or other
corporate security shall be authenticated by the manual signature of
a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the
persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile
of the signatures of such persons. Interest coupons appertaining to
any such bond, debenture or other corporate security, authenticated
by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be
authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall
have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any
such interest coupon, shall have ceased to be such officer before the
bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate
security nevertheless may be adopted by the corporation and issued
and delivered as though the person who signed the same or whose
facsimile signature shall have been used thereon had not ceased to be
such officer of the corporation.
ARTICLE IX
Dividends
Section 42. Declaration of Dividends. Dividends upon the
capital stock of the corporation, subject to the provisions of the
Certificate of Incorporation, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting.
Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the Certificate of
Incorporation. (Del. Code Ann., tit. 8, Secs. 170, 173)
Section 43. Dividend Reserve. Before payment of any
dividend, there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the Board of Directors
may from time to time, in its absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors
shall think conducive to the interests of the corporation, and the
Board of Directors may modify or abolish any such reserve in the
manner in which it was created. (Del. Code Ann., tit. 8, Section
171)
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ARTICLE X
Fiscal Year
Section 44. Fiscal Year. Unless otherwise fixed by
resolution of the Board of Directors, effective as of January 1,
1992, the fiscal year of the corporation shall end on the 31st day of
the month of December in each calendar year.
ARTICLE XI
Indemnification of Directors, Officers
Employees and Other Agents
Section 45. Indemnification of Directors, Officers,
Employees and Other Agents.
(a) Directors and Officers. The corporation shall
indemnify its directors and officers to the full extent permitted by
the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the corporation to provide
broader indemnification rights than said Law permitted the
corporation to provide prior to such amendment); provided, further,
that the corporation shall not be required to indemnify any director
or officer in connection with any proceeding (or part thereof)
initiated by such person or any proceeding by such person against the
corporation or its directors, officers, employees or other agents
unless (i) such indemnification is expressly required to be made by
law, (ii) the proceeding was authorized by the Board of Directors of
the corporation or (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in
the corporation under the Delaware General Corporation Law, or (iv)
such indemnification is required to be made under subsection (d) of
this Article XI.
(b) Other Employees and Other Agents. The corporation
shall have the power to indemnify its other employees and other
agents as set forth in the Delaware General Corporation Law.
(c) Expenses. The corporation shall advance to any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the
fact that he is or was a director or officer of the corporation, or
is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of any such
proceeding, promptly following request therefor, all expenses
incurred by any director or officer in connection with such
proceeding upon receipt of any undertaking by or on behalf of such
person to repay said amounts if it should be determined ultimately
that such person is not entitled to be indemnified under this Bylaw
or otherwise.
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Notwithstanding the foregoing, unless otherwise determined
pursuant to paragraph (d) of this Bylaw, no advance shall be made by
the corporation to an officer of the corporation in any action, suit
or proceeding, whether civil, criminal, administrative or
investigate, if a determination is reasonably and promptly made (1)
by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to the proceeding, or (2) if such
quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion that, the facts known to the decision-making party at
the time such determination is made demonstrate clearly and
convincingly that such person acted in bad faith or in a manner that
such person did not reasonably believe to be in or not opposed to the
best interests of the corporation, or, with respect to any criminal
action or proceeding, such person believed or had reasonable cause to
believe his conduct was unlawful, except by reason of the fact that
such officer is or was a director of the corporation or is or was
serving at the request of the corporation as a director of another
corporation, joint venture, trust or other enterprise in which event
this paragraph shall not apply.
(d) Enforcement. Without the necessity of entering into
an express contract, all rights to indemnification and advances under
this Bylaw shall be deemed to be contractual rights and be effective
to the same extent and as if provided for in a contract between the
corporation and the director or officer who serves in such capacity
at any time while this Bylaw and other relevant provisions of the
Delaware General Corporation Law and other applicable law, if any,
are in effect. Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on
behalf of the person holding such right in any court of competent
jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. The claimant in
such enforcement action, if successful in whole or in part, shall be
entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall
be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the
corporation to indemnify the claimant for the amount claimed. In
connection with any claim by an officer of the corporation (except in
any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
officer is or was a director of the corporation or is or was serving
at the request of the corporation as a director of another
corporation, partnership, joint venture, trust or other enterprise)
for advances, the corporation shall be entitled to raise a defense as
to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not reasonably
believe to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding,
such person believed or had reasonable cause to believe his conduct
was unlawful. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel or its stockholders) to
have made a determination prior to the commencement of such action
17
<PAGE>
that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal
counsel or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant has not met the applicable
standard of conduct. In any suit brought by a director or officer to
enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that the director or officer is not
entitled to be indemnified, or to such advancement of expenses, under
this Article XI or otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on
any person by this Bylaw shall not be exclusive of any other right
which such person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, Bylaws, agreement,
vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its
directors, officers, employees or agents respecting indemnification
and advances, as provided by law.
(f) Survival of Rights. The rights conferred on any
person by this Bylaw shall continue as to a person who has ceased to
be a director, officer, employee or other agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(g) Insurance. To the fullest extent permitted by the
Delaware General Corporation Law, the corporation, upon approval by
the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this
Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw
shall only be prospective and shall not affect the rights under this
Bylaw in effect at the time of the alleged occurrence of any action
or omission to act that is the cause of any proceeding against any
agent of the corporation.
(i) Savings Clause. If this Bylaw or any portion hereof
shall be invalidated on any ground by any court of competent
jurisdiction, then the corporation shall nevertheless indemnify each
director and officer to the full extent permitted by any applicable
portion of this Bylaw that shall not have been invalidated, or by any
other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw,
the following definitions shall apply:
(i) The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation,
preparation, prosecution, defense, settlement, arbitration
and appeal of, and the giving of testimony in, any
18
<PAGE>
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative.
(ii) The term "expenses" shall be broadly construed
and shall include, without limitation, court costs,
attorneys' fees, witness fees, fines, amounts paid in
settlement or judgment and any other costs and expenses of
any nature or kind incurred in connection with any
proceeding.
(iii) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and
authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position
under the provisions of this Bylaw with respect to the
resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate
existence had continued.
(iv) References to a "director," "officer,"
"employee," or "agent" of the corporation shall include,
without limitation, situations where such person is serving
at the request of the corporation as, respectively, a
director, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust or other
enterprise.
(v) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in
this Bylaw.
ARTICLE XII
Notices
19
<PAGE>
Section 46. Notices.
(a) Notice to Stockholders. Whenever under any provisions
of these Bylaws notice is required to be given to any stockholder, it
shall be given in writing, timely and duly deposited in the United
States mail, postage prepaid, and addressed to his last known post
office address as shown by the stock record of the corporation or its
transfer agent. (Del. Code Ann., tit. 8, Section 222)
(b) Notice to Directors. Any notice required to be given
to any director may be given by the method stated in subsection (a),
or by telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such director
shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) Address Unknown. If no address of a stockholder or
director be known, notice may be sent to the office of the
corporation required to be maintained pursuant to Section 2 hereof.
(d) Affidavit of Mailing. An affidavit of mailing,
executed by a duly authorized and competent employee of the
corporation or its transfer agent appointed with respect to the class
of stock affected, specifying the name and address or the names and
addresses of the stockholder or stockholders, or director or
directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence
of the statements therein contained. (Del. Code Ann., tit. 8,
Section 222)
(e) Time Notices Deemed Given. All notices given by mail,
as above provided, shall be deemed to have been given as at the time
of mailing and all notices given by telegram shall be deemed to have
been given as at the sending time recorded by the telegraph company
transmitting the notices.
(f) Methods of Notice. It shall not be necessary that the
same method of giving notice be employed in respect of all directors,
but one permissible method may be employed in respect of any one or
more, and any other permissible method or methods may be employed in
respect of any other or others.
(g) Failure to Receive Notice. The period or limitation
of time within which any stockholder may exercise any option or
right, or enjoy any privilege or benefit, or be required to act, or
within which any director may exercise any power or right, or enjoy
any privilege, pursuant to any notice sent him in the manner above
provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(h) Notice to Person with Whom Communication Is Unlawful.
Whenever notice is required to be given, under any provision of law
or of the Certificate of Incorporation or Bylaws of the corporation,
to any person with whom communication is unlawful, the giving of such
notice to such person shall not be required and there shall be no
duty to apply to any governmental authority or agency for a license
20
<PAGE>
or permit to give such notice to such person. Any action or meeting
which shall be taken or held without notice to any such person with
whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action
taken by the corporation is such as to require the filing of a
certificate under any provision of the Delaware General Corporation
Law, the certificate shall state, if such is the fact and if notice
is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(Del. Code Ann., tit. 8, Section 230)
ARTICLE XIII
Amendments
Section 47. Amendments. These Bylaws may be repealed,
altered or amended or new Bylaws adopted by the stockholders. The
Board of Directors also shall have the authority, if such authority
is conferred upon the Board of Directors by the Certificate of
Incorporation, to repeal, alter or amend these Bylaws or adopt new
Bylaws (including, without limitation, the amendment of any Bylaw
setting forth the number of directors who shall constitute the whole
Board of Directors) subject to the power of the stockholders to
change or repeal such Bylaws and provided that the Board of Directors
shall not make or alter any Bylaws fixing the qualifications,
classifications, term of office or compensation of directors. (Del.
Code Ann., tit. 8, Secs. 109(a), 122(6))
ARTICLE XIV
Loans of Officers and Others
Section 48. Certain Corporate Loans and Guaranties. The
corporation may make loans of money or property to, or guarantee the
obligations of, or otherwise assist any officer or other employee who
is a director of the corporation or its parent or any subsidiary, or
adopt an employee benefit plan or plans authorizing such loans or
guaranties, upon the approval of the Board of Directors alone if the
Board of Directors determines that such a loan or guaranty or plan
may reasonably be expected to benefit the corporation.
21
<PAGE>
EXHIBIT 10.50
FIRST AMENDMENT TO THE
AMGEN INC. AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN AS AMENDED
AND RESTATED EFFECTIVE JANUARY 1, 1998
The Amgen Inc. Amended and Restated Employee Stock Purchase
Plan (effective October 22, 1996) (the "Plan") is hereby amended,
effective as of January 1, 1998, in the following respects:
1. Section 7(a) of the Plan is amended and restated to read in
its entirety as follows:
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an
Offering by delivering a participation agreement to the Company
within the time specified in the Offering, in such form as the
Company provides. Each such agreement shall authorize payroll
deductions of up to the maximum percentage specified by the Board
or the Committee of such employee's Earnings during the Purchase
Period. "Earnings" is defined as the total compensation paid to
an employee, including all salary, wages (including amounts
elected to be deferred by the employee, that would otherwise have
been paid, under any cash or deferred arrangement established by
the Company), overtime pay, commissions, bonuses, and other
remuneration paid directly to the employee, but excluding profit
sharing, the cost of employee benefits paid for by the Company,
education or tuition reimbursements, imputed income arising under
any Company group insurance or benefit program, traveling
expenses, business and moving expense reimbursements, income
received in connection with stock options, contributions made by
the Company under any employee benefit plan, certain cost of
living allowances and tax equalization payments made to employees
whose payroll originates in the United States and who are working
outside the United States, and similar items of compensation or
such other inclusions or exclusions as the Board or Committee may
determine for one or more specified Offerings. The payroll
deductions made for each participant shall be credited to an
account for such participant under the Plan and shall be deposited
with the general funds of the Company. A participant may reduce
(including to zero), increase or begin such payroll deductions
after the beginning of any Purchase Period only as provided for in
the Offering. A participant may make additional payments into his
or her account only if specifically provided for in the Offering
and only if the participant has not had the maximum amount
withheld during the Purchase Period.
<PAGE>
To record this First Amendment to the Plan as set forth herein,
Amgen Inc. has caused its authorized officer to execute this
document this 17th of June, 1997.
AMGEN INC.
By: /s/ George A. Vandeman
George A. Vandeman
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
EXHIBIT 10.51
THIRD AMENDMENT TO THE
AMGEN RETIREMENT AND SAVINGS PLAN
AS AMENDED AND RESTATED EFFECTIVE APRIL 1, 1996
The Amgen Retirement and Savings Plan As Amended and Restated
Effective April 1, 1996 (the "Plan") is hereby amended, effective
January 1, 1997, as follows:
Section 2.32 of the Plan is amended to read in its entirety as
follows:
2.32 "Hour of Service" means:
(a) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by a member of the Affiliated
Group for the performance of services,
(b) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by a member of the Affiliated
Group on account of a period of time during which no
services are performed (without regard to whether the
employment relationship between the Employee and the member
of the Affiliated Group has terminated) due to vacation,
holiday, illness, incapacity, disability, layoff, jury
duty, military duty or leave of absence with pay, and
(c) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment of an amount as back pay
(without regard to mitigation of damages) either awarded or
agreed to by a member of the Affiliated Group.
The foregoing notwithstanding:
(1) No more than 501 Hours of Service shall be credited to
an Employee under Subsection (b) or (c) above on
account of any single continuous period of time during
which no services are performed.
(2) An hour for which an Employee is directly or
indirectly paid or entitled to payment by a member of
the Affiliated Group on account of a period during
which no services are performed shall not constitute
an Hour of Service hereunder if such payment is made
or due under a plan maintained solely for the purpose
of complying with applicable workers' compensation,
unemployment compensation or disability insurance
laws.
(3) Hours of Service shall not be credited for payments
that solely reimburse an Employee for medical or
medically related expenses.
<PAGE>
(4) The same Hour of Service shall not be credited to an
Employee both under Subsection (a) or (b) and under
Subsection (c).
(5) The computation period to which Hours of Service
determined under Subsection (b) or (c) are to be
credited shall be determined under applicable federal
law and regulations, including, without limitation,
Department of Labor Regulation Section 2530.200b-2(b),
(c) and (d).
The Company shall determine the number of Hours of Service,
if any, to be credited to an Employee under the foregoing
rules in a uniform and nondiscriminatory manner and in
accordance with applicable federal laws and regulations,
including, without limitation, Department of Labor
Regulation Section 2530.200b-2(b), (c) and (d) and Section
2530.200b-3. For purposes of the application of Department
of Labor Regulation Section 2530.200b-3, an Employee who is
compensated on a salaried basis or for whom hourly records
are not maintained shall be credited with ninety-five (95)
Hours of Service for each semi-monthly payroll period for
which he or she would be required to be credited with at
least one Hour of Service under the preceding provisions of
this section.
To record this Third Amendment to the Plan as set forth herein, the
Company has caused its authorized officer to execute this document
this 16th day of June, 1997.
AMGEN INC.
By: /s/ George A. Vandeman
George A. Vandeman
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
EXHIBIT 10.52
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
HEADS OF AGREEMENT
between
Amgen Inc......and
Kirin-Amgen, Inc......on the one hand
and
F. Hoffmann-La Roche Ltd......on the other hand.
Whereas:
Amgen and Roche have entered into various agreements on G-CSF in the
European Union ("AMRO Agreements") and other European countries
("ROE") and Kirin-Amgen and Roche have entered into such agreements
for the rest of the world ("ROW").
Roche entered into a license agreement with *********** on a
********** ********************* ("***** Product") on January 1, 1996
("*********** License").
Amgen and Roche have agreed to modify their present relationship as
follows:
1. Certain Rights
1.1 *********** License Concurrently herewith, Roche will
terminate or relinquish the ***********
License for
***************************************
********** and Roche shall cause its
affiliate company - La Roche Inc.,
Nutley, New Jersey USA to terminate or
relinquish the *********** license for
the United States as of the date
hereof, such that the rights to the
***** Product in those territories will
revert to ***********.
1.2 License Grant Roche will grant to and cause Hoffmann-
La Roche Inc. to grant to Amgen and
Kirin-Amgen
*********************************** for
the U.S., ******************** covering
all intellectual property, now owned or
hereafter developed or acquired by
Roche and Hoffmann-La Roche Inc., which
relates to the
1
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
***************************************
***************************************
************************* Such
************ shall be limited to:
(*)*******************************
***************************************
****************************
(**)******************************
***************************************
***************************************
*
(***)**********************************
(**)******************************
***************************************
****************
(*)*******************************
***************************************
************
(**)******************************
***************************************
***************************************
***************************************
*************
Such ************ other than G-CSF
(Neupogen) are referred to elsewhere
herein as "Second Generation Products."
Such license shall terminate upon the
date of termination of the AMRO
Agreements as extended herein;
provided, however, that if the AMRO
Agreements are terminated for "Good
Cause" (as defined therein) by Amgen,
such license will continue in effect
until the date specified in Section
2.1.
2. Extension of AMRO
2.1 Extension of AMRO; In consideration of the rights granted
2
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
Term and relinquished pursuant to Section 1,
above, and the other terms contained
herein, the AMRO Agreements between
Amgen and Roche will be extended and
modified, as set forth below. The term
of the AMRO Agreements shall be
extended to December 31, 2010, or
***************************************
***************************************
***************************************
***************************************
***************************************
***************** whichever is later.
If, however,
***************************************
*, the term of the AMRO Agreement
******* ******** until the
***************************************
***************************************
*****************
2.2 AMRO Territory All countries ************* and those
countries which
******************************* of the
AMRO Agreements.
2.3 Profit Split The profit split *******************
shall be:
Amgen/Roche
**** *****
**** *****
**** *****
**** and beyond *****
2.4 ************** Effective upon the date of this Heads
of Agreement, ************** shall
include
***************************************
******* required to be paid
***************************************
********************************* The
************* payable as of the date
hereof are set forth on Exhibit A
attached hereto.
***************************************
** shall be included in **************
than those related in Exhibit A
(***********************************).
2.5 Roche Sales Force
**********************************
***************************************
3
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
**************
3. Other Matters
3.1 Continuation of Except as provided in Section 2.5,
Other AMRO Changes the process of shifting to Amgen
marketing, licensing/regulatory,
distribution, invoicing, etc. which is
currently underway for G-CSF (Neupogen)
shall continue as per the AMRO
Agreements and not be affected by this
extension and amendment.
3.2 Development
3.2.1 Products It is the desire of the parties to
develop a Second Generation Product.
The decision by Amgen and Roche to
develop a Second Generation Product
shall be
***************************************
***************************************
***************************************
***************************************
***************************************
******************************, the
Second Generation Product shall be
deemed to be a "Product" within the
meaning of the AMRO Agreement and
development will be governed by the
4
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
terms thereof. The specific product to
be developed shall be
********************, in accordance
with the Evaluation Plan attached
hereto as Exhibit B. Upon selection of
a Product for development following
completion of the Evaluation Plan,
Amgen and Roche shall prepare a
Development Plan. Thereafter, Amgen
and Roche shall exercise commercially
reasonable efforts to develop and
commercialize the Product in accordance
with the Development Plan in the AMRO
territory. Amgen shall control
development, preclinical, clinical,
regulatory and marketing of a Second
Generation Product and shall
distribute, and
***************************************
***************************************
The Development Plan including launch
date shall be mutually agreed upon.
3.2.2 *********** License If the agreed upon Second Generation
Product includes any technology covered
by the *********** patents, Roche will
grant Amgen *************************
sublicense for the EU under any rights
Roche may have with respect to the
*********** patents under the
*********** license.
3.2.3 Amgen Products
**********************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***** This paragraph shall not apply
to G-CSF (Neupogen) or a Second
Generation Product which Amgen or its
licensee/partner brings to the EU in a
cell therapy ex-vivo expansion
application.
3.2.4 Roche Products
**********************************
***************************************
***************************************
***************************************
***************************************
5
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
***************************************
***************************************
*****
3.2.5 Development Costs Effective upon the date of this Heads
of Agreement, Amgen and Roche shall
share, in accordance with the then
current profit split under the AMRO
Agreement,
************************************ in
the AMRO territory, including:
- ********************************;
-
**********************************
***************************************
**; and
-
**********************************
***************************************
*********** License. Such costs shall
include ********* payable to
*********** as follows:
a) ***************** of the net
sales of ***** Product
*******************; provided,
however, that in the event that
(1) certain ********* have to
be paid to a third party due to
a patent issue, in such case
the ******* payable to *****
shall be
*******************************
*******************************
; or
(2) such ***** Product shall
face significant competition
from a third party
*******************************
*******************************
************* the *******
payable to ***** in any such
country shall be
*******************************
*******************************
*******;
6
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
provided further that the
*************** in the aggregate
from (1) and (2) shall not cause
the ************ payable to *****
to be less than *****************.
If both (1) and (2) are
applicable, the calculation in (1)
shall be made first and then (2)
shall be calculated.
b) For a Second Generation Product
covered by ******* patents
other than the product in a)
all ************* as per a)
will be ******* by
*****************.
c) For a Second Generation Product
which would not be covered by
******* patents, all
************* as per a) will be
******* by ***.
d) The ********* under c) above
shall be payable so long as the
*********** License is in full
force and effect.
Such costs shall also include the
********** payable to ***********
as follows:
(1) ************
***************
***************************
**************** shall be
payable within *********
after the signature of
these Heads of Agreement.
(2) ********************
***************
***************************
******* shall be payable
within ****************
after the first entry of a
patient in a **************
with a Second Generation
7
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
Product or in any EU
country or
********************** as
agreed to in the time and
events schedule in the
Development Plan (to be
established after the
evaluation period),
whichever is earlier.
(3) ******************
***************
***************************
******* shall be payable
within ****************
after 50% of patients have
been enrolled in a
*************** with a
Second Generation Product
in any EU country, or to
***************************
****** as agreed to in the
time and events schedule of
Development Plan, whichever
occurs earlier.
(4) ****************
***************
***************************
***************************
** shall be payable within
**************** after the
submission of the first
Second Generation Product
license
***************************
******** to the Authority
in
***************************
******* or the
*********************** as
agreed to in the time and
events schedule in the
Development Plan, whichever
is earlier.
(5) With respect to
***************************
***************************
8
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
* of (3) above and
***************************
***************************
***************** of (4)
above, shall be
****************** the
payment of ******* payable
to *****.
3.2.6 ********* of Second *************************************
Generation Products
**********************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************************
***************************
*)
*****************************
**********************************
**********************************
*************
*)
*****************************
**********************************
**********************************
*************
9
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
*)
*****************************
**********************************
**********************************
***************
*)
*****************************
**********************************
**********************************
*****************************
*)
*****************************
**********************************
**********************************
**********
3.2.7 Rest of Europe If a Second Generation Product is
successfully developed and approved for
the EU, it is the intention of the
parties that if such rights are
available Roche be granted the rights
to sell the Product in *************
("ROE") under the terms of the existing
agreements; provided, however, that
Amgen and Roche shall negotiate in good
faith the terms of such license, in
accordance with the following
principles:
3.2.7.1 if the Second Generation
Product is not a *****
Product and does not use the
********************* covered
by the *********** License,
the royalty payable by Roche
to Amgen will be
*********************,
3.2.7.2 if the Second Generation
Product is not a *****
Product but does use the
********************* covered
by the *********** License,
the royalty payable by Roche
to Amgen will be
***************** that
specified in Section 3.2.7.1,
and
3.2.7.3 if the Second Generation
Product is a ***** Product,
10
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
the royalty payable by Roche to Amgen will be ***************** that
specified in Section 3.2.7.2.
In such good faith negotiations the
parties will take into account all
factors relevant to each of them,
including without limitation royalties
each party may be required to pay to
third parties, the relative
contribution of the parties to the
particular Second Generation Product
and who is the manufacturer and at what
cost. The term of the ROE Agreement
shall be until
***************************************
***************************************
***************************************
**************************************,
whichever date is later.
3.2.8 Rest of World If a Second Generation Product is
successfully developed and approved for
the EU, it is the intention of the
parties that if such rights are
available Roche be granted the rights
to sell the Product throughout the
world,
***************************************
***************************************
********** ("ROW") under the terms of
the existing agreements. Kirin-Amgen
or Amgen, as the case may be, and Roche
shall negotiate in good faith a
modification of the terms of such
license, in accordance with the
following principles:
3.2.8.1 if the Second Generation
Product is not a *****
Product and does not use the
********************* covered
by the *********** License,
the royalty payable by Roche
to Kirin-Amgen will be
*****************************
***,
3.2.8.2 if the Second Generation
Product is not a *****
Product but does use the
********************* covered
by the *********** License,
the royalty payable by Roche
11
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
to Kirin-Amgen will be
***************** that
specified in Section 3.2.8.1,
and
3.2.8.3. if the Second Generation
Product is a ***** Product,
the royalty payable by Roche
to Kirin-Amgen will be
***************** that
specified in Section 3.2.8.2.
In such good faith negotiations the
parties will take into account all
factors relevant to each of them,
including without limitation royalties
each party may be required to pay to
third parties, the relative
contribution of the parties to the
particular Second Generation Product
and who is the manufacturer and at what
cost. The term of the ROW Agreement
shall be until the
***************************************
***************************************
***************************************
*********************************,
whichever date is later. Roche agrees
to ********* with Kirin such Second
Generation Product in the following
countries:
***************************************
***************************************
**********.
3.3 Manufacture by If the Second Generation Product is
*********** the ***** Product, ***** shall have the
rights to manufacture the product for
the EU, ROE and ROW.
3.4 Manufacture by Amgen All Second Generation Products other
than a *********** Product will be
manufactured by Amgen for the EU.
3.5 Definitive Agreement The parties shall enter into a
definitive agreement within ninety (90)
days following execution of this Heads
of Agreement.
3.6 Miscellaneous Sections 7.01 (a) and 11.01 of the AMRO
Agreements shall be revised to reflect
the new profit splits and to provide
for the sharing of Operating Losses in
12
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
accordance with the profit splits for
the term of AMRO.
The AMRO Agreements shall be revised to
change the functional currency from
Swiss Francs to U.S. Dollars.
The AMRO Agreements shall no longer
provide for ***************** to Roche.
There is nothing in the Kirin-Amgen
Agreements that restricts Amgen or
Kirin-Amgen from fulfilling its
obligations under this Agreement
regarding any Second Generation Product
in the EU, ROE and ROW.
There is nothing in this Agreement that
restricts any party from
commercializing in the ROE and ROW a
Second Generation Product that is not
being commercialized in the EU.
The Heads of Agreement will become binding upon the parties upon the
execution hereof. Although binding upon the parties, the terms
hereof shall be incorporated in a definitive amendment to the AMRO
Agreements containing additional terms, including terms addressing
individual country issues that exist between the parties.
Dated: April 10, 1997
F. HOFFMANN-LA ROCHE LTD AMGEN INC.
By: /s/ Werner Henrich By: /s/ George A. Vandeman
Dated: April 10, 1997 Dated: April 10, 1997
KIRIN-AMGEN, INC.
BY AMGEN INC.
By: /s/ George A. Vandeman
Dated: April 10, 1997
13
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
Exhibit A
Party *******
*********** ************************
************************ *********************************
******* *********************
******** ****
*********************** **
14
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
Exhibit B
Evaluation Plan
*******
**********************************
*************************************
*************************************
*************************************
*************************************
*************************************
*************************************
*************************************
****
**************************
**********************************
*************************************
*************************************
*************************************
*************************************
*************************************
*************************************
*************************************
*************************************
*************************************
*************************************
***************************
******************
**********************************
*************************************
*************************************
*************************************
*************************************
*************************************
**
**************************** ******************************
***************
***********************************
***************************************
***************************************
***************************************
***************************************
***************************************
15
<PAGE>
ASTERISKS (*) INDICATE CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.
***************************************
*********
********************
**********************************
********************************
**********
**********************************
***********************************
16
<PAGE>
EXHIBIT 11
AMGEN INC.
COMPUTATION OF PER SHARE EARNINGS
PRIMARY COMPUTATION
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------ ------- ------ ------
Net income .................. $200.5 $178.7 $380.8 $322.3
====== ====== ====== ======
Applicable common and common
stock equivalent shares:
Weighted average shares of
common stock outstanding
during the period .......... 265.3 264.9 265.3 265.4
Incremental number of shares
outstanding during the
period resulting from the
assumed exercises of stock
options .................... 12.2 16.0 12.5 16.8
------ ------ ------ ------
Weighted average shares of
common stock and common
stock equivalents
outstanding during the
period ..................... 277.5 280.9 277.8 282.2
====== ====== ====== ======
Earnings per common share
primary..................... $ .72 $ .64 $ 1.37 $ 1.14
====== ====== ====== ======
<PAGE>
EXHIBIT 11
AMGEN INC.
COMPUTATION OF PER SHARE EARNINGS
FULLY DILUTED COMPUTATION
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------ ------ ------ ------
Net income .................. $200.5 $178.7 $380.8 $322.3
====== ====== ====== ======
Applicable common and common
stock equivalent shares:
Weighted average shares of
common stock outstanding
during the period .......... 265.3 264.9 265.3 265.4
Incremental number of shares
outstanding during the
period resulting from the
assumed exercises of stock
options .................... 12.2 16.0 12.5 16.8
------ ------ ------ ------
Weighted average shares of
common stock and common
stock equivalents
outstanding during the
period ..................... 277.5 280.9 277.8 282.2
====== ====== ====== ======
Earnings per common share
fully diluted .............. $ .72 $ .64 $ 1.37 $ 1.14
====== ====== ====== ======
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 331
<SECURITIES> 894
<RECEIVABLES> 229
<ALLOWANCES> 0
<INVENTORY> 106
<CURRENT-ASSETS> 1646
<PP&E> 1045
<DEPRECIATION> 65
<TOTAL-ASSETS> 3043
<CURRENT-LIABILITIES> 588
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2270
<TOTAL-LIABILITY-AND-EQUITY> 3043
<SALES> 1103
<TOTAL-REVENUES> 1196
<CGS> 149
<TOTAL-COSTS> 701
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 529
<INCOME-TAX> 148
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.37
</TABLE>
EXHIBIT 99
AMGEN INC.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Factors That May Affect Future Results
Amgen operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. The
following discussion highlights some of these risks and others are
discussed elsewhere herein and in other documents filed by the
Company with the Securities and Exchange Commission.
Period to period fluctuations
The Company's operating results may fluctuate for a number of
reasons. The forecasting of revenue is inherently uncertain for a
variety of reasons. Because the Company plans its operating
expenses, many of which are relatively fixed in the short term, on
the basis that revenues will continue to grow, even a relatively
small revenue shortfall may cause a period's results to be below
expectations. Such a revenue shortfall could arise from any number
of factors, including lower than expected demand, wholesalers' buying
patterns, product pricing strategies, fluctuations in foreign
currency exchange rates, changes in government or private
reimbursement, transit interruptions, overall economic conditions or
natural disasters (including earthquakes).
See "Results of Operations - Product sales - NEUPOGEN(R)
(Filgrastim)" for a discussion regarding quarterly NEUPOGEN(R) sales.
The Company's stock price, like that of other biotechnology
companies, is subject to significant volatility. If revenues or
earnings in any quarter fail to meet the investment community's
expectations, there could be an immediate impact on the Company's
stock price. The stock price may also be affected by, among other
things, clinical trial results and other product development related
announcements by Amgen or its competitors, regulatory matters,
intellectual property and legal matters, or broader industry and
market trends unrelated to the Company's performance.
Rapid growth
In light of management's views of the potential for future
growth of the Company's business, the Company has adopted an
aggressive growth plan that includes substantial and increased
investments in research and development and investments in facilities
that will be required to support significant growth. This plan
carries with it a number of risks, including a higher level of
operating expenses, the difficulty of attracting and assimilating a
large number of new employees, and the complexities associated with
managing a larger and faster growing organization.
Product development
1
<PAGE>
The Company intends to continue to develop product candidates.
Successful product development in the biotechnology industry is
highly uncertain and only a small minority of research and
development programs ultimately result in commercially successful
drugs. Product development is dependent on numerous factors, many of
which are beyond the Company's control. Product candidates that
appear promising in the early phases of development may fail to reach
market for numerous reasons. They may be found to be ineffective or
to have harmful side effects in clinical or preclinical testing, fail
to receive necessary regulatory approvals, be uneconomic because of
manufacturing costs or other factors, or be precluded from
commercialization by the proprietary rights of others. Success in
preclinical and early clinical trials does not ensure that large
scale clinical trials will be successful. Clinical results are
frequently susceptible to varying interpretations which may delay,
limit or prevent further clinical development or regulatory
approvals. The length of time necessary to complete clinical trials
and receive approval for product marketing by regulatory authorities
varies significantly by product and indication and is often difficult
to predict.
Regulatory approvals
The success of current products and future product candidates of
the Company will depend in part upon maintaining and obtaining
regulatory approval to market products. Domestic and foreign
statutes and regulations govern matters relating to the Company's
products and product candidates and the research and development
activities associated with them. The Company's product candidates
may prove to have undesirable side effects that may interrupt or
delay clinical studies and could ultimately prevent or limit their
commercial use. The Company or regulatory authorities may suspend or
terminate clinical trials at any time if the participants in such
trials are believed to be exposed to unacceptable health risks. Even
if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continued review. Later discovery of
previously unknown problems with a product or manufacturer may result
in restrictions on such product or manufacturer, including withdrawal
of the product from the market. Failure to obtain necessary
approvals, or the restriction, suspension, or revocation of any
approvals, or the failure to comply with regulatory requirements
could have a material adverse effect on the Company.
Reimbursement
The success of the Company's products partially depends upon the
extent to which a consumer is willing to pay the price or able to
obtain reimbursement for the cost of these products from government
health administration authorities, private health insurers, and other
organizations. Significant uncertainties exist as to the
reimbursement status of newly approved therapeutic products, and
current reimbursement policies for existing products may change. It
is possible that changes in reimbursement or failure to obtain
reimbursement may reduce the demand for or the price of the Company's
products.
2
<PAGE>
Several factors could influence the pricing or reimbursement for
the Company's products including: (1) third-party payors continuing
to challenge the prices charged for medical services and products,
(2) the trend towards managed care in the United States, (3) the
growth of organizations which could control or significantly
influence the purchase of health care services and products, and (4)
legislative proposals to reform health care or reduce government
insurance programs. NEUPOGEN(R) usage has been and is expected to
continue to be affected by cost containment pressures on health care
providers worldwide. In addition, patients receiving EPOGEN(R) in
connection with treatment for end stage renal disease are covered
primarily under medical programs provided by the federal government.
Therefore, EPOGEN(R) sales may also be affected by future changes in
reimbursement rates or the basis for reimbursement by the federal
government.
Competition
Substantial competition exists in the biotechnology industry
from pharmaceutical and biotechnology companies which may have
technical or competitive advantages. The Company competes with these
companies in the development of technologies and processes and
sometimes competes with them in acquiring technology from academic
institutions, government agencies, and other private and public
research organizations. There can be no assurance that the Company
will be able to produce or acquire rights to products that have
commercial potential. Even if the Company achieves product
commercialization, there can be no assurance that one or more of the
Company's competitors may not: (1) achieve product commercialization
earlier than the Company, (2) receive patent protection that
dominates or adversely affects the Company's activities, or (3) have
significantly greater marketing capabilities.
The field of biotechnology has undergone rapid and significant
technological change. The Company expects that the technology
associated with the Company's research and development will continue
to develop rapidly, and the Company's future success will depend in
large part on its ability to maintain a competitive position with
respect to this technology. Rapid technological development by the
Company or others may result in some of the Company's product
candidates, products, or processes becoming obsolete before the
Company recovers a significant portion of the research, development,
manufacturing, and commercialization expenses it incurs. This could
have a material adverse effect on the Company.
Intellectual property and legal matters
The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and
factual questions. Accordingly the breadth of claims allowed in such
companies' patents cannot be predicted. Patent disputes are frequent
and can preclude commercialization of products. The Company is and
may in the future be involved in material patent litigation. Such
litigation, if decided adversely, could subject the Company to
significant liabilities and cause the Company to obtain third party
licenses or cease using the technology or product in dispute.
3
<PAGE>
The Company is involved in arbitration proceedings with Ortho
Pharmaceutical Corporation, a subsidiary of Johnson & Johnson
("Johnson & Johnson"), relating to a license granted by the Company
to Johnson & Johnson for sales of Epoetin alfa in the United States
for all human uses except dialysis and diagnostics. See Note 4 to
the Condensed Consolidated Financial Statements - "Contingencies -
Johnson and Johnson arbitrations." While it is impossible to predict
accurately or determine the outcome of these proceedings, based
primarily upon the merits of its claims and based upon certain
liabilities established due to the inherent uncertainty of any
arbitrated result, the Company believes that the outcome of these
proceedings will not have a material adverse effect on its financial
statements. However, it is possible that an adverse decision could,
depending on its magnitude, have a material adverse effect on the
financial statements.
4
<PAGE>
