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UNITED STATES
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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-12477
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.)
One Amgen Center Drive, Thousand Oaks, California 91320-1799
- -------------------------------------------------------------------------------
(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, 1999, the registrant had 509,955,945 shares of Common Stock,
$.0001 par value, outstanding.
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AMGEN INC.
INDEX
<TABLE>
<CAPTION>
Page No.
PART I FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements................................ 3
Condensed Consolidated Statements of
Operations - three and six months
ended June 30, 1999 and 1998.................................. 4
Condensed Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998........................... 5
Condensed Consolidated Statements of
Cash Flows - six months
ended June 30, 1999 and 1998.................................. 6
Notes to Condensed Consolidated Financial
Statements.................................................... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.......................................... 13
<CAPTION>
PART II OTHER INFORMATION
<S> <C>
Item 1. Legal Proceedings................................... 23
Item 4. Submission of Matters to a Vote of
Security Holders.................................... 24
Item 5. Other Information................................... 25
Item 6. Exhibits and Reports on Form 8-K.................... 25
Signatures...................................................... 26
Index to Exhibits............................................... 27
</TABLE>
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,
1999 and 1998 is unaudited but includes all adjustments (consisting only of
normal recurring accruals, unless otherwise indicated) 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, 1998.
Interim results are not necessarily indicative of results for the full
fiscal year.
3
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AMGEN INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------- -------------- ----------------- -----------------
Revenues:
<S> <C> <C> <C> <C>
Product sales $737.9 $611.2 $1,426.2 $1,178.0
Corporate partner revenues 49.0 29.9 76.0 52.5
Royalty income 33.6 15.8 63.8 31.8
-------------- -------------- ----------------- -----------------
Total revenues 820.5 656.9 1,566.0 1,262.3
-------------- -------------- ----------------- -----------------
Operating expenses:
Cost of sales 98.8 83.9 191.2 162.9
Research and development 194.1 152.4 382.1 304.9
Selling, general and administrative 157.2 122.0 290.1 235.1
Loss of affiliates, net 9.2 10.2 12.0 16.4
-------------- -------------- ----------------- -----------------
Total operating expenses 459.3 368.5 875.4 719.3
-------------- -------------- ----------------- -----------------
Operating income 361.2 288.4 690.6 543.0
Other income (expense):
Interest and other income 24.5 23.9 43.0 39.1
Interest expense, net (3.3) (3.3) (5.5) (5.5)
-------------- -------------- ----------------- -----------------
Total other income (expense) 21.2 20.6 37.5 33.6
-------------- -------------- ----------------- -----------------
Income before income taxes 382.4 309.0 728.1 576.6
Provision for income taxes 114.8 92.7 213.3 173.0
-------------- -------------- ----------------- -----------------
Net income $267.6 $216.3 $ 514.8 $ 403.6
============== ============== ================= =================
Earnings per share:
Basic $ 0.52 $ 0.43 $ 1.01 $ 0.79
Diluted $ 0.50 $ 0.41 $ 0.96 $ 0.77
Shares used in calculation of earnings
per share:
Basic 510.5 507.9 511.2 510.2
Diluted 536.9 525.0 538.7 526.4
</TABLE>
See accompanying notes.
4
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AMGEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------- ---------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 199.6 $ 201.1
Marketable securities 1,168.7 1,074.9
Trade receivables, net 363.6 319.9
Inventories 121.8 110.8
Other current assets 157.1 156.6
----------------- ---------------------
Total current assets 2,010.8 1,863.3
----------------- ---------------------
Property, plant and equipment at cost, net 1,484.0 1,450.2
Investments in affiliated companies 124.6 120.9
Other assets 270.2 237.8
----------------- ---------------------
$3,889.6 $3,672.2
================= =====================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 144.0 $ 121.6
Commercial paper 99.8 99.7
Accrued liabilities 637.4 659.7
Current portion of long-term debt - 6.0
----------------- ---------------------
Total current liabilities 881.2 887.0
----------------- ---------------------
Long-term debt 223.0 223.0
Contingencies
Stockholders' equity:
Preferred stock: $.0001 par value; 5 shares
authorized; none issued or outstanding - -
Common stock and additional paid-in capital;
$.0001 par value; 1,500 shares authorized;
outstanding - 510.0 shares in 1999 and
509.2 shares in 1998 1,870.5 1,671.9
Retained earnings 938.3 894.3
Accumulated other comprehensive loss (23.4) (4.0)
----------------- ---------------------
Total stockholders' equity 2,785.4 2,562.2
----------------- ---------------------
$3,889.6 $3,672.2
================= =====================
</TABLE>
See accompanying notes.
5
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AMGEN INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 514.8 $ 403.6
Depreciation and amortization 89.2 72.7
Gain on sale of investments - (13.2)
Loss of affiliates, net 12.0 16.4
Cash provided by (used in):
Trade receivables, net (43.7) (22.2)
Inventories (11.0) (4.1)
Other current assets 3.7 3.7
Accounts payable 22.4 (18.9)
Accrued liabilities (22.3) 63.8
-------------- ---------------
Net cash provided by operating activities 565.1 501.8
-------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and equipment (147.0) (236.0)
Proceeds from maturities of marketable securities 10.5 -
Proceeds from sales of marketable securities 373.3 272.1
Purchases of marketable securities (494.0) (348.5)
Other (2.0) 7.0
-------------- ---------------
Net cash used in investing activities (259.2) (305.4)
-------------- ---------------
Cash flows from financing activities:
Increase in commercial paper - 99.5
Repayment of long-term debt (6.0) (25.0)
Net proceeds from issuance of common stock upon
the exercise of stock options 131.6 91.8
Tax benefits related to stock options 66.9 30.0
Repurchases of common stock (470.7) (457.0)
Other (29.2) (16.8)
-------------- ---------------
Net cash used in financing activities (307.4) (277.5)
-------------- ---------------
Decrease in cash and cash equivalents (1.5) (81.1)
Cash and cash equivalents at beginning of period 201.1 239.1
-------------- ---------------
Cash and cash equivalents at end of period $ 199.6 $ 158.0
============== ===============
</TABLE>
See accompanying notes.
6
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AMGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
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):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Raw materials $ 23.5 $ 18.1
Work in process 50.7 49.1
Finished goods 47.6 43.6
----------------- -----------------
$121.8 $110.8
================= =================
</TABLE>
7
<PAGE>
Product sales
Product sales primarily consist of sales from EPOGEN(R) (Epoetin alfa) and
NEUPOGEN(R) (Filgrastim).
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 (which has assigned its rights under the product
license agreement to Ortho Biotech, Inc.), 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. Sales in Amgen's exclusive market and
adjustments thereto are derived from Company shipments and from third-party data
on shipments to end users and their usage (see Note 6, "Contingencies - Johnson
& Johnson arbitrations"). Sales of the Company's other products are recognized
when shipped.
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, 1999, the Company had option and forward contracts to
exchange foreign currencies for U.S. dollars of $57.7 million and $13.1 million,
respectively, all having maturities of six months or less. The option
contracts, which have only nominal intrinsic value at the time of purchase, are
designated as effective hedges of anticipated foreign currency transactions for
financial reporting purposes and accordingly, the net gains on such contracts
are deferred and 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 assets and liabilities
denominated in foreign currencies. At June 30, 1999, the Company had forward
contracts to exchange foreign currencies for U.S. dollars of $23.5 million, all
having maturities of less than six months. These contracts are designated as
effective 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
forward contracts are included in the corresponding captions of the hedged
assets and liabilities. Gains
8
<PAGE>
and losses on forward contracts, to the extent they differ in amount from the
hedged assets and liabilities, are included in "Interest and other income".
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The date required for adoption of this
statement has been delayed until fiscal years beginning after June 15, 2000.
Because of the Company's minimal use of derivatives, management anticipates that
the adoption of this new statement will not have a significant effect on
earnings or the financial position of the Company.
Employee stock option and stock purchase plans
The Company's employee stock option and stock purchase plans are accounted
for under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees".
Earnings per share
Basic earnings per share is based upon the weighted-average number of
common shares outstanding. Diluted earnings per share is based upon the
weighted-average number of common shares and dilutive potential common shares
outstanding. Potential common shares are outstanding options under the
Company's employee stock option plans which are included under the treasury
stock method.
The following table sets forth the computation for basic and diluted
earnings per share (in millions, except per share information):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Numerator for basic and diluted
earnings per share - net income $267.6 $216.3 $514.8 $403.6
============== ============== ============== ==============
Denominator:
Denominator for basic earnings
per share - weighted-average shares 510.5 507.9 511.2 510.2
Effect of dilutive securities -
employee stock options 26.4 17.1 27.5 16.2
-------------- -------------- -------------- --------------
Denominator for diluted earnings
per share - adjusted weighted-
average shares 536.9 525.0 538.7 526.4
============== ============== ============== ==============
Basic earnings per share $ 0.52 $ 0.43 $ 1.01 $ 0.79
Diluted earnings per share $ 0.50 $ 0.41 $ 0.96 $ 0.77
</TABLE>
9
<PAGE>
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, 1999
and 1998 is unaudited but includes all adjustments (consisting only of normal
recurring accruals, unless otherwise indicated) which the Company 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.
Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. Debt
As of June 30, 1999, the Company had $223 million of unsecured debt
securities outstanding. These unsecured debt securities consisted of: 1) $100
million of debt securities that bear interest at a fixed rate of 6.5% and mature
in 2007 that were issued in December 1997 under a $500 million debt shelf
registration (the "Shelf"), 2) $100 million of debt securities that bear
interest at a fixed rate of 8.1% and mature in 2097, and 3) $23 million of debt
securities that bear interest at a fixed rate of 6.2% and mature in 2003. Under
the Shelf, all of the remaining $400 million of debt securities available for
issuance may be offered under the Company's medium term note program from time
to time with terms to be determined by market conditions.
The Company has a commercial paper program which provides for unsecured
short-term borrowings up to an aggregate of $200 million. As of June 30, 1999,
commercial paper with a face amount of $100 million was outstanding. These
borrowings had maturities of less than three months and had effective interest
rates averaging 5.1%.
The Company also has an unsecured $150 million credit facility that expires
on May 28, 2003. As of June 30, 1999, no amounts were outstanding under this
line of credit.
10
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3. Income taxes
The provision for income taxes consists of the following (in millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Federal (including U.S. possessions) $105.9 $86.6 $196.6 $161.5
State 8.9 6.1 16.7 11.5
-------------- ------------- -------------- --------------
$114.8 $92.7 $213.3 $173.0
============== ============= ============== ==============
</TABLE>
The Company's effective tax rate for the three and six months ended June
30, 1999 was 30.0% and 29.3%, respectively, compared with 30.0% for each of the
same periods last year.
4. Stockholders' equity
During the six months ended June 30, 1999, the Company repurchased 7
million shares of its common stock at a total cost of $470.7 million under its
common stock repurchase program. In October 1998, the Board of Directors
authorized the Company to repurchase up to an additional $1 billion of common
stock through December 31, 1999. At June 30, 1999, $329.3 million of this
authorization remained. Stock repurchased under the program is retired.
On May 4, 1999, the Company's stockholders approved an increase in the
number of authorized shares of common stock from 750,000,000 to 1,500,000,000.
5. Comprehensive income
During the three and six months ended June 30, 1999, total comprehensive
income was $260.7 million and $495.4 million, respectively. During the three
and six months ended June 30, 1998, total comprehensive income was $208.1
million and $392.4 million, respectively. The Company's other comprehensive
income/loss is comprised of unrealized gains and losses on the Company's
available-for-sale securities and foreign currency translation adjustments.
6. Contingencies
Johnson & Johnson arbitrations
In September 1985, the Company granted Johnson & Johnson's affiliate, Ortho
Pharmaceutical Corporation, 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. A number of disputes have arisen
11
<PAGE>
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").
A dispute between Amgen and Johnson & Johnson that has been the subject of
an arbitration proceeding relates to the audit methodology currently employed by
the Company to account for Epoetin alfa sales. The Company and Johnson & Johnson
are required to compensate each other for Epoetin alfa sales that either party
makes into the other party's exclusive market, sometimes described as
"spillover" sales. The Company has established and is employing an audit
methodology to measure each party's spillover sales and to allocate the net
profits from those sales to the appropriate party. The arbitrator in this
matter (the "Arbitrator") issued an opinion adopting the Company's audit
methodology with certain adjustments and, subsequently, issued his final order
confirming that the Company was the successful party in the arbitration. As a
result, Johnson & Johnson was ordered to pay to the Company all costs and
expenses, including reasonable attorneys' fees, that the Company incurred in the
arbitration as well as one-half of the audit costs. The Company submitted a
bill for such costs incurred over an eight year period in the amount of
approximately $110 million. On January 20, 1999, Johnson & Johnson informed the
Company that it intends to contest substantially all costs and expenses,
including reasonable attorneys' fees, that the Company incurred in the
arbitration as well as one-half of the audit costs.
On April 15, 1999, the Arbitrator ruled that the Company cannot recover
certain of its fees and costs. Although further clarification of the
Arbitrator's order will be required, and although he will determine at a later
date the specific amount of the unrecoverable fees, the Company has estimated
that the ruling reduces the Company's potential recovery of such fees and costs
by approximately $12 million. In addition to determining that amount, the
Arbitrator will determine how much of the Company's remaining claim the Company
is entitled to recover from Johnson & Johnson.
On October 26, 1998, Johnson & Johnson filed a petition in the Circuit
Court of Cook County, Illinois seeking to vacate or modify the Arbitrator's
award to the Company of all costs and expenses, including reasonable attorney's
fees and costs, that the Company incurred in the arbitration. On January 8,
1999, the Company filed a motion to dismiss Johnson & Johnson's petition. That
motion remains pending. Due to remaining uncertainties the Company has not
recognized any benefit from the recovery of attorneys' fees and costs or audit
costs.
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 based on the Company's claim that Johnson & Johnson has
intentionally sold PROCRIT(R) (the brand name under which Johnson & Johnson
sells Epoetin alfa) into the Company's exclusive dialysis market. Johnson &
Johnson disputed the Arbitrator's jurisdiction to decide the Company's demand.
On March 2, 1999, the Illinois Court of Appeals denied Johnson & Johnson's
appeal of the Company's successful motion for summary judgment
12
<PAGE>
affirming the Arbitrator has jurisdiction over this matter. Pursuant to the
Arbitrator's ruling, discovery has commenced. No trial date has been set. The
Company is unable to predict at this time the outcome of its demand for
termination of the License Agreement or when it will be resolved.
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
annual financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company had cash, cash equivalents and marketable securities of
$1,368.3 million at June 30, 1999, compared with $1,276 million at December 31,
1998. 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, 1999, operations provided $565.1 million of cash compared with
$501.8 million during the same period last year.
Capital expenditures totaled $147 million for the six months ended June 30,
1999, compared with $236 million for the same period a year ago. The Company
anticipates spending approximately $300 million to $400 million in 1999 on
capital projects and equipment to expand the Company's global operations.
Thereafter, over the next few years, the Company anticipates that capital
expenditures will average in excess of $300 million per year.
The Company receives cash from the exercise of employee stock options.
During the six months ended June 30, 1999, stock options and their related tax
benefits provided $198.5 million of cash compared with $121.8 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 primarily to offset the dilutive
effect of its employee stock option and stock purchase plans. During the six
months ended June 30, 1999, the Company purchased 7 million shares of its common
stock at a cost of $470.7 million compared with 16.4 million shares purchased at
a cost of $457 million during the same period last year. In October 1998, the
Board of Directors authorized the Company to repurchase up to an additional $1
billion of common stock through December 31, 1999. At June 30, 1999, $329.3
million of this authorization remained.
To provide for financial flexibility and increased liquidity, the Company
has established several sources of debt financing. As of June 30, 1999, the
Company had $223 million of unsecured debt
13
<PAGE>
securities outstanding. These unsecured debt securities consisted of: 1) $100
million of debt securities that bear interest at a fixed rate of 6.5% and mature
in 2007 that were issued in December 1997 under a $500 million debt shelf
registration (the "Shelf"), 2) $100 million of debt securities that bear
interest at a fixed rate of 8.1% and mature in 2097 and 3) $23 million of debt
securities that bear interest at a fixed rate of 6.2% and mature in 2003. Under
the Shelf, all of the remaining $400 million of debt securities available for
issuance may be offered under the Company's medium-term note program.
The Company's sources of debt financing also include a commercial paper
program which provides for short-term borrowings up to an aggregate face amount
of $200 million. As of June 30, 1999, commercial paper with a face amount of
$100 million was outstanding. These borrowings had maturities of less than
three months and had effective interest rates averaging 5.1%. In addition, the
Company has an unsecured $150 million credit facility that expires on May 28,
2003. This credit facility supports the Company's commercial paper program. As
of June 30, 1999, no amounts were outstanding under this line of credit.
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.
Results of Operations
Product sales
Product sales were $737.9 million and $1,426.2 million during the three and
six months ended June 30, 1999, respectively. These amounts represent increases
of $126.7 million and $248.2 million or 21% over each of the same periods last
year. Quarterly product sales volume is influenced by a number of factors,
including underlying demand and wholesaler inventory management practices.
14
<PAGE>
EPOGEN(R) (Epoetin alfa)
EPOGEN(R) sales were $428 million and $822.9 million for the three and six
months ended June 30, 1999, respectively. These amounts represent increases of
$91.5 million and $182 million or 27% and 28%, respectively, over the same
periods last year. These increases were primarily due to the administration of
higher doses and the continuing growth in the U.S. dialysis patient population.
The administration of higher doses of EPOGEN(R) was principally due to changes
in reimbursement announced in March and June 1998 by the Health Care Financing
Administration ("HCFA"), discussed below, as well as many dialysis providers
using better anemia management practices, including using hemoglobin instead of
hematocrit to measure red blood cell counts.
In September 1997, HCFA implemented changes (the "HCFA Policy Changes") to
its reimbursement policy. Prior to the HCFA Policy Changes, fiscal
intermediaries under contract with HCFA were authorized to pay reimbursement
claims for patients whose hematocrits exceeded 36 percent, the top of the
suggested target hematocrit range in the Company's labeling, if deemed medically
justified. Under the HCFA Policy Changes, medical justification was not
accepted for payment of claims of hematocrits that exceeded 36 percent and, if
the current month's hematocrit was greater than 36 percent and the patient's
hematocrit exceeded 36.5 percent on an historical 90-day "rolling average"
basis, reimbursement for the current month would be denied in full. Beginning
in the second quarter of 1997, the Company experienced a decline in the growth
rate of EPOGEN(R) sales as dialysis providers attempted to lower hematocrits by
lowering or withholding EPOGEN(R) doses in order to avoid or minimize claim
denials under the HCFA Policy Changes. However, in March 1998, HCFA announced
the easing of restrictions on reimbursement that had been instituted under the
HCFA Policy Changes. In June 1998, HCFA announced further revisions.
In March 1998, HCFA issued two revisions (the "March HCFA Revisions") to
the HCFA Policy Changes in a program memorandum. The first revision provided
that, for a month in which the three month "rolling average" hematocrit exceeds
36.5 percent, HCFA would pay the lower of 100 percent of the actual dosage
billed for that month, or 80 percent of the prior month's allowable EPOGEN(R)
dosage. The second revision re-established authorization to make payment for
EPOGEN(R) when a patient's hematocrit exceeded 36 percent when accompanied by
documentation establishing medical necessity. In June 1998, HCFA issued another
program memorandum establishing additional revisions (the "June HCFA Revisions")
to the reimbursement policy. The policy now states that pre-payment review of
claims has been eliminated and fiscal intermediaries should conduct post-payment
reviews of those dialysis providers with an atypical number of patients with
hematocrit levels above a 90-day "rolling average" of 37.5 percent.
Additionally, HCFA stated that it is encouraging dialysis providers to maintain
a hematocrit level within the range of 33 to 36 percent as recommended by the
Dialysis Outcomes Quality Initiative. HCFA also stated that it plans to develop
a national policy for medical justification for physicians who target their
patients' hematocrits greater than 36 percent. In
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the interim, individual patient treatment will continue to be subject to the
physician's discretion and documentation must satisfy the judgment of the fiscal
intermediary. The June HCFA Revisions supersede the HCFA Policy Changes and the
March HCFA Revisions.
NEUPOGEN(R) (Filgrastim)
Worldwide NEUPOGEN(R) sales were $303.5 million and $590.5 million for the
three and six months ended June 30, 1999. These amounts represent increases of
$32.9 million and $58.7 million or 12% and 11%, respectively, over the same
periods last year. These increases were primarily due to the growth in demand
worldwide within the cancer chemotherapy markets and the effect of higher prices
in the U.S.
Cost containment pressures in the U.S. health care marketplace have limited
growth in domestic NEUPOGEN(R) sales. These pressures are expected to continue
to influence growth for the foreseeable future.
The growth of the colony stimulating factor ("CSF") market in the European
Union ("EU") in which NEUPOGEN(R) competes has remained essentially flat,
principally due to EU government pressures on physician prescribing practices in
response to ongoing government initiatives to reduce health care expenditures.
Additionally, the Company faces competition from another granulocyte CSF
product. Amgen's CSF market share in the EU has remained relatively constant
over the last few years, however, the Company expects that the competitive
intensity may increase in the near future.
Other product sales
INFERGEN(R) (Interferon alfacon-1) sales were $6.3 million and $12.6
million for the three and six months ended June 30, 1999. These amounts
represent increases of $2.2 million and $7.3 million or 54% and 138%,
respectively, over the same periods last year. INFERGEN(R) was launched in
October 1997 for the treatment of chronic hepatitis C virus infection. There
are existing treatments, including a new therapy launched in 1998, for this
infection against which INFERGEN(R) competes. The Company cannot predict the
extent to which it will penetrate this market.
Cost of sales
Cost of sales as a percentage of product sales was 13.4% for both the three
and six months ended June 30, 1999, respectively, compared with 13.7% and 13.8%
for the same periods last year.
Research and development
During the three and six months ended June 30, 1999, research and
development expenses increased $41.7 million and $77.2 million, or 27% and 25%,
respectively, compared with the same periods last year. These increases were
primarily due to higher staff-related costs necessary to support ongoing product
development activities
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and costs related to the collaboration with PRAECIS PHARMACEUTICALS
INCORPORATED.
Selling, general and administrative
Selling, general and administrative expenses increased $35.2 million and
$55 million, or 29% and 23%, during the three and six months ended June 30, 1999
compared with the same periods last year. These increases were primarily due to
higher staff-related costs, outside marketing expenses and information
management consulting fees.
Income taxes
The Company's effective tax rate for the three and six months ended June
30, 1999 was 30.0% and 29.3%, respectively, compared with 30.0% for each of the
same periods last year.
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, which typically mature within one to three
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, 1999, outstanding foreign currency option and forward
contracts totaled $57.7 million and $36.6 million, respectively.
Year 2000
The Year 2000 problem (the "Year 2000 Problem") results from computer
programs and devices that do not differentiate between the year 1900 and the
year 2000 because they were written using two digits rather than four to define
the applicable year; accordingly, computer systems that have time-sensitive
calculations may not properly recognize the year 2000. This could result in
system failures or miscalculations causing disruptions of the Company's
operations, including, without limitation, manufacturing, distribution, clinical
development, research and other business activities. The Year 2000 Problem is
likely to affect the Company's computer hardware, software, systems, devices,
applications and manufacturing equipment, including without limitation, its non-
information technology systems (such as elevators, HVAC equipment, security
systems and other equipment containing embedded technology such as
microcontrollers) (collectively, "Computer Systems"). Amgen is not currently
year 2000 compliant. Like many corporations, the Company does not have any
previous experience with an issue like the Year 2000 Problem. The Year 2000
Problem potentially affects the Company across its worldwide locations and
within substantially all of its business activities. Although the Company
believes it is developing an appropriate program to address the Year 2000
Problem, it cannot guarantee that its program will succeed or will be timely.
The following is a discussion of the Company's year 2000 program.
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Amgen has conducted a review of its Computer Systems to identify those
areas that could be affected by the Year 2000 Problem and has established a
program to address year 2000 issues. The Company has substantially completed
its evaluation of its functional areas and site locations worldwide.
Additionally, the Company has appointed a program manager for year 2000
compliance. The Company has identified the following three principal areas of
potential Computer Systems exposure at Amgen to the Year 2000 Problem, in
addition to supplier and customer issues which are discussed elsewhere:
- - Process Control, Instruments and Environmental Monitoring and Control Systems:
these types of systems are used in the Company's manufacturing and clinical
trial processes, among other operations. These generally are systems, devices
and instruments which utilize date functionality and generate, send, receive
or manipulate date-stamped data and signals. These systems may be found in
data acquisition/processing software, laboratory instrumentation and other
equipment with embedded code, for example. These devices and instruments may
be controlled by installed software, firmware or other embedded control
algorithms.
- - Servers, Desktops and Infrastructure: these generally are desktop computers
(PCs and Macintosh) and server computer equipment (NT and UNIX),
telecommunications, local area networks, wide area networks, and include
system hardware, firmware, installed commercial application software, e-mail,
video teleconferencing and electronic calendaring systems, for example.
- - Custom Applications and Business Systems: these generally are systems which
the Company either wrote or for which the Company has purchased the source
code, or applications purchased from an external vendor. These systems include
applications developed or purchased by a functional area on computer systems
located within Amgen's corporate departments and operated by departmental
personnel, such as Amgen's core business systems (including financial systems
and sales operations systems), fund transfer systems and personnel management
systems.
For each of these areas, Amgen has planned an inventory, business risk
assessment, remediation, testing and implementation phase. The Company has
substantially completed the first four of these phases and expects to have
substantially completed the implementation phase by September 30, 1999. Upon
completion of remediation and testing, the Company plans to implement
appropriate Computer Systems in their year 2000-compliant form. Since the
commencement of its year 2000 efforts, the Company has in the past missed some
deadlines at various stages of developing and implementing its program.
However, the majority of schedule slippage has been recovered and the Company is
working to recover the remainder. The Company is currently behind schedule in
some projects. The Company cannot guarantee that it will meet internal or
external deadlines for year 2000 compliance.
The Company is using both internal and external resources to identify,
correct/reprogram and test its Computer Systems for year
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<PAGE>
2000 compliance. However, the Company cannot guarantee that these resources will
be available at a reasonable cost or at all, due, in part, to competing demands
for these resources which the Company anticipates will increase as January 1,
2000 nears. Further, while the Company plans to complete modifications of its
business critical Computer Systems prior to the year 2000, if modifications of
such business critical Computer Systems, or Computer Systems of Suppliers (as
defined below) are not completed in a timely manner, the Year 2000 Problem could
have a material adverse effect on the operations and financial position of the
Company.
The Company has identified critical providers of information, goods and
services ("Suppliers") in order to assess their year 2000 compliance/readiness.
Suppliers have been prioritized based on business criticality and year 2000
surveys were distributed. The Company has substantially completed its
assessment of year 2000 surveys completed and returned by its Suppliers.
Although the Company cannot control Suppliers' response time, the Company hopes
to have confirmed year 2000 readiness of selected Suppliers by August 31, 1999.
The Company does not intend to contact entities that are not critical and cannot
guarantee that such entities will be year 2000 compliant. The Company plans to
visit selected Suppliers to confirm their year 2000 compliance. In some cases,
the Company also plans to stock extra inventory and qualify alternate suppliers,
although the Company cannot guarantee the availability of additional supplies or
the year 2000 compliance of alternate suppliers. The failure of Suppliers to
become year 2000 compliant on a timely basis, or at all, could have a material
adverse effect on the Company.
The Company has identified its key customers and is working to understand
year 2000 exposure and compliance in that area. However, the Company believes
that the failure of its key customers to become year 2000 compliant on a timely
basis, or at all, could have a material adverse effect on the Company.
The Company may also be affected by the failure of other third parties to
be year 2000 compliant even though these third parties do not directly conduct
business with Amgen. For example, the failure of state, federal and private
payors or reimbursers to be year 2000 compliant and thus unable to make timely,
proper or complete payments to sellers and users of the Company's products,
could have a material adverse effect on the Company. The Government Accounting
Office has stated that the Health Care Financing Administration ("HCFA"), the
principal federal reimburser for the Company's marketed products, may not become
fully year 2000 compliant on a timely basis.
In developing a contingency plan for the Year 2000 Problem, the Company
believes that its "most reasonably likely worst case year 2000 scenario" (the
"Scenario") includes periodic, sporadic disruptions to the delivery of power,
water and normal telecommunication services to the Company's worldwide locations
and impaired transportation, including limited air traffic capacity, which may
occur in the first few months of 2000. The Scenario also contemplates the
failure of Computer Systems of third parties that use the Company's products and
seek reimbursement for the cost of these products (such as hospitals, physicians
and dialysis providers)
19
<PAGE>
and of third parties who reimburse for such costs (such as HCFA). Under the
Scenario, the Company's manufacturing, distribution, and research and clinical
development activities, among others, could be adversely affected. Although the
Company believes it has identified the major elements of its "most reasonably
likely worst case year 2000 scenario," there can be no assurance that the
Company has accurately or adequately anticipated the effects of the Year 2000
Problem on the Company or third parties, or that the Company will develop an
adequate contingency plan based on the Scenario or otherwise. The Company
anticipates finalizing its contingency plan by September 1, 1999 and
implementing such plan by November 1999.
As of June 30, 1999, total expenditures related to the Company's year 2000
program, including, without limitation, anticipated upgrades, remediation and
new Computer Systems, are expected to range from $45 million to $55 million,
approximately one-third of which is expected to be capital expenditures.
However, these amounts are only estimates and are based on information currently
available to the Company; the Company cannot guarantee that these amounts will
be adequate to address the Company's year 2000 compliance needs. As of June 30,
1999, the Company estimates that it had incurred approximately $27 million in
its year 2000 efforts, including without limitation, internal staff costs,
outside consulting fees and Computer Systems upgrades.
The statements set forth herein concerning the Year 2000 Problem which are
not historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. There can be no guarantee that any estimates or
other forward-looking statements will be achieved and actual results could
differ significantly from those planned or contemplated. The Company plans to
update the status of its year 2000 program as necessary in its periodic filings
and in accordance with applicable securities laws.
Financial Outlook
The Company expects the sales growth rate for EPOGEN(R) in 1999 to be in
the mid-twenties. The Company believes that dialysis providers have increased
doses primarily in response to the June HCFA Revisions and due to certain
dialysis providers using hemoglobin instead of hematocrit to measure red blood
cell counts (see "Results of Operations - Product sales - EPOGEN(R) (Epoetin
alfa)"). The Company also believes that increases in the U.S. dialysis patient
population and dose will continue to grow EPOGEN(R) sales in the near term,
although the Company anticipates dose may grow at a slower rate. Patients
receiving 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 a change in the
basis for reimbursement by the federal government.
The Clinton administration has proposed a Medicare cost savings plan which
includes a provision for cutting Medicare reimbursement of EPOGEN(R) by 10%.
This proposal will be addressed during the
20
<PAGE>
federal government's fiscal year 2000 budget process. The Company believes the
proposal, if enacted, would primarily affect dialysis providers that use
EPOGEN(R) and it is difficult to predict its impact on Amgen.
The Company expects a high single- to low double-digit sales growth rate
for NEUPOGEN(R) in 1999. Future NEUPOGEN(R) sales growth is dependent primarily
upon further penetration of existing markets, the effects of competitive
products and the timing and nature of additional indications for which the
product may be approved. NEUPOGEN(R) usage is expected to continue to be
affected by cost containment pressures on health care providers worldwide. In
addition, reported NEUPOGEN(R) sales will continue to be affected by changes in
foreign currency exchange rates, government budgets and increased competition in
Europe.
Generally, in the U.S. the cost of drugs and biologicals administered to
Medicare-eligible patients receiving outpatient services, such as chemotherapy
infusion, is reimbursed under Medicare only if those drugs and biologicals
qualify for coverage under Medicare Part B. Generally, drugs and biologicals
that are "usually self-administered" are not covered by Medicare. However,
Medicare does pay for some drugs and biologicals that are furnished incident to
a physician's services. Currently, NEUPOGEN(R) is reimbursed by HCFA under
Medicare Part B. HCFA has established broad Medicare coverage policies and, in
some cases, interpretations of its policies. However, the Medicare program is
administered by local carriers (typically a private insurance organization that
contracts with HCFA) in each state, which is overseen by a medical director
under contract with HCFA. These carriers and medical directors have the
authority to interpret Medicare reimbursement coverage policies. Although
medical directors in a few states have preliminarily considered that NEUPOGEN(R)
should not be eligible for reimbursement under Medicare Part B principally
because, in their opinions, it is "usually self-administered" when delivered
subcutaneously, neither HCFA nor any local carrier has adopted guidelines or
coverage policies that would exclude NEUPOGEN(R) from Medicare Part B coverage.
However, there can be no assurance that carriers, or HCFA itself, will not in
the future adopt interpretations or guidelines under Medicare Part B or
otherwise, that could exclude or limit reimbursement for NEUPOGEN(R). Any
guidelines or policies that limit or eliminate reimbursement for NEUPOGEN(R)
could adversely affect NEUPOGEN(R) sales.
The Clinton administration has proposed a reduction in the basis upon which
Medicare reimburses outpatient prescription drugs from the current 95% of
average wholesale price ("AWP") to a proposed 83% of AWP. This proposal would
impact reimbursement of NEUPOGEN(R). The Company believes that this new
recommendation, if enacted, would primarily affect customers that use
NEUPOGEN(R) and it is difficult to predict its impact on Amgen.
The Company anticipates the growth rate for total product sales in 1999 to
be in the high teens. For 1999, Amgen expects earnings per share will be at the
high end of a range of $1.90 to $1.95, assuming that the federal government will
extend the research and
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experimentation tax credit for the second half of 1999. Estimates of future
product sales, operating expenses, and earnings per share 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. Investors are cautioned
that forward-looking statements or projections made by the Company, including
those made in this document, are subject to risks and uncertainties that may
cause actual results to differ materially from those projected. Reference is
made in particular to forward-looking statements regarding product sales,
earnings per share and expenses. 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 the Company's stock price may
be affected by a number of factors, including, without limitation: (i) the
results of preclinical and clinical trials; (ii) regulatory approvals of product
candidates, new indications and manufacturing facilities; (iii) reimbursement
for Amgen's products by governments and private payors; (iv) health care
guidelines and policies relating to Amgen's products; (v) intellectual property
matters (patents) and the results of litigation; (vi) competition; (vii)
fluctuations in operating results and (viii) rapid growth of the Company. These
factors and others are discussed herein and in the sections appearing in "Item
1. Business - Factors That May Affect Amgen" in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 which sections are incorporated
herein by reference and filed as an exhibit hereto.
Legal Matters
The Company is engaged in arbitration proceedings with one of its
licensees. For a discussion of these matters, see Note 6 to the Condensed
Consolidated Financial Statements.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Legal proceedings are reported in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998, with material developments since that
report described in the Company's Form 10-Q for the quarter ended March 31,
1999, and 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 proceedings will not have a material adverse effect on the annual
financial statements of the Company.
Transkaryotic Therapies and Hoechst litigation
On June 9, 1999, Transkaryotic Therapies, Inc. and Hoechst Marion Roussel
Inc. filed a motion with the court to re-open proceedings. Amgen filed a notice
with the court on June 10, 1999, that Amgen joined in the motion thereby re-
opening the litigation. The court has set April 2000 for the start of the
trial.
Genentech litigation
A final claim construction order was issued May 14, 1999. The judge's
ruling, among other things, essentially limited the claim term "control region"
to DNA taken from a single operon and not constructed from control elements
derived from various operons. It may not be constructed portion-by-portion from
multiple operons. Currently the case has been stayed in light of the judge's
departure from the bench. The parties are waiting for a notice of reassignment
to a new judge.
FoxMeyer Health Corporation
On January 7, 1999, the Federal Bankruptcy Court in Texas (the "Texas
Bankruptcy Court") entered an order: a) denying Avatex Corporation's ("Avatex")
motion which had requested dismissal of three counts ("Counts 1-3"), in the suit
filed in the District Court of Dallas County, Dallas, Texas by FoxMeyer Health
Corporation without prejudice; b) denying stay pending the remand appeal sought
by the Company and McKesson Corporation and the eleven other manufacturer
defendants (the "Defendants") and c) granting a limited interim stay until
February 8, 1999 to permit the Defendants to make an orderly request for stay
from the U.S. District Court judge hearing the appeals. Avatex has cross
appealed the dismissal with prejudice of Counts 1-3 by the Texas Bankruptcy
Court. That issue is still under advisement in the U.S. District Court in
Dallas. The U.S. District Court in Dallas affirmed the decision of the Texas
Bankruptcy Court directing remand of the case to the Texas State Court. That
decision affirming the remand also denied as moot the appeal of the earlier
order denying a transfer venue to Delaware. Various Defendants joined in an
appeal to the Fifth Circuit from the order mooting the appeal of denial of
change of venue; Amgen did not join in that appeal. In the Texas State Court
the parties have stipulated to extensions of time for any discovery.
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<PAGE>
Securities litigation
In June 1999, the parties entered into a memorandum of understanding
regarding settlement of the actions pending in the U.S. District Court for the
Central District of California (the "Federal Action") and in California Superior
Court for the County of Ventura (the "State Action"). The memorandum of
understanding provides generally that the Company will reimburse brokerage fees,
subject to a maximum of $500 per claimant, associated with the repurchase of
Amgen common stock by claimants who are members of the settlement class, who
purchased shares during the class period, and who later sold such shares at a
loss. The plaintiffs and members of the settlement class will release Amgen and
the named defendants from certain claims and will dismiss the Federal Action and
State Action with prejudice. The contemplated settlement is subject to court
approval.
Johnson & Johnson arbitrations
The Company is engaged in arbitration proceedings with one of its
licensees. See Note 6 to the Condensed Consolidated Financial Statements,
"Contingencies-Johnson & Johnson arbitrations".
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on May 4, 1999.
(b) Omitted pursuant to Instruction 3 to Item 4 of Form 10-Q.
(c) The five matters voted upon at the meeting were: (i) to elect three
directors to hold office until the Annual Meeting of Stockholders in
the year 2002; (ii) to approve an amendment to the Company's Restated
Certificate of Incorporation, as amended, to increase the authorized
number of shares of Common Stock from 750,000,000 shares to
1,500,000,000 shares ("Proposal Two"); (iii) to approve the material
terms of the performance goals under which management incentive plan
Section 162(m) awards are to be paid under the Amended and Restated
Management Incentive Plan ("Proposal Three"); (iv) to approve the
Company's Amended and Restated 1991 Equity Incentive Plan, as amended,
to (x) extend the term of such plan, (y) delete provisions of such
plan that permit the repricing of outstanding options and the
cancellation and regrant of options, and (z) make certain other
conforming changes to such plan, and as restated in 1999 to reflect
such amendments and all prior amendments ("Proposal Four"); and (v) to
ratify the selection of Ernst & Young LLP as independent auditors of
the Company for the year ending December 31, 1999 ("Proposal Five").
(i) With respect to each of the nominees for director, William K.
Bowes, Jr., received 450,138,326 shares
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in favor and 2,736,027 shares were withheld, Judith C. Pelham
received 450,157,600 shares in favor and 2,716,753 shares were
withheld, Kevin W. Sharer received 450,111,379 shares in favor
and 2,762,974 shares were withheld, and there were no
abstentions or broker non-votes. All nominees were declared to
have been elected as directors to hold office until the Annual
Meeting of Stockholders in the year 2002.
(ii) With respect to Proposal Two, 369,593,840 shares were in favor,
81,551,609 shares were against, 1,728,903 shares abstained and
there was 1 broker non-vote. Proposal Two was declared to have
been approved.
(iii) With respect to Proposal Three, 432,129,802 shares were in
favor, 13,872,825 shares were against, 3,648,292 shares
abstained and there were 3,223,434 broker non-votes. Proposal
Three was declared to have been approved.
(iv) With respect to Proposal Four, 407,158,100 shares were in
favor, 39,162,662 shares were against, 3,330,157 shares
abstained and there were 3,223,434 broker non-votes. Proposal
Four was declared to have been approved.
(v) With respect to Proposal Five, 449,997,785 shares were in favor,
848,477 shares were against, 2,028,041 shares abstained and
there were 50 broker non-votes. Proposal Five was declared to
have been ratified.
(d) Not applicable.
Item 5. Other Information
The Company's 2000 Annual Meeting of Stockholders will be held on May 11,
2000.
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 - none
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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: 8/3/99 By:/s/Kathryn E. Falberg
- --------------- ----------------------------------
Kathryn E. Falberg
Senior Vice President, Finance
and Chief Financial Officer
Date: 8/3/99 By:/s/Marc M.P. de Garidel
- ---------------- ----------------------------------
Marc M.P. de Garidel
Vice President, Controller and
Chief Accounting Officer
26
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AMGEN INC.
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Restated Certificate of Incorporation as amended. (17)
3.2* Amended and Restated Bylaws.
3.3* Certificate of Amendment of Restated Certificate of Incorporation.
3.4* Certificate of Amendment of Certificate of Designations of Series A
Junior Participating Preferred Stock.
4.1 Indenture dated January 1, 1992 between the Company and Citibank
N.A., as trustee. (8)
4.2 First Supplement to Indenture, dated February 26, 1997 between the
Company and Citibank N.A., as trustee. (14)
4.3 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." (16)
4.4 8-1/8% Debentures due April 1, 2097. (16)
4.5 Form of stock certificate for the common stock, par value $.0001 of
the Company. (17)
4.6 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, dated as of January 1, 1992, as supplemented by the First
supplemental Indenture, dated as of February 26, 1997, each between
the Company and Citibank, N.A., as Trustee, establishing a series of
securities entitled "6.50% Notes Due December 1, 2007". (20)
4.7 6.50% Notes Due December 1, 2007 described in Exhibit 4.6. (20)
4.8 Corporate Commercial Paper - Master Note between and among Amgen
Inc., as Issuer, Cede & Co., as nominee of The Depository Trust
Company and Citibank, N.A. as Paying Agent. (23)
10.1* Company's Amended and Restated 1991 Equity Incentive Plan.
10.2 Sixth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated April 1, 1996. (25)
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
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(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. (12)
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)
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 1988 Stock Option Plan. (12)
10.14 Company's Amended and Restated Retirement and Savings Plan. (12)
10.15 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)
10.16 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).
(7)
10.17 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. (9)
10.18 Amgen Inc. Supplemental Retirement Plan (As Amended and Restated
Effective January 1, 1998). (23)
10.19 Promissory Note of Mr. Kevin W. Sharer, dated June 4, 1993. (10)
10.20* Amended and Restated Amgen Performance Based Management Incentive
Plan.
10.21 Credit Agreement, dated as of May 28, 1998, among Amgen Inc., the
Borrowing Subsidiaries named therein, the Banks named therein,
Citibank, N.A., as Issuing Bank, and Citicorp USA, Inc., as
Administrative Agent. (24)
10.22 Promissory Note of Mr. George A. Vandeman, dated December 15, 1995.
(11)
10.23 Promissory Note of Mr. George A. Vandeman, dated December 15, 1995.
(11)
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10.24 Promissory Note of Mr. Stan Benson, dated March 19, 1996. (11)
10.25 Amendment No. 1 to the Company's Amended and Restated Retirement and
Savings Plan. (12)
10.26* Seventh Amendment to the Amgen Retirement and Savings Plan as
Amended and Restated effective April 1, 1996.
10.27 Amendment Number 2 to the Company's Amended and Restated Retirement
and Savings Plan dated April 1, 1996. (15)
10.28 Amgen Inc. Change of Control Severance Plan effective as of October
20, 1998. (25)
10.29 Preferred Share Rights Agreement, dated February 18, 1997, between
Amgen Inc. and American Stock Transfer and Trust Company, Rights
Agent. (13)
10.30 First Amendment, effective January 1, 1998, to the Company's Amended
and Restated Employee Stock Purchase Plan. (18)
10.31 Third Amendment, effective January 1, 1997, to the Company's Amended
and Restated Retirement and Savings Plan dated April 1, 1996. (18)
10.32 Binding Term Sheet, dated August 20, 1997, between Guilford
Pharmaceuticals Inc. and GPI NIL Holdings, Inc., and Amgen Inc.
(with certain confidential information deleted therefrom). (19)
10.33 Promissory Note of Ms. Kathryn E. Falberg, dated April 7, 1995. (21)
10.34 Promissory Note of Mr. Edward F. Garnett, dated July 18, 1997. (21)
10.35 Fourth Amendment to the Company's Amended and Restated Retirement
and Savings Plan as amended and restated effective April 1, 1996.
(21)
10.36 Fifth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated effective April 1, 1996. (21)
10.37 Company's Amended and Restated 1987 Directors' Stock Option Plan.
(15)
10.38 Amended and Restated Agreement on G-CSF in the EU between Amgen Inc.
and F. Hoffmann-La Roche Ltd (with certain confidential information
deleted therefrom). (23)
10.39 Collaboration and License Agreement, dated December 15, 1997,
between the Company, GPI NIL Holdings, Inc. and Guilford
Pharmaceuticals Inc. (with certain confidential information deleted
therefrom). (22)
27* Financial Data Schedule.
99* Sections appearing under the heading "Business - Factors That May
Affect Amgen" in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
- ----------------
* 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.
29
<PAGE>
(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 dated November 8, 1989, amending the
Annual Report on Form 10-K for the year ended March 31, 1989 on June 28,
1989 and incorporated herein by reference.
(8) Filed as an exhibit to Form S-3 Registration Statement dated December 19,
1991 and incorporated herein by reference.
(9) Filed as an exhibit to the Form 8-A dated March 31, 1993 and incorporated
herein by reference.
(10) 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.
(11) 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.
(12) 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.
(13) Filed as an exhibit to the Form 8-K Current Report dated February 18, 1997
on February 28, 1997 and incorporated herein by reference.
(14) Filed as an exhibit to the Form 8-K Current Report dated March 14, 1997 on
March 14, 1997 and incorporated herein by reference.
(15) 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.
(16) Filed as an exhibit to the Form 8-K Current Report dated April 8, 1997 on
April 8, 1997 and incorporated herein by reference.
(17) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1997
on May 13, 1997 and incorporated herein by reference.
(18) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1997 on
August 12, 1997 and incorporated herein by reference.
(19) Filed as exhibit 10.47 to the Guilford Pharmaceuticals Inc. Form 8-K
Current Report dated August 20, 1997 on September 4, 1997 and incorporated
herein by reference.
(20) Filed as an exhibit to the Form 8-K Current Report dated and filed on
December 5, 1997 and incorporated herein by reference.
30
<PAGE>
(21) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1997 on March 24, 1998 and incorporated herein by reference.
(22) Filed as Exhibit 10.40 to the Guilford Pharmaceuticals Inc. Form 10-K for
the year ended December 31, 1997 on March 27, 1998 and incorporated herein
by reference.
(23) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1998
on May 13, 1998 and incorporated herein by reference.
(24) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1998
on August 14, 1998 and incorporated herein by reference.
(25) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1998 on March 16, 1999 and incorporated herein by reference.
31
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
AMGEN INC.
(AS AMENDED JUNE 29, 1999)
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
AMGEN INC.
(a Delaware corporation)
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.
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.
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.
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.
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.
Section 6. Special Meetings. Special meetings of the stockholders of the
----------------
corporation may be called, for any purpose or
1
<PAGE>
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.
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.
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.
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
2
<PAGE>
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
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.
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 furnished with 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.
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
3
<PAGE>
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.
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
4
<PAGE>
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 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 ten. 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.
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.
5
<PAGE>
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 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 controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
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.
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, 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.
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
6
<PAGE>
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.
(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.
(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.
(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.
(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.
Section 23. Quorum and Voting.
-----------------
(a) Quorum. Unless the Certificate of Incorporation requires a
------
greater number, a quorum of the Board of Directors
7
<PAGE>
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.
(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.
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.
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.
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
8
<PAGE>
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.
(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 event shall such committee have the powers denied to the Executive
Committee in these Bylaws.
(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.
(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
9
<PAGE>
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.
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 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
10
<PAGE>
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 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
11
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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 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.
12
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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.
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 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.
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.
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
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absence of such authorization, by the Chairman of the Board, the Chief Executive
Officer, the President, or any Vice President.
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.
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 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.
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.
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
14
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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.
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.
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
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
15
<PAGE>
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.
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.
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.
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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.
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
17
<PAGE>
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 that
18
<PAGE>
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:
19
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(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 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
20
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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
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.
(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.
(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
21
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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 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.
ARTICLE XIII
Amendments
Section 47. Amendments. These Bylaws may be repealed, altered or amended
----------
or new Bylaws adopted by the affirmative vote of the holders of not less than
sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of stock
entitled to vote upon the election of directors. 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 foregoing 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.
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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.
23
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
AMGEN INC.
Amgen Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That a resolution was duly adopted by the Board of Directors of
the Corporation setting forth a proposed amendment to the Restated Certificate
of Incorporation of the Corporation, as amended, and declaring said amendment to
be advisable and recommended for approval by the stockholders of the
Corporation. The resolution setting forth the proposed amendment states that the
first paragraph of the Fourth Article of the Restated Certificate of
Incorporation of the Corporation, as amended, be, and it hereby is, amended to
read in full as follows:
"FOURTH: This corporation is authorized to issue
two (2) classes of stock to be designated,
respectively, "Preferred Stock" and "Common Stock." The
total number of shares which this corporation is
authorized to issue is One Billion Five Hundred and
Five Million (1,505,000,000) shares, of which Five
Million (5,000,000) shares shall be Preferred Stock and
One Billion Five Hundred Million (1,500,000,000) shares
shall be Common Stock, all with a par value of $.0001."
SECOND: That, thereafter, pursuant to a resolution of the Board of
Directors, the officers of the Corporation solicited the vote of the
stockholders thereof at the Annual
<PAGE>
Meeting of Stockholders in favor of the amendment, and the stockholders of the
Corporation approved the amendment by a majority of the outstanding stock
entitled to vote thereon.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said Corporation has caused this Certificate of
Amendment to be signed by George A. Vandeman, its Senior Vice President,
Corporate Development, General Counsel and Secretary, this 6th day of May, 1999.
/s/ George A. Vandeman
------------------------------------------
George A. Vandeman, Senior Vice President,
Corporate Development, General Counsel
and Secretary
2
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
AMGEN INC.
Amgen Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That, pursuant to the authority granted to and vested in the
Board of Directors in accordance with the provisions of its Restated Certificate
of Incorporation, as amended, and Section 1 of the Certificate of Designations
of Series A Junior Participating Preferred Stock of the Corporation (the
"Certificate of Designations"), resolutions were duly adopted by the Board of
Directors of the Corporation approving an amendment to the Certificate of
Designations increasing the number of shares designated as Series A Junior
Participating Preferred Stock from 750,000 to 1,500,000 shares. Pursuant to
those resolutions, the Certificate of Designations is hereby amended by striking
the first sentence following "Section 1. Designation and Amount." and
substituting in lieu thereof a new sentence as follows:
"Section 1. Designation and Amount. The shares of
such series shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting the
Series A Preferred Stock shall be 1,500,000."
<PAGE>
SECOND: That said amendment was duly adopted in accordance with the
provisions of the Delaware General Corporation Law.
IN WITNESS WHEREOF, said Corporation has caused this Certificate of
Designations to be signed by George A. Vandeman, its Senior Vice President,
Corporate Development, General Counsel and Secretary, this 6th day of May, 1999.
/s/ George A. Vandeman
-----------------------------------------
George A. Vandeman, Senior Vice President,
Corporate Development, General Counsel
and Secretary
2
<PAGE>
EXHIBIT 10.1
AMGEN INC.
AMENDED AND RESTATED 1991 EQUITY INCENTIVE PLAN
-----------------------------------------------
1. PURPOSE.
-------
(a) The purpose of the Amended and Restated 1991 Equity Incentive
Plan as amended and restated in February 1999 (the "Plan") is to provide a means
by which employees or directors of and consultants to Amgen Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in paragraph 1(b),
directly, or indirectly through Trusts, may be given an opportunity to benefit
from increases in value of the stock of the Company through the granting of (i)
incentive stock options, (ii) nonqualified stock options, (iii) stock bonuses,
and (iv) rights to purchase restricted stock, all as defined below. For purposes
of the incentive stock option rules of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), the Plan is a new plan.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Code.
(c) The Company, by means of the Plan, seeks to retain the services
of persons now employed by or serving as directors or consultants to the
Company, to secure and retain the services of persons capable of filling such
positions, and to provide incentives for such persons to exert maximum efforts
for the success of the Company.
(d) The Company intends that the rights issued under the Plan ("Stock
Awards") shall, in the discretion of the Board of Directors of the Company (the
"Board") or any committee to which responsibility for administration of the Plan
has been delegated pursuant to paragraph 2(c), be either (i) stock
<PAGE>
options granted pursuant to Sections 5 or 6 hereof, including incentive stock
options as that term is used in Section 422 of the Code ("Incentive Stock
Options"), or options which do not qualify as Incentive Stock Options
("Nonqualified Stock Options") (together hereinafter referred to as "Options"),
or (ii) stock bonuses or rights to purchase restricted stock granted pursuant to
Section 7 hereof.
(e) The word "Trust" as used in the Plan shall mean a trust created
for the benefit of the employee, director or consultant, his or her spouse, or
members of their immediate family. The word optionee shall mean the person to
whom the option is granted or the employee, director or consultant for whose
benefit the option is granted to a Trust, as the context shall require.
2. ADMINISTRATION.
--------------
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a committee, as provided in paragraph 2(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a Nonqualified
Stock Option, a stock bonus, a right to purchase restricted stock, or a
combination of the foregoing; the provisions of each Stock Award granted (which
need not be identical), including the time or times when a person shall be
permitted to purchase or receive stock pursuant to a Stock Award; and the number
of shares with respect to which Stock Awards shall be granted to each such
person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or
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<PAGE>
inconsistency in the Plan or in any Stock Award, in a manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). One
or more of these members may be non-employee directors and outside directors, if
required and as defined by the provisions of paragraphs 2(d) and 2(e). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board (except amendment of Section 6 or the options granted thereunder
shall only be by action taken by the Board or a committee of one or more members
of the Board to which such authority has been specifically delegated by the
Board), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.
Notwithstanding anything else in this paragraph 2(c) to the contrary, at any
time the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant or amend options to all employees,
directors or consultants or any portion or class thereof.
(d) The term "non-employee director" shall mean a member of the Board
who (i) is not currently an officer of the Company or a parent or subsidiary of
the Company (as defined in Rule 16a-1(f) promulgated by the Securities and
Exchange Commission under Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or an employee of the Company or a parent or
subsidiary of the Company; (ii) does not receive compensation from the Company
or a parent or subsidiary of the Company for services rendered in any capacity
other than as a member of the Board (including a consultant) in an amount
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<PAGE>
required to be disclosed to the Company's stockholders under Rule 404 of
Regulation S-K promulgated by the Securities and Exchange Commission ("Rule
404"); (iii) does not possess an interest in any other transaction required to
be disclosed under Rule 404; or (iv) is not engaged in a business relationship
required to be disclosed under Rule 404, as all of these provisions are
interpreted by the Securities and Exchange Commission under Rule 16b-3
promulgated under the Exchange Act.
(e) The term "outside director," as used in this Plan, shall mean an
administrator of the Plan, whether a member of the Board or of any Committee to
which responsibility for administration of the Plan has been delegated pursuant
to paragraph 2(c), who is considered to be an "outside director" in accordance
with the rules, regulations or interpretations of Section 162(m) of the Code.
(f) Any requirement that an administrator of the Plan be a "non-
employee director" or "outside director" shall not apply if the Board or the
Committee expressly declares that such requirement shall not apply.
3. SHARES SUBJECT TO THE PLAN.
--------------------------
(a) Subject to the provisions of Section 11 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
granted under the Plan shall not exceed in the aggregate Ninety Six Million
(96,000,000) shares of the Company's $.0001 par value common stock (the "Common
Stock"). If any Stock Award granted under the Plan shall for any reason expire
or otherwise terminate without having been exercised in full, the Common Stock
not purchased under such Stock Award shall again become available for the Plan.
Shares repurchased by the Company pursuant to any repurchase rights reserved by
the Company pursuant to the Plan shall not be available for subsequent issuance
under the Plan.
(b) The Common Stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
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<PAGE>
(c) An Incentive Stock Option may be granted to an eligible person
under the Plan only if the aggregate fair market value (determined at the time
the Incentive Stock Option is granted) of the Common Stock with respect to which
incentive stock options (as defined by the Code) are exercisable for the first
time by such optionee during any calendar year under all such plans of the
Company and its Affiliates does not exceed one hundred thousand dollars
($100,000). If it is determined that an entire Option or any portion thereof
does not qualify for treatment as an Incentive Stock Option by reason of
exceeding such maximum, such Option or the applicable portion shall be
considered a Nonqualified Stock Option.
4. ELIGIBILITY.
-----------
(a) Incentive Stock Options may be granted only to employees
(including officers) of the Company or its Affiliates. A director of the Company
shall not be eligible to receive Incentive Stock Options unless such director is
also an employee of the Company or any Affiliate. Stock Awards other than
Incentive Stock Options may be granted to employees (including officers) or
directors of or consultants to the Company or any Affiliate or to Trusts of any
such employee, director or consultant.
(b) A director shall in no event be eligible for the benefits of the
Plan (other than from a Director NQSO under Section 6 of the Plan) unless and
until such director is expressly declared eligible to participate in the Plan by
action of the Board or the Committee, and only if, at any time discretion is
exercised by the Board or the Committee in the selection of a director as a
person to whom Stock Awards may be granted, or in the determination of the
number of shares which may be covered by Stock Awards granted to a director, the
Plan complies with the requirements of Rule 16b-3 promulgated under the Exchange
Act, as from time to time in effect. The Board shall otherwise comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act, as from time to
time in
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<PAGE>
effect. Notwithstanding the foregoing, the restrictions set forth in this
paragraph 4(b) shall not apply if the Board or Committee expressly declares that
such restrictions shall not apply.
(c) No person shall be eligible for the grant of an Incentive Stock
Option under the Plan if, at the time of grant, such person owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates unless the exercise price of such Incentive
Stock Option is at least one hundred and ten percent (110%) of the fair market
value of the Common Stock at the date of grant and the Incentive Stock Option is
not exercisable after the expiration of five (5) years from the date of grant.
(d) Stock Awards shall be limited to a maximum of 1,000,000 shares of
Common Stock per person per calendar year.
5. TERMS OF DISCRETIONARY STOCK OPTIONS.
------------------------------------
An option granted pursuant to this Section 5 (a "Discretionary Stock
Option") shall be in such form and shall contain such terms and conditions as
the Board or the Committee shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) The exercise price of each Incentive Stock Option and each
Nonqualified Stock Option shall be not less than one hundred percent (100%) of
the fair market value of the Common Stock subject to the Option on the date the
Option is granted.
(c) The purchase price of Common Stock acquired pursuant to an Option
shall be paid, to the extent permitted by applicable statutes and regulations,
either: (i) in cash at the time the Option is exercised; or (ii) at the
discretion of the
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<PAGE>
Board or the Committee, either at the time of grant or exercise of the Option
(A) by delivery to the Company of shares of Common Stock that have been held for
the period required to avoid a charge to the Company's reported earnings and
valued at the fair market value on the date of exercise, (B) according to a
deferred payment or other arrangement with the person to whom the Option is
granted or to whom the Option is transferred pursuant to paragraph 5(d), or (C)
in any other form of legal consideration that may be acceptable to the Board or
the Committee in their discretion; including but not limited to payment of the
purchase price pursuant to a program developed under Regulation T as promulgated
by the Federal Reserve Board which results in the receipt of cash (or a check)
by the Company before Common Stock is issued or the receipt of irrevocable
instruction to pay the aggregate exercise price to the Company from the sales
proceeds before Common Stock is issued.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at not less than the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) An Option granted to a natural person shall be exercisable during
the lifetime of such person only by such person, provided that such person
during such person's lifetime may designate a Trust to be such person's
beneficiary with respect to any Incentive Stock Options granted after February
25, 1992 and with respect to any Nonqualified Stock Options, and such
beneficiary shall, after the death of the person to whom the Option was granted,
have all the rights that such person has while living, including the right to
exercise the Option. In the absence of such designation, after the death of the
person to whom the Option is granted, the Option shall be exercisable by the
person or persons to whom the optionee's rights under such Option pass by will
or by the laws of descent and distribution.
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<PAGE>
(e) The total number of shares of Common Stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). From time to time during each of such installment periods, the
Option may become exercisable ("vest") with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or all of the
shares allotted to such period and/or any prior period as to which the Option
was not fully exercised. During the remainder of the term of the Option (if its
term extends beyond the end of the installment periods), the Option may be
exercised from time to time with respect to any shares then remaining subject to
the Option. The provisions of this paragraph 5(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) The Company may require any optionee, or any person to whom an
Option is transferred under paragraph 5(d), as a condition of exercising any
such Option: (i) to give written assurances satisfactory to the Company as to
such person's knowledge and experience in financial and business matters and/or
to employ a purchaser representative who has such knowledge and experience in
financial and business matters, and that such person is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (ii) to give written assurances satisfactory to the
Company stating that such person is acquiring the Common Stock subject to the
Option for such person's own account and not with any present intention of
selling or otherwise distributing the Common Stock. These requirements, and any
assurances given pursuant to such requirements, shall be inoperative if: (x) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"); or (y) as to any particular
requirement, a determination is made by
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<PAGE>
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities law.
(g) An Option shall terminate three (3) months after termination of
the optionee's employment or relationship as a consultant or director with the
Company or an Affiliate, unless: (i) such termination is due to the optionee's
permanent and total disability, within the meaning of Section 422(c)(6) of the
Code, in which case the Option may, but need not, provide that it may be
exercised at any time within one (1) year following such termination of
employment or relationship as a consultant or director; (ii) the optionee dies
while in the employ of or while serving as a consultant or director to the
Company or an Affiliate, or within not more than three (3) months after
termination of such employment or relationship as a consultant or director, in
which case the Option may, but need not, provide that it may be exercised at any
time within eighteen (18) months following the death of the optionee by the
person or persons to whom the optionee's rights under such Option pass by will
or by the laws of descent and distribution; or (iii) the Option by its term
specifies either (A) that it shall terminate sooner than three (3) months after
termination of the optionee's employment or relationship as a consultant or
director with the Company or an Affiliate; or (B) that it may be exercised more
than three (3) months after termination of the optionee's employment or
relationship as a consultant or director with the Company or an Affiliate. This
paragraph 5(g) shall not be construed to extend the term of any Option or to
permit anyone to exercise the Option after expiration of its term, nor shall it
be construed to increase the number of shares as to which any Option is
exercisable from the amount exercisable on the date of termination of the
optionee's employment or relationship as a consultant or director.
(h) The Option may, but need not, include a provision whereby the
optionee may elect at any time during the term of the optionee's employment or
relationship as a consultant or director with the Company or any Affiliate to
exercise the
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<PAGE>
Option as to any part or all of the shares subject to the Option prior to the
stated vesting dates of the Option. Any shares so purchased from any unvested
installment or Option may be subject to a repurchase right in favor of the
Company or to any other restriction the Board or the Committee determines to be
appropriate.
(i) To the extent provided by the terms of an Option, each optionee
may satisfy any federal, state or local tax withholding obligation relating to
the exercise of such Option by any of the following means or by a combination of
such means: (i) tendering a cash payment; (ii) authorizing the Company to
withhold from the shares of the Common Stock otherwise issuable to the optionee
as a result of the exercise of the Option a number of shares having a fair
market value less than or equal to the amount of the withholding tax obligation;
or (iii) delivering to the Company owned and unencumbered shares of the Common
Stock having a fair market value less than or equal to the amount of the
withholding tax obligation.
(j) Without in any way limiting the authority of the Board or
Committee to make or not to make grants of Discretionary Stock Options under
this Section 5, the Board or Committee shall have the authority (but not an
obligation) to include as part of any Option agreement a provision entitling the
optionee to a further Option (a "Re-Load Option") in the event the optionee
exercises the Option evidenced by the Option agreement, in whole or in part, by
surrendering other shares of Common Stock in accordance with this Plan and the
terms and conditions of the Option agreement. Any such Re-Load Option (i) shall
be for a number of shares equal to the number of shares surrendered as part or
all of the exercise price of such Option; (ii) shall have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (iii) shall have an exercise price which
is equal to one hundred percent (100%) of the fair market value of the Common
Stock subject to the Re-Load Option on the date of exercise of the original
Option or, in the case of a Re-
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<PAGE>
Load Option which is an Incentive Stock Option and which is granted to a 10%
stockholder (as defined in paragraph 4(c)), shall have an exercise price which
is equal to one hundred and ten percent (110%) of the fair market value of the
Common Stock subject to the Re-Load Option on the date of exercise of the
original Option.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonqualified Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option, provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollars ($100,000) annual limitation on exercisability of
Incentive Stock Options described in paragraph 3(c) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Option on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under paragraph 3(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine.
6. TERMS OF NON-DISCRETIONARY OPTIONS
----------------------------------
(a) On January 27 of each year, each person who is at that time an
Eligible Director of the Company, (as defined in paragraph 6(k)), shall
automatically be granted under the Plan, without further action by the Company,
the Board, or the Company's stockholders, a Nonqualified Stock Option (a
"Director NQSO") to purchase eight thousand (8,000) shares of Common Stock on
the terms and conditions set forth herein. An Eligible Director may designate
that such Director NQSO be granted in the name of a Trust instead of in the name
of such Eligible Director. The Director NQSO shall be on the terms and
conditions set forth herein and should the date of grant set forth above be a
Saturday, Sunday or legal holiday, such grant shall be made on the next business
day.
(b) Each person who, after January 27 of any year and prior to
November 1 of any year, becomes an Eligible Director, shall, upon the date such
person becomes an Eligible Director,
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<PAGE>
automatically be granted under the Plan, without further action by the Company,
the Board, or the Company's stockholders, a Director NQSO to purchase thirty
thousand (30,000) shares of Common Stock on the terms and conditions set forth
herein. An Eligible Director may designate that such Director NQSO be granted in
the name of a Trust instead of in the name of such Eligible Director. The
Director NQSO shall be on the terms and conditions set forth herein and should
the date of grant set forth above be a Saturday, Sunday or legal holiday, such
grant shall be made on the next business day.
(c) Each Director NQSO granted pursuant to this Section 6 (or any
Director Re-Load Option granted pursuant to paragraph 6(j)) shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The provisions of separate Director NQSO's need not be
identical, but each Director NQSO shall include (through incorporation of
provisions hereof by reference in the Director NQSO or otherwise) the substance
of each of the following provisions as set forth in paragraphs 6(d) through
6(j), inclusive.
(d) The term of each Director NQSO shall be ten (10) years from the
date it was granted.
(e) The exercise price of each Director NQSO shall be one hundred
percent (100%) of the fair market value of the Common Stock subject to such
Director NQSO on the date such Director NQSO is granted.
(f) The purchase price of Common Stock acquired pursuant to a
Director NQSO shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Director NQSO is exercised; (ii)
by delivery to the Company of shares of Common Stock that have been held for the
period required to avoid a charge to the Company's reported earnings and valued
at their fair market value on the date of exercise; or (iii) pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or a check) by the Company
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before Common Stock is issued or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds before
Common Stock is issued.
(g) A Director NQSO shall be exercisable during the lifetime of the
Eligible Director with respect to whom it was granted only by the person to whom
it was granted (whether the Eligible Director or a Trust), provided that such
person during the Eligible Director's lifetime may designate a Trust to be a
beneficiary with respect to the Director NQSO, and such beneficiary shall, after
the death of the Eligible Director to whom the Director NQSO was granted, have
all of the rights designated for such beneficiary. In the absence of such
designation, after the death of the Eligible Director with respect to whom the
Director NQSO was granted, if such Director NQSO was granted to the Eligible
Director, the Director NQSO shall be exercisable by the person or persons to
whom the optionee's rights under such option pass by will or by the laws of
descent and distribution.
(h) A Director NQSO shall not vest with respect to an Eligible
Director, or the affiliate of such Eligible Director, as the case may be, (i)
unless the Eligible Director, has, at the date of grant, provided three (3)
years of prior continuous service as an Eligible Director, or (ii) until the
date upon which such Eligible Director has provided one year of continuous
service as an Eligible Director following the date of grant of such Director
NQSO, whereupon such Director NQSO shall become fully vested and exercisable in
accordance with its terms.
(i) The Company may require any optionee under this Section 6, or any
person to whom a Director NQSO is transferred under paragraph 6(g), as a
condition of exercising any such option: (i) to give written assurances
satisfactory to the Company as to such person's knowledge and experience in
financial and business matters and/or to employ a purchaser representative who
has such knowledge and experience in financial and business matters, and that
such person is capable of evaluating, alone or together with the purchaser
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representative, the merits and risks of exercising the Director NQSO; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the Common Stock subject to the Director NQSO for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the Director NQSO has been registered under a then currently
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), or (ii), as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.
(j) Subject to the last sentence of this paragraph 6(j), each Director
NQSO shall include a provision entitling the optionee to a further Nonqualified
Stock Option (a "Director Re-Load Option") in the event the optionee exercises
the Director NQSO evidenced by the Director NQSO grant, in whole or in part, by
surrendering other shares of Common Stock in accordance with the Plan and the
terms of the Director NQSO grant. Any such Director Re-Load Option (i) shall be
for a number of shares equal to the number of shares surrendered as part or all
of the exercise price of the original Director NQSO; (ii) shall have an
expiration date which is the same as the expiration date of the original
Director NQSO; and (iii) shall have an exercise price which is equal to one
hundred percent (100%) of the fair market value of the Common Stock subject to
the Director Re-Load Option on the date of exercise of the original Director
NQSO. Any such Director Re-Load Option shall be subject to the availability of
sufficient shares under paragraph 3(a). There shall be no Director Re-Load
Option on a Director Re-Load Option. Notwithstanding anything else in the Plan
to the contrary, this paragraph 6(j) shall be of no force and effect from and
after June 23, 1998.
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(k) For purposes of this Section 6, the term "Eligible Director" shall mean
a member of the Board who is not an employee of the Company or any Affiliate,
and the term "affiliate" shall mean a person that directly or indirectly
controls, is controlled by, or is under common control with, the Eligible
Director.
7. TERMS OF STOCK BONUSES AND PURCHASES OF
---------------------------------------
RESTRICTED STOCK.
----------------
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) The purchase price under each stock purchase agreement shall be
such amount as the Board or Committee shall determine and designate in such
agreement. Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(b) No rights under a stock bonus or restricted stock purchase
agreement shall be assignable by any participant under the Plan, either
voluntarily or by operation of law, except where such assignment is required by
law or expressly authorized by the terms of the applicable stock bonus or
restricted stock purchase agreement.
(c) The purchase price of stock acquired pursuant to a stock purchase
agreement shall be paid either: (i) in cash at the time of purchase; (ii) at
the discretion of the Board or the Committee, according to a deferred payment or
other arrangement
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with the person to whom the Common Stock is sold; or (iii) in any other form of
legal consideration that may be acceptable to the Board or the Committee in
their discretion; including but not limited to payment of the purchase price
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which results in the receipt of cash (or a check) by the Company
before Common Stock is issued or the receipt of irrevocable instruction to pay
the aggregate exercise price of the Company from the sales proceeds before
Common Stock is issued. Notwithstanding the foregoing, the Board or the
Committee to which administration of the Plan has been delegated may award
Common Stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) Shares of Common Stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) In the event a person ceases to be an employee of or ceases to
serve as a director or consultant to the Company or an Affiliate, the Company
may repurchase or otherwise reacquire any or all of the shares of Common Stock
held by that person which have not vested as of the date of termination under
the terms of the stock bonus or restricted stock purchase agreement between the
Company and such person.
8. COVENANTS OF THE COMPANY.
------------------------
(a) During the terms of the Stock Awards granted under the Plan, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards up to the number of shares of Common Stock
authorized under the Plan.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of Common Stock under the Stock Awards granted under the
Plan;
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provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any Stock Award granted under
the Plan or any Common Stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority that counsel for the Company
deems necessary for the lawful issuance and sale of Common Stock under the Plan,
the Company shall be relieved from any liability for failure to issue and sell
Common Stock upon exercise of such Stock Awards unless and until such authority
is obtained.
9. USE OF PROCEEDS FROM COMMON STOCK.
---------------------------------
Proceeds from the sale of Common Stock pursuant to Stock Awards
granted under the Plan shall constitute general funds of the Company.
10. MISCELLANEOUS.
-------------
(a) The Board or Committee shall have the power to accelerate the time
during which a Stock Award may be exercised or the time during which a Stock
Award or any part thereof will vest, notwithstanding the provisions in the Stock
Award stating the time during which it may be exercised or the time during which
it will vest. Each Discretionary Stock Option providing for vesting pursuant to
paragraph 5(e) shall also provide that if the employee's employment or a
director's or consultant's affiliation with the Company is terminated by reason
of death or disability (within the meaning of Title II or XVI of the Social
Security Act and as determined by the Social Security Administration), the
vesting schedule of Discretionary Stock Options granted to such employee,
director or consultant or to the Trusts of such employee, director or consultant
shall be accelerated by twelve months for each full year the employee has been
employed by or the director or consultant has been affiliated with the Company.
Discretionary Stock Options granted under the Plan that are outstanding on
February 25,
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1992, shall be amended to include the accelerated vesting upon death provided
for in the preceding sentence of this paragraph 10(a) and Discretionary Stock
Options granted under the Plan that are outstanding on June 18, 1996, shall be
amended to include the accelerated vesting upon disability provided for in the
preceding sentence of this paragraph 10(a).
(b) Neither an optionee nor any person to whom an Option is
transferred under the provisions of the Plan shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such person has satisfied all requirements for
exercise of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any eligible employee, consultant,
director, optionee or holder of Stock Awards under the Plan any right to
continue in the employ of the Company or any Affiliate or to continue acting as
a consultant or director or shall affect the right of the Company or any
Affiliate to terminate the employment or consulting relationship or directorship
of any eligible employee, consultant, director, optionee or holder of Stock
Awards under the Plan with or without cause. In the event that a holder of
Stock Awards under the Plan is permitted or otherwise entitled to take a leave
of absence, the Company shall have the unilateral right to (i) determine whether
such leave of absence will be treated as a termination of employment or
relationship as consultant or director for purposes hereof, and (ii) suspend or
otherwise delay the time or times at which exercisability or vesting would
otherwise occur with respect to any outstanding Stock Awards under the Plan.
11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
----------------------------------------
If any change is made in the Common Stock subject to the Plan, or
subject to any Stock Award granted under the Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other
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than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding Stock Awards
will be appropriately adjusted in the class(es) and maximum number of shares
subject to the Plan, the maximum number of shares which may be granted to a
participant in a calendar year, the class(es) and number of shares and price per
share of stock subject to outstanding Stock Awards, and the number of shares of
Common Stock to be granted as provided for in paragraphs 6(a) and 6(b). Such
adjustment shall be made by the Board or the Committee, the determination of
which shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving
the receipt of consideration".)
12. CHANGE OF CONTROL.
-----------------
(a) Notwithstanding anything to the contrary in this Plan, in the
event of a Change in Control (as hereinafter defined), then, to the extent
permitted by applicable law: (i) the time during which Stock Awards become
vested shall automatically be accelerated so that the unvested portions of all
Stock Awards shall be vested prior to the Change in Control and (ii) the time
during which the Options may be exercised shall automatically be accelerated to
prior to the Change in Control. Upon and following the acceleration of the
vesting and exercise periods, at the election of the holder of the Stock Award,
the Stock Award may be: (x) exercised (with respect to Options) or, if the
surviving or acquiring corporation agrees to assume the Stock Awards or
substitute similar stock awards, (y) assumed; or (z) replaced with substitute
stock awards. Options not exercised, substituted or assumed prior to or upon the
Change in Control shall be terminated.
(b) For purposes of the Plan, a "Change of Control" shall be deemed to
have occurred at any of the following times:
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(i) upon the acquisition (other than from the Company) by any
person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act (excluding, for this purpose, the Company or its affiliates, or
any employee benefit plan of the Company or its affiliates which acquires
beneficial ownership of voting securities of the Company), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of fifty percent (50%) or more of either the then outstanding shares of Common
Stock or the combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of directors; or
(ii) at the time individuals who, as of April 2, 1991, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to April 2, 1991, whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of the Plan, considered as though
such person were a member of the Incumbent Board; or
(iii) immediately prior to the consummation by the Company of a
reorganization, merger, consolidation, (in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than fifty percent (50%) of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or consolidated
company's then outstanding voting securities) or a liquidation or dissolution of
the Company or of
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<PAGE>
the sale of all or substantially all of the assets of the Company; or
(iv) the occurrence of any other event which the Incumbent Board in
its sole discretion determines constitutes a Change of Control.
13. QUALIFIED DOMESTIC RELATIONS ORDERS
-----------------------------------
(a) Anything in the Plan to the contrary notwithstanding, rights
under Stock Awards may be assigned to an Alternate Payee to the extent that a
QDRO so provides. (The terms "Alternate Payee" and "QDRO" are defined in
paragraph 13(c) below.) The assignment of a Stock Award to an Alternate Payee
pursuant to a QDRO shall not be treated as having caused a new grant. The
transfer of an Incentive Stock Option to an Alternate Payee may, however, cause
it to fail to qualify as an Incentive Stock Option. If a Stock Award is
assigned to an Alternate Payee, the Alternate Payee generally has the same
rights as the grantee under the terms of the Plan; provided however, that (i)
the Stock Award shall be subject to the same vesting terms and exercise period
as if the Stock Award were still held by the grantee, (ii) an Alternate Payee
may not transfer a Stock Award and (iii) an Alternate Payee is ineligible for
Re-Load Options described at paragraph 5(j) or Director Re-Load Options
described at paragraph 6(j).
(b) In the event of the Plan administrator's receipt of a domestic
relations order or other notice of adverse claim by an Alternate Payee of a
grantee of a Stock Award, transfer of the proceeds of the exercise of such Stock
Award, whether in the form of cash, stock or other property, may be suspended.
Such proceeds shall thereafter be transferred pursuant to the terms of a QDRO or
other agreement between the grantee and Alternate Payee. A grantee's ability to
exercise a Stock Award may be barred if the Plan administrator receives a court
order directing the Plan administrator not to permit exercise.
(c) The word "QDRO" as used in the Plan shall mean a court order (i)
that creates or recognizes the right of the
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spouse, former spouse or child (an "Alternate Payee") of an individual who is
granted a Stock Award to an interest in such Stock Award relating to marital
property rights or support obligations and (ii) that the administrator of the
Plan determines would be a "qualified domestic relations order," as that term is
defined in section 414(p) of the Code and section 206(d) of the Employee
Retirement Income Security Act ("ERISA"), but for the fact that the Plan is not
a plan described in section 3(3) of ERISA.
14. AMENDMENT OF THE PLAN.
---------------------
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in the Common Stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(i) increase the number of shares reserved for Stock Awards
under the Plan;
(ii) modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422(b) of
the Code); or
(iii) modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422(b) of the Code.
(b) The Board may in its sole discretion submit any other amendment
to the Plan for stockholder approval, including, but not limited to, amendments
to the Plan intended to satisfy the requirements of Section 162(m) of the Code
and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide optionees with the
maximum benefits
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<PAGE>
provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to employee Incentive Stock Options and/or to
bring the Plan and/or Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan,
unless: (i) the Company requests the consent of the person to whom the Stock
Award was granted; and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
-------------------------------------
(a) The Board may suspend or terminate the Plan at any time. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated. No Incentive Stock Options may be granted under the Plan after
February 22, 2009.
(b) Rights and obligations under any Stock Awards granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
----------------------
The Plan shall become effective as determined by the Board.
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EXHIBIT 10.20
AMENDED AND RESTATED AMGEN
PERFORMANCE BASED
MANAGEMENT INCENTIVE PLAN
I. Purpose
This Amended and Restated Amgen Performance Based Management Incentive Plan
(the "MIP" or the "Plan") is maintained by Amgen, Inc. (the "Company") to:
A. Attract and retain persons of outstanding competence.
B. Broaden the total compensation program.
C. Stimulate outstanding effort to bring about exceptional operating
performance and to reward the contributors to this performance by
providing them with a share of the resulting benefits.
The Plan is intended to supplement the Participant's base salary and result
in total cash compensation for above average performance which exceeds the
average compensation levels of comparable companies. The MIP consists of
two plans: one plan for the payment of incentive awards that are intended
to satisfy Internal Revenue Code Section 162(m)'s "qualified performance-
based compensation" requirements and one plan for the payment of incentive
awards that are not intended to satisfy Internal Revenue Code Section
162(m)'s "qualified performance-based compensation" requirements.
II. Basic Concepts
Since the purpose of this Management Incentive Plan is to stimulate and
reward outstanding performance in the accomplishment of specific
objectives, the Plan should generally be formally integrated with the
objectives of the total management system. The Plan should thus support a
continuing and meaningful emphasis on the effective use of goal setting and
management by objectives and generally should be aligned with the goals
reflected in the approved Annual Plan of the Company.
Annual incentive award programs under the Plan shall be developed under the
following basic concepts:
A. The advance identification of the participants in the Plan and the
establishment of target incentive awards, specific performance goals
and the extent to which each such objective shall determine the actual
award.
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B. The establishment of a range in the actual awards available under the
Plan to reflect the achievements of the respective participants as
well as the achievement of the Company-wide performance goals.
III. Eligibility
A. Participation in the Amgen Management Incentive Plan shall be limited
to all executive officers of the Company and its subsidiaries and
certain other key employees of the Company and its subsidiaries
nominated by the Chairman of the Board (the "Chairman") and approved
by the Compensation Committee of the Board of Directors (each a
"Participant").
B. Unless otherwise specifically authorized by the Compensation
Committee, persons approved for participation in the Amgen Management
Incentive Plan shall be excluded from participation in any other cash
bonus or incentive program.
IV. Basis of Participation
A. Participants may receive incentive awards under the Management
Incentive Plan on the basis of percentages established in advance --
as recommended by the Chairman and approved by the Compensation
Committee of the Board of Directors as part of the annual compensation
plan.
B. The target incentive award for a Participant shall be developed in
accordance with the following:
1. In connection with the planning of their performance goals for
the MIP year, the Chairman shall recommend (for approval by the
Compensation Committee) the individual Participants and the
target incentive award for each such Participant (expressed as a
% of the base pay of the Participant).
2. The target incentive award for each Participant (expressed as a %
of base pay of the Participant) shall be established in
accordance with guidelines established by the Compensation
Committee. The Compensation Committee shall designate those
target incentive awards intended to constitute "qualified
performance based compensation" for purposes of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), as
"Section 162(m) Awards" (such awards are hereinafter referred to
as "Section 162(m) Awards").
(a) Because of the many variables in establishing base salary
structures, the Plan does not contemplate achieving any
degree of uniformity in the relationship of awards to base
pay. Therefore, the range of target incentive awards will be
rather broad. Individual target incentive awards should be
based upon consideration of:
(1) Relative significance of the individual's function in
directly influencing the performance of the Company.
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(2) Relative performance rating of the individual.
(3) Length of time in position and/or Plan. Generally, it
should be expected that initial percentages for new
Participants will be set at levels which allow for
gradual increases within the established range based
upon Participant's performance.
(4) The relative competitive total compensation for the
respective positions.
C. Each Plan year, the Compensation Committee shall establish a formula
for determining the amount of incentive award a Participant may
receive and such formula shall specify the Participants or class of
Participants to which such formula applies. Generally, a formula
established by the Compensation Committee should reflect both (i)
Company-wide goals ("Corporate Goals") which generally should be based
on key elements of the Company's Annual Plan and (ii) specific goals
relating to the performance of the respective Participant ("Individual
Goals"). Corporate Goals and Individual Goals with respect to a
Section 162(m) Award shall be objective and the formula with respect
to a Section 162(m) Award must be objective and state the method for
computing the amount that may be paid to the Participant if the
performance goal or goals are attained. A formula established by the
Compensation Committee may provide that if certain specified goals are
not met, no incentive awards will be awarded under the Plan for the
Plan year to which such formula applies.
D. Subject to Sections IV.E.4., VII.C., VIII.B., VIII.C. and VIII.D., the
actual incentive award to a Participant under the Plan shall be
computed according to the formula determined pursuant to Section
IV.C.; provided, however, that the Compensation Committee shall have
the discretion to increase or decrease the amount of the award payable
(except that with respect to Section 162(m) Awards, the Committee
shall not have the discretion to increase the amount payable pursuant
to the formula). A Participant may receive an award that is less than,
equal to or greater than his or her target incentive award provided,
however, that the calculation of any Section 162(m) Award (including
any increase above the target incentive award but excluding any
decrease in the award payable) shall not be discretionary but rather
shall be pursuant to an objective formula for computing the amount of
compensation payable to the Participant if the applicable performance
goals are attained.
E. Individual Goals shall be established as follows:
1. Individual Goals should generally be based on business criteria
underlying the Corporate Goals and relate to significant and
measurable areas that require special attention during the
current year. The purpose is to add special emphasis to those
particular activities and reward for their accomplishments. From
year-to-year, it is expected that the emphasis will change both
in relation to the selected Individual Goals as well as to the
importance of such goals in determining the actual incentive
award.
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Individual Goals with respect to a Section 162(m) Award shall be
based on one or more of the business criteria set forth in
Section V.A.
2. Individual Goals should generally be precise in establishing the
targets and the basis for measurement of accomplishment. Wherever
there can be variations in the degree of accomplishment (such as
a dollar target for total revenues or joint ventures; a target
for filing IND's or PLA's; etc.), the extent to which such goal
will be considered satisfied upon attainment of the levels of
accomplishment should be clearly stated. Individual Goals with
respect to a Section 162(m) Award shall be precise in
establishing the targets and the basis for measurement of
accomplishment, and if there can be variations in the degree of
accomplishment of an Individual Goal with respect to a Section
162(m) Award, the extent to which such goal will be considered
satisfied upon attainment of the levels of accomplishment shall
be clearly stated.
3. Where Individual Goals relate to dollar objectives, they should
be identified with or reconciled to amounts reflected in the
Company's approved Annual Plan.
4. If operating conditions during the year make it desirable to
change emphasis on established Individual Goals or to establish
new Individual Goals, a revised formula should be submitted to
and approved by the Compensation Committee; provided, however,
that this subsection IV.E.4. shall in no event apply to Section
162(m) Awards.
V. Provisions Applicable to Section 162(M) Awards
A. Notwithstanding any provision of the Plan to the contrary, Section
162(m) Awards shall be paid solely on account of the attainment of one
or more objective performance goals which are (i) preestablished by
the Compensation Committee, (ii) based on one or more of the business
criteria listed below in subsection V.B. and (iii) state, in terms of
an objective formula or standard, the method for computing the amount
of compensation payable to the Participant if the goal is attained;
provided, however, that Section 162(m) Awards may also be paid in
accordance with Section VIII.B.
B. Notwithstanding any provision of the Plan to the contrary, performance
goals with respect to which Section 162(m) Awards may be paid shall be
based on one or more of the following business criteria: return on
capital employed, revenue growth, profit after taxes, product
development, research, sales, in-licensing, out-licensing, mergers,
acquisitions, sales of assets or subsidiaries, litigation, human
resources, information services, manufacturing, production, inventory,
support services, site development, plant development, building
development, facility development, government relations, product
market share, management, Board of Directors composition, year 2000,
finance, net income, pre-tax income, operating income, cash flow,
earnings per share, return on equity, return on invested capital,
return on assets, cost reductions or savings, funds from operations,
appreciation
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<PAGE>
in the fair market value of common stock, total return to stockholders
and earnings before any one or more of the following items: interest,
taxes, depreciation or amortization.
C. Notwithstanding any provision of the Plan to the contrary, the final
award of any Section 162(m) Award (including any increase above the
target incentive award but excluding any decrease in the award
payable) shall not be discretionary but rather shall be pursuant to an
objective formula for computing the amount of incentive award payable
to the Participant if the applicable goals are attained.
D. Notwithstanding any provision of the Plan to the contrary, for any
Plan year the Committee may establish for any Participant a target
incentive award intended to constitute a Section 162(m) Award or a
target incentive award not intended to constitute a Section 162(m)
Award ("Non-Section 162(m) Award") or both; provided, however, that if
for any Plan year, the Committee establishes for any one Participant
both a target Section 162(m) Award and a target Non-Section 162(m)
Award, the performance goals underlying the target Section 162(m)
Award must be different from the performance goals underlying the
target Non-Section 162(m) Award. Furthermore, the Section 162(m) Award
must be calculated separately from and without regard to the Non-
Section 162(m) Award and the Non-Section 162(m) Award must be
calculated separately from and without regard to the Section 162(m)
Award.
E. Notwithstanding any provision of the Plan to the contrary, to the
extent necessary to comply with the qualified performance-based
compensation requirements of Code Section 162(m), award formulas for
any Section 162(m) Awards shall be adopted in each performance period
by the Compensation Committee no later than the latest time permitted
by Code Section 162(m) (generally, for performance periods of one year
or more, no later than 90 days after the commencement of the
performance period). No Section 162(m) Awards shall be paid to
Participants unless and until the Compensation Committee makes a
certification in writing with respect to the attainment of the
performance goals with respect to such Section 162(m) Award as
required by Code Section 162(m). Although the Compensation Committee
may in its sole discretion reduce a Section 162(m) Award payable to a
Participant pursuant to the applicable formula, subject to Section
VIII.B. the Compensation Committee shall have no discretion to
increase the amount of a Participant's Section 162(m) Award as
determined under the applicable formula.
VI. Administration
A. The overall administration of this Management Incentive Plan shall be
under the direction of the Compensation Committee of the Company's
Board of Directors. The Compensation Committee shall consist solely of
two or more members of the Company's Board of Directors who qualify as
"outside directors" for Section 162(m) purposes.
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<PAGE>
B. Responsibility for the operating administration of the Plan shall be
under the direction of the Company's Vice President of Human
Resources.
VII. Determination of Awards
A. Promptly following the close of the Plan year, the respective managers
shall evaluate the performance of the Participants, determine the
extent to which Individual Goals were achieved (in terms of %
achievement, subject to a maximum percentage established annually by
the Compensation Committee, which in no event shall be more than 150%)
and forward for review and approval (with respect to Section 162(m)
Awards, such review and approval shall be by the Compensation
Committee). In all cases, the extent to which Individual Goals were
achieved shall be determined only after a self-assessment has been
completed.
B. The final determination of the extent to which Corporate Goals were
achieved (in terms of % achievement, subject to a maximum percentage
established annually by the Compensation Committee, which in no event
shall be more than 150%) will be made by the Compensation Committee,
promptly following the availability of year-end financial and
technical results.
C. Subject to the limitation that the maximum amount payable under the
Plan to any employee during any calendar year may not exceed
$1,800,000 and subject to Sections IV.D., IV.E.4., VIII.B., VIII.C.
and VIII.D., dollar awards to Participants shall be computed according
to the formula established under Section IV.C., using, to the extent
applicable to such formula, the percent achievement determined in
accordance with subsection A. above and the percent achievement
determined in accordance with subsection B. above.
VIII. Payments, Termination of Employment and General Conditions
A. Subject to Section VIII.C. and VIII.D., payments to Participants who
have been determined to be entitled to an award will be made in cash
generally not later than the fifteenth day of the third month
following the close of the Company's Fiscal Year.
B. If a Participant dies or a Participant's employment is terminated for
any reason prior to the end of the Plan year, the payment of any award
(and in the case of death, the person or persons to whom such payment
shall be made) shall be determined at the sole discretion of the
Committee; provided, however, that a Participant who terminates
employment prior to the end of the Plan year may receive a Section
162(m) Award at the discretion of the Committee only if such
termination was due to death, disability or a change of ownership or
control of the Company, unless the performance goals applicable to
such Section 162(m) Award were attained prior to such termination.
C. While it is the intent of the Company to continue the Plan during any
year for which it is established and to make awards to Participants in
accordance with these policies and guidelines, the Company reserves
the right to amend, modify or terminate the Plan, any annual incentive
program under the Plan or any
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Participant's participation in the Plan at any time or on such
conditions as the Compensation Committee shall deem appropriate;
provided, however, that once the Compensation Committee has
established the performance goals underlying a Section 162(m) Award,
the Committee may not change either such performance goals or the
formula for computing whether such goals were met and the Committee
may not increase the amount of the targeted Section 162(m) Award (the
Compensation Committee may , however, decrease the amount of a
Participant's actual Section 162(m) Award). No Participant shall have
any right to any award under the Plan until such award and the amount
thereof has been finally approved by the Compensation Committee and
communicated to such Participant after the end of the year for which
the award is being made.
D. No awards shall be paid under the Plan unless and until the material
terms of the performance goals under which Section 162(m) Awards may
be paid have been approved by the Company's stockholders as required
by Section 162(m) of the Code. So long as the Plan shall not have
been previously terminated by the Company, the material terms of the
performance goals under which Section 162(m) Awards may be paid shall
be resubmitted for approval by the Company's stockholders in the fifth
year after the material terms of the performance goals under which
Section 162(m) Awards may be paid shall have first been approved by
the Company's stockholders and every fifth year thereafter. In
addition, the material terms of the performance goals under which
Section 162(m) Awards may be paid shall be resubmitted to the
Company's stockholders for approval if the Plan is amended in any way
which changes the employees eligible under the Plan, the business
criteria listed in Section V.B. above, the maximum amount of
compensation which may be paid to any Participant under the Plan in
any calendar year, or for purposes of Section 162(m), otherwise
changes the material terms of the performance goals under which
Section 162(m) Awards may be paid.
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EXHIBIT 10.26
SEVENTH 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, as amended (the "Plan") is hereby amended, effective June 28,
1999, as follows:
1. Section 2.20 of the Plan is amended to read in its entirety as follows:
2.20 "Employee" means an individual who (a) on the Payroll of a member of
the Affiliated Group or (b) is a "leased employee" (within the meaning
of section 414(n) of the Code) with respect to a member of the
Affiliated Group. "Employee shall not include a nonresident alien who
receives no earned income (within the meaning of section 911(b) of the
Code) from a member of the Affiliated Group that constitutes income
from sources within the United States (within the meaning of section
861(a)(3) of the Code).
2. Section 2.35 of the Plan is amended to read in its entirety as follows:
2.35 "Participating Company" means the Company, Amgen (Bermuda) Clinical
Development, Limited, Amgen (Bermuda) Clinical Development 2, Limited,
Amgen (Bermuda) Clinical Development 3, Limited, Amgen (Bermuda)
Clinical Development 4, Limited, Amgen (Bermuda) Clinical Development
5, Limited, Amgen (Bermuda) Clinical Development 6, Limited, Amgen
(Bermuda) Clinical Development 7, Limited, Amgen (Bermuda) Clinical
Development 8, Limited, and any other member of the Affiliated Group
that the Company has designated in writing as a Participating Company.
3. Section 2.36 of the Plan is added to read in its entirety as follows and
all subsequent sections shall be renumbered to reflect the addition of this
Section 2.36:
2.36 "Payroll" means the system used by an entity to pay those individuals
it regards as its employees for their services and to withhold federal
income and employment taxes from the compensation it pays to such
employees. "Payroll" does not include any system the entity uses to
pay individuals whom it does not regard as its employees and for whom
it does not actually withhold federal income and employment taxes
(including, but not limited to, individuals it regards as independent
contractors, consultants or employees of temporary employment
agencies).
4. Section 3.3 of the Plan is amended to read in its entirety as follows:
<PAGE>
3.3 "Eligible Employee" means an Employee of a Participating Company who
-----------------
is described in (a) or (b) of this Section 3.3. and is not excluded
under (c) of this Section 3.3. An individual's status as an Eligible
Employee shall be determined by the Company and its determination
shall be conclusive and binding on all persons.
(a) Regular Full-Time Employee. Unless excluded under (c) below, an
individual classified by a Participating Company as a "regular
full-time employee" is an Eligible Employee.
(b) Regular Part-Time Employee. Unless excluded under (c) below, an
individual classified by a Participating Company as a "regular
part-time employee" shall become an Eligible Employee upon
completion of a Year of Service.
(c) Excluded Individuals. An individual shall not be an Eligible
Employee for any period in which he or she is:
(1) Included in a unit of employees covered by a collective-
bargaining agreement that does not provide that such
individual shall be eligible to participate in the Plan;
(2) Not on the Payroll of a Participating Company, even though
such person may be deemed, for any reason, to be an employee;
(3) Subject to an oral or written agreement that provides that
such individual shall not be eligible to participate in the
Plan;
(4) Employed by a non-U.S. subsidiary of the Company;
(5) Classified by a Participating Company as a "leased employee"
(within the meaning of section 414(n) of the Code) with
respect to such Participating Company or would be so
classified but for the period-of-service requirement of Code
section 414(n)(2)(B); or
(6) A temporary employee, independent contractor, consultant, or
any other person or entity for whom a Participating Company
does not withhold federal income and employment taxes from
such person's or entity's compensation.
If, during any period, a Participating Company has not regarded an
individual as an Employee and, for that reason, has not withheld
employment taxes with respect to that individual, then that
individual shall not be an Eligible Employee for that period, even
in the event that the individual is determined, retroactively, to
have been an Employee during all or any portion of that period.
2
<PAGE>
To record this Seventh Amendment to the Plan as set forth herein, the Company
has caused its authorized officer to execute this document this 28th day of
June, 1999.
AMGEN INC.
By: /s/ George A. Vandeman
----------------------
Title: Senior Vice President,
Corporate Development,
General Counsel and Secretary
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 200
<SECURITIES> 1,169
<RECEIVABLES> 384
<ALLOWANCES> 21
<INVENTORY> 122
<CURRENT-ASSETS> 2,011
<PP&E> 2,168
<DEPRECIATION> 684
<TOTAL-ASSETS> 3,890
<CURRENT-LIABILITIES> 881
<BONDS> 223
0
0
<COMMON> 0
<OTHER-SE> 2,785
<TOTAL-LIABILITY-AND-EQUITY> 3,890
<SALES> 1,426
<TOTAL-REVENUES> 1,566
<CGS> 191
<TOTAL-COSTS> 191
<OTHER-EXPENSES> 382<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 728
<INCOME-TAX> 213
<INCOME-CONTINUING> 515
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 515
<EPS-BASIC> 1.01<F2>
<EPS-DILUTED> 0.96
<FN>
<F1>Item consists of research and development expenses.
<F2>"EPS-Primary" denotes basic EPS.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99
AMGEN INC.
Factors That May Affect Amgen
Amgen operates in a rapidly changing environment that involves a number of
risks, some of which are beyond our control. The following discussion
highlights some of these risks and others are discussed elsewhere herein.
Product development
We intend to continue an aggressive product development program.
Successful product development in the biotechnology industry is highly
uncertain, and very few research and development projects produce a commercial
product. Product candidates that appear promising in the early phases of
development, such as in early human clinical trials, may fail to reach the
market for a number of reasons, such as:
- - the product candidate was not effective in treating a specified condition or
illness
- - the product candidate had harmful side effects on humans
- - the necessary regulatory bodies (such as the FDA) did not approve our product
candidate for an indicated use
- - the product candidate was not economical for us to manufacture it
- - other companies or people may have proprietary rights to our product
candidate (e.g. patent rights) and will not let us sell it on reasonable
terms, or at all
- - the product candidate is not cost effective in light of existing therapeutics
- - the product candidate did not demonstrate acceptable clinical trial results
even though it demonstrated positive preclinical trial results
For example, in 1997, we announced the failure of BDNF (for the treatment
of ALS by subcutaneous injection administration route), because the product
candidate, as administered, did not produce acceptable clinical results in a
specific indication after a phase 3 trial, even though BDNF had progressed
through preclinical and earlier clinical trials. Of course, there may be other
factors that prevent us from marketing a product. We cannot guarantee we will
be able to produce commercially successful products. Further, clinical trial
results are frequently susceptible to varying interpretations by scientists,
medical personnel, regulatory personnel, statisticians and others which may
delay, limit or prevent further clinical development or regulatory approvals of
a product candidate. Also, the length of time that it takes for us to complete
clinical trials and obtain regulatory approval for product marketing has in the
past varied by product and by the indicated use of a product. We expect that
this will likely be the case with future product candidates and we cannot
predict the length of time to complete necessary clinical trials and obtain
regulatory approval. See "- Regulatory matters."
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<PAGE>
Regulatory matters
Our research, preclinical testing, clinical trials, facilities,
manufacturing, pricing and sales and marketing are subject to extensive
regulation by numerous state and federal governmental authorities in the U.S.,
such as the FDA and the Health Care Financing Administration ("HCFA"), as well
as by foreign countries and the European Union (the "EU"). Currently, we are
required in the U.S. and in foreign countries to obtain approval from those
countries' regulatory authorities before we can market and sell our products in
those countries. The success of our current and future products will depend in
part upon obtaining and maintaining regulatory approval to market products in
approved indications in the U.S. and foreign markets. In our experience, the
regulatory approval process is a lengthy and complex process, both in the U.S.
and in foreign countries, including countries in the EU. Even if we obtain
regulatory approval, both our manufacturing processes and our marketed products
are subject to continued review. Later discovery of previously unknown problems
with our products or manufacturing processes may result in restrictions on such
product or manufacturing processes, including withdrawal of the products from
the market. Our failure to obtain necessary approvals, or the restriction,
suspension or revocation of any approvals, or our failure to comply with
regulatory requirements could prevent us from manufacturing or selling our
products which could have a material adverse effect on us and our results of
operations.
Reimbursement; Third party payors
In both domestic and foreign markets, sales of our products are dependent,
in part, on the availability of reimbursement from third party payors such as
state and federal governments (for example, under Medicare and Medicaid programs
in the U.S.) and private insurance plans. In certain foreign markets, the
pricing and profitability of our products generally are subject to government
controls. In the U.S., there have been, and we expect there will continue to
be, a number of state and federal proposals that limit the amount that state or
federal governments will pay to reimburse the cost of drugs. In addition, we
believe the increasing emphasis on managed care in the U.S. has and will
continue to put pressure on the price and usage of our products, which may
impact product sales. Further, when a new therapeutic is approved, the
reimbursement status and rate of such a product is uncertain. In addition,
current reimbursement policies for existing products may change at any time.
Changes in reimbursement or our failure to obtain reimbursement for our products
may reduce the demand for, or the price of, our products, which could result in
lower product sales or revenues which could have a material adverse effect on us
and our results of operations. For example, in the U.S. the use of EPOGEN(R) in
connection with treatment for end stage renal disease is funded primarily by the
U.S. federal government. Therefore, as in the past, EPOGEN(R) sales could be
affected by future changes in reimbursement rates or the basis for reimbursement
by the federal government. For example, in early 1997, HCFA instituted a
reimbursement change for EPOGEN(R) which adversely affected the Company's
EPOGEN(R) sales. See "Item 7. Management's Discussion and Analysis of
Financial
2
<PAGE>
Condition and Results of Operations - Results of Operations - Product sales -
EPOGEN(R) (Epoetin alfa)."
Guidelines
Government agencies promulgate regulations and guidelines directly
applicable to us and to our products. However, professional societies, practice
management groups, private health/science foundations and organizations involved
in various diseases may also publish, from time to time, guidelines or
recommendations to the health care and patient communities. These organizations
may make recommendations that affect a patient's usage of certain therapies,
drugs or procedures, including our products. Recommendations of government
agencies or these other groups/organizations may relate to such matters as
usage, dosage, route of administration and use of concomitant therapies.
Recommendations or guidelines that are followed by patients and health care
providers could result in, among other things, decreased use of our products
which could have a material adverse effect on our results of operations. In
addition, the perception by the investment community or stockholders that such
recommendations or guidelines will be followed could adversely affect prevailing
market prices for our common stock.
Intellectual property and legal matters
The patent positions of pharmaceutical and biotechnology companies can be
highly uncertain and often involve complex legal, scientific and factual
questions. To date, there has emerged no consistent policy regarding breadth of
claims allowed in such companies' patents. Accordingly, the patents and patent
applications relating to our products and technologies may be challenged,
invalidated or circumvented by third parties and might not protect us against
competitors with similar products or technology. Patent disputes are frequent
and can preclude commercialization of products. We are currently, and in the
future may be, involved in patent litigation. The results of such litigation
could subject us to competition and/or significant liabilities, could require us
to enter into third party licenses or could cause us to cease using the
technology or product in dispute. In addition, we cannot guarantee that such
licenses will be available on terms acceptable to us.
The Company is currently involved in arbitration proceedings with Ortho
Pharmaceutical Corporation (which has assigned its rights under the Product
License Agreement to Ortho Biotech, Inc.), 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 U.S. for all human uses except
dialysis. See Note 4 to the Consolidated Financial Statements, "Contingencies -
Johnson & Johnson arbitrations".
Competition
We operate in a highly competitive environment. Our principal competitors
are pharmaceutical and biotechnology companies. Some of our competitors, mainly
large pharmaceutical corporations, have greater clinical, research, regulatory
and marketing resources than
3
<PAGE>
we do. In addition, some of our competitors may have technical or competitive
advantages over us for the development of technologies and processes and the
acquisition of technology from academic institutions, government agencies and
other private and public research organizations. We cannot guarantee that we
will be able to produce or acquire rights to products that have commercial
potential. Even if we achieve successful product commercialization, we cannot
guarantee that one or more of our competitors will not achieve product
commercialization earlier than we do, obtain patent protection that dominates or
adversely affects our activities, or have significantly greater marketing
capabilities.
Fluctuations in operating results
Our operating results may fluctuate from period to period for a number of
reasons. In budgeting our operating expenses, some of which are fixed in the
short term, we assume that revenues will continue to grow. Accordingly, even a
relatively small revenue shortfall may cause a period's results to be below our
expectations. A revenue shortfall could arise from any number of factors, such
as:
- - lower than expected demand for our products
- - changes in the government's or private payor's reimbursement policies for our
products
- - changes in wholesaler buying patterns
- - increased competition from new or existing products
- - fluctuations in foreign currency exchange rates
- - changes in our product pricing strategies
Of course, there may be other factors that affect the Company's revenues in
any given period.
Rapid growth
We have an aggressive growth plan that includes substantial and increasing
investments in research and development and facilities. Our plan has a number
of risks, such as:
- - the need to generate higher revenues to cover a higher level of operating
expenses
- - the need to manage complexities associated with a larger and faster growing
organization
- - the need to accurately anticipate demand for the products we manufacture and
maintain adequate manufacturing capacity
Of course, there may be other risks and we cannot guarantee that we will be
able to successfully manage these or other risks.
Stock price volatility
Our stock price, like that of other biotechnology companies, is extremely
volatile. Our stock price may be affected by, among other things, clinical
trial results and other product-development announcements by us or our
competitors, regulatory matters, announcements in the scientific and research
community, intellectual property and legal matters, changes in reimbursement
policies or
4
<PAGE>
medical practices or broader industry and market trends unrelated to our
performance. In addition, if our revenues or earnings in any period fail to meet
the investment community's expectations, there could be an immediate adverse
impact on our stock price.
5
