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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 0-12042
BIOGEN, INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3002117
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14 Cambridge Center, Cambridge, Massachusetts 02142
(Address of principal executive offices)(zip code)
Registrant's telephone number, including area code: (617) 679-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
(Title of class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10- K or any amendment to
this Form 10-K. [ ]
Aggregate market value of Common Stock held by nonaffiliates of the
Registrant at February 13, 1997: $3,526,097,099 (excludes shares held by
directors). Exclusion of shares held by any person should not be construed to
indicate that such person possesses the power, direct or indirect, to direct or
cause the direction of management or policies of the Registrant, or that such
person is controlled by or under common control with the Registrant. Common
Stock outstanding at February 13, 1997: 73,060,328 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1997 Annual
Meeting of Stockholders are incorporated by reference into Part III of this
Report, and portions of the Registrant's 1996 Annual Report to Shareholders are
incorporated by reference into Parts II and IV of this Report.
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PART I
ITEM 1 - BUSINESS
OVERVIEW
Biogen, Inc. ("Biogen" or the "Company") is a biopharmaceutical company
principally engaged in the business of developing, manufacturing and marketing
drugs for human healthcare. Biogen currently derives revenues from United States
sales of AVONEX(TM) (Interferon beta-1a) for the treatment of relapsing forms of
multiple sclerosis and from worldwide sales by Biogen's licensees of a number of
products, including alpha interferon and hepatitis B vaccines and diagnostic
products. Biogen began selling AVONEX(TM) in the United States in May 1996, upon
receipt of a product license from the United States Food and Drug Administration
("FDA"). During 1996, Biogen's revenues from sales of AVONEX(TM) were
approximately $76.5 million. The Company expects to receive regulatory approval
to market and sell AVONEX(TM) in the European Union in the first half of 1997.
During 1996, Biogen also received approximately $181.5 million in royalty
revenue from its licensees on sales of their products, including a one-time
royalty payment of $30.0 million from Pharmacia & Upjohn AB. Biogen's licensees
generated total sales of greater than $2.0 billion in 1996 from products covered
under licenses with Biogen.
Biogen continues to devote significant resources to its ongoing research
and development efforts. Biogen focuses its research and development efforts on
areas where it has particular scientific strengths: inflammatory diseases,
respiratory diseases, kidney diseases and certain cancers and viruses. In 1996,
Biogen completed two Phase 1 clinical trials of LFA3TIP, one of the product
candidates from Biogen's inflammation program. The trials were designed to study
LFA3TIP's safety profile in healthy human volunteers. A Phase 2-A clinical trial
of LFA3TIP to study the safety profile of LFA3TIP in psoriasis patients is
currently underway. Biogen also expects that clinical testing of at least one
other product candidate from its inflammation program will begin in 1997.
Biogen's anti-inflammatory product candidates are being tested for therapeutic
uses in a broad range of acute and chronic inflammatory and autoimmune diseases.
In 1996, Biogen also commenced a Phase 1 clinical trial to study the safety
profile of gelsolin, a mucolytic agent which is a potential treatment for cystic
fibrosis and several other pulmonary diseases. In addition, Biogen has
earlier-stage research programs directed toward finding therapies for kidney
diseases, through a collaboration with Creative BioMolecules, central nervous
system disorders, through a collaboration with Ontogeny, Inc., and toward
developing products for human gene therapy through a collaboration with Genovo,
Inc. Biogen is also exploring the use of growth factors to prevent or treat the
degeneration of the kidney which results from renal failure, and is
investigating new ways to modify immune responses more specifically in order to
treat diseases of the immune system.
AVONEX(TM) INTERFERON BETA-1A
In May 1996, upon receipt of a license from the FDA, Biogen commenced
marketing and sales in the United States of AVONEX(TM) (Interferon beta-1a) for
the treatment of relapsing forms of multiple sclerosis. Multiple sclerosis is a
progressive neurological disease in which the body loses the ability to transmit
messages among nerve cells, leading to a loss of muscle control, paralysis and,
in some cases, death. Patients with active relapsing multiple sclerosis
experience an uneven pattern of disease progression characterized by periods of
stability interrupted by flareups of the disease after which the patient returns
to a new baseline of functioning. AVONEX(TM) is a recombinant form of a protein
produced by fibroblast cells in response to viral infection. AVONEX(TM) has been
shown in a pivotal clinical trial to both slow the accumulation of disability
and to
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reduce the frequency of exacerbations in patients with relapsing forms of
multiple sclerosis. A clinical study of AVONEX(TM) in patients who have had only
one confirmed exacerbation and a dose comparison study comparing the approved
dosage of AVONEX(TM) with a higher dose are currently underway. Revenues from
sales of AVONEX(TM) in 1996 were approximately $76.5 million.
In the last quarter of 1996, Biogen received regulatory approval of its
application to market and sell AVONEX(TM) in Israel for the treatment of
relapsing forms of multiple sclerosis. The Company expects to receive a license
from regulatory authorities in Israel in the first half of 1997. Biogen also
received, in late 1996, a positive opinion from the Committee for Proprietary
Medicinal Products ("CPMP") of the European Medicines Evaluation Agency ("EMEA")
in connection with Biogen's application for marketing approval in the European
Union and a positive opinion in connection with Biogen's application for
marketing approval in Switzerland. The CPMP's opinion represents the EMEA's
scientific evaluation of AVONEX(TM) as a treatment for relapsing forms of
multiple sclerosis. Biogen expects to receive final EMEA approval in the first
half of 1997. The Company plans to begin marketing AVONEX(TM) in the United
Kingdom and Germany shortly after receipt of EMEA approval, and in France after
approval and completion of pricing discussions with French regulatory
authorities. Biogen intends to market and sell AVONEX(TM) through distribution
partners in Spain, Scandinavia, Italy and Greece. The Company has also applied
for approval to market and sell AVONEX(TM) in Canada, New Zealand, and Norway.
The Company does not expect to receive regulatory approval in Australia in the
foreseeable future.
MAJOR RESEARCH PROGRAMS
Biogen's research is focused on biological systems and processes where its
scientific expertise in molecular biology, cell biology, immunology and protein
chemistry can lead to a greater understanding of disease processes and, as a
result, to the creation of new pharmaceuticals. Biogen selects product
candidates from its research programs to test in clinical trials, focusing its
efforts on those agents which it believes have the greatest potential
competitive advantages and large commercial markets. Described below are
Biogen's major research programs.
INFLAMMATION PROGRAM
Biogen scientists have been working to understand the activities of white
blood cells involved in the inflammation process. Biogen has focused on two
events central to inflammation: (1) the activation of T-cells, specialized white
blood cells which initiate and control the immune response; and (2) the adhesion
of white blood cells to the endothelium (blood vessel walls) and their migration
through the endothelium into surrounding tissues where they cause inflammation.
Activation and adhesion of white blood cells depend upon the binding of pairs of
receptor molecules which appear on the surface of white blood cells and
endothelial cells. When these pairs of receptors bind together, their
interactions create cellular "pathways" for activation and adhesion events.
Biogen has investigated several of these cellular pathways and identified new
receptors in certain of these pathways.
Based on its research, Biogen has selected three cellular pathways as the
promising points of therapeutic intervention to prevent inflammation: (1) the
LFA-3/CD2 pathway, which activates T-cells, (2) the VCAM-1/VLA-4 pathway, which
is necessary for the adhesion of several types of white blood cells to
endothelial cells, and (3) the CD40L/CD40 pathway, which activates B-cells which
produce antibodies. Biogen believes that products which interrupt these pathways
will block the inflammation process at an early stage, thus preventing tissue
damage more effectively than currently available therapies. Moreover, such
products should result in selective inhibition of the immune system, rather than
the broad suppression
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associated with many therapies currently available or under development. In in
vitro and in vivo experiments the product candidates from the inflammation
program have shown promising inhibitory effects. In 1996, the Company completed
two Phase 1 clinical trials of LFA3TIP, one of the product candidates from
Biogen's inflammation program. LFA3TIP is a recombinant protein that has been
designed to modulate immune responses through interaction with the CD2 receptor.
The trials were designed to study the drug's safety profile in healthy human
volunteers. A Phase 2-A clinical trial to study the safety profile of LFA3TIP in
patients with severe psoriasis is currently underway. Biogen is conducting
preclinical tests on two other anti-inflammatory product candidates, VLA4, a
small molecule antagonist, and CD40 Ligand, a monoclonal antibody. Biogen
expects to begin clinical trials of CD40 Ligand in 1997.
GELSOLIN
In 1996, Biogen commenced a Phase 1 clinical trial of a recombinant form of
the actin-severing agent, gelsolin. Biogen is developing gelsolin as a therapy
for reducing airway mucous viscosity in patients with cystic fibrosis ("CF"),
chronic bronchitis and several other pulmonary diseases. Thick viscid secretions
in the airways of CF patients and patients with other respiratory diseases are
believed to cause progressive pulmonary destruction. A major contributor to the
viscosity of mucus secretions is the release of a large amount of filamentous
actin by degenerating inflammatory cells which migrate in large numbers to the
airways of patients with these diseases. Biogen and its collaborators believe
that severing actin filaments contaminating the airway mucus may lead to
clinical improvement.
OP-1
In 1996, Biogen entered into a collaborative research and license agreement
with Creative BioMolecules, Inc. ("CBM") for the development of CBM's
morphogenic protein, OP-1, for the treatment of kidney diseases and disorders.
OP-1 is a circulating human protein agonist expressed during development and
regeneration of the kidney, spinal cord and bone. Under its agreement with CBM,
Biogen obtained exclusive worldwide rights to develop, market and sell OP-1 in
the renal field. Biogen will initially focus on the development of OP-1 as a
treatment for acute and chronic renal failure. As part of the collaboration with
CBM, Biogen purchased approximately 1.5 million shares of CBM's Common Stock.
HEDGEHOG PROTEINS
In 1996, the Company entered into a research collaboration and license
agreement with Ontogeny, Inc. ("Ontogeny") for the development of three specific
"Hedgehog" cell differentiation proteins. Hedgehog proteins are a class of novel
human proteins that are responsible for inducing the formation or regeneration
of tissue. Under its agreement with Ontogeny, Biogen receives exclusive
worldwide rights to therapeutics directly based on Ontogeny's proprietary family
of Hedgehog proteins, sonic, indian and desert Hedgehogs, for most disease
indications. The Company's initial focus will be development of the Hedgehog
proteins for the treatment of central nervous system disorders. As part of the
collaboration with Ontogeny, Biogen purchased a minority equity interest in
Ontogeny.
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GENE THERAPY
In 1995, the Company entered into a collaborative research agreement with
Genovo, Inc. ("Genovo") for the development of certain human gene therapy
treatments. Under its agreement with Genovo, Biogen has agreed to pay more than
$35 million to Genovo over a five-year period to fund research at Genovo and at
the Institute for Human Gene Therapy at the University of Pennsylvania. Under
its agreement with Genovo, Biogen has received a substantial minority equity
interest in Genovo and certain licensing rights related to diseases of the liver
and lung with the first disease targets to be in the areas of cystic fibrosis
and familial hypercholesterolemia.
OTHER RESEARCH PROGRAMS
As part of its further research efforts, Biogen is exploring the use of
growth factors to prevent or treat the degeneration of the kidney which results
from renal failure. The Company is also investigating new ways to modify immune
responses more specifically in order to treat diseases of the immune system.
RESEARCH AND DEVELOPMENT COSTS
During 1996, 1995 and 1994, Biogen's research and development costs were
approximately $132.4 million, $87.4 million and $91.2 million, respectively.
RISKS ASSOCIATED WITH DRUG DEVELOPMENT
Certain of the statements set forth above regarding the Company's drug
development programs, such as the statement regarding the anticipated receipt
and timing of regulatory approval by the EMEA for the marketing of AVONEX(TM) in
the European Union, are forward-looking and are based upon the Company's current
belief as to the outcome and timing of such future events. Many important
factors affect the Company's ability to successfully develop and commercialize
drugs, including the ability to obtain and maintain all necessary patents or
licenses, to demonstrate the safety and efficacy of drug candidates at each
stage of the clinical trial process, to meet applicable regulatory standards and
receive required regulatory approvals, to be capable of producing drug
candidates in commercial quantities at reasonable costs, to compete successfully
against other products, and to market products successfully. For example, to
receive final marketing approval from the EMEA for AVONEX(TM) in the first half
of 1997, the Company must await final action by the EMEA, the outcome and timing
of which is still within the EMEA's sole control. There can be no assurance that
any of the products described in this section or resulting from Biogen's
research programs will be successfully developed, prove to be safe and
efficacious at each stage of clinical trials, meet applicable regulatory
standards, be capable of being produced in commercial quantities at reasonable
costs or be successfully marketed.
PRINCIPAL PRODUCTS BEING MARKETED OR DEVELOPED BY BIOGEN'S LICENSEES
INTRON(R) A ALPHA INTERFERON
Alpha interferon is a naturally occurring protein produced by normal white
blood cells. Biogen has been granted patents in the United States and in Europe
covering the production of alpha interferons through recombinant DNA techniques
and has applications pending in numerous other countries. See "Patents and Other
Proprietary Rights." Biogen's worldwide licensee for recombinant alpha
interferon, Schering-Plough
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Corporation ("Schering-Plough"), first began commercial sales of its Intron(R) A
brand of alpha interferon in the United States in 1986 for hairy-cell leukemia.
Schering-Plough now sells Intron(R) A in 72 countries for as many as 16
indications. The FDA has approved Intron(R) A for the treatment of chronic
hepatitis B and hepatitis C, hairy cell leukemia, AIDS-related Kaposi's sarcoma,
condylomata acuminata, and for injection as an adjuvant treatment to surgery in
patients at high risk for systemic recurrence of malignant melanoma.
Schering-Plough has undertaken studies using Intron(R) A for a number of
additional indications. Royalties from Schering-Plough on sales of Intron(R) A
accounted for approximately 27% of Biogen's revenues (excluding interest) in
1996. The majority of sales of Intron(R) A were generated outside the United
States.
HEPATITIS B VACCINES AND DIAGNOSTICS
Hepatitis B is a blood-borne disease which causes a serious infection of
the liver and substantially increases the risk of liver cancer. More than 250
million people worldwide have chronic hepatitis B virus infections. Biogen holds
several important patents related to hepatitis B antigens produced by genetic
engineering techniques. See "Patents and Other Proprietary Rights." These
antigens are used in recombinant hepatitis B vaccines and in diagnostic test
kits used to detect hepatitis B infection. In total, sales of hepatitis B
vaccines and diagnostic products by Biogen licensees exceeded $1.1 billion in
1996.
HEPATITIS B VACCINES
At least 20 countries around the world, including the United States,
recommend vaccination against hepatitis B for all infants. The United States
Centers for Disease Control and the American Academy of Pediatrics have also
recommended universal immunization of ten-year-old children and at-risk
adolescents. The United States Occupational Safety and Health Administration has
recommended that all persons with an occupational exposure to blood and other
infectious material receive the hepatitis B vaccine.
SmithKline Beecham Biologicals s.a. ("SmithKline") and Merck & Co., Inc.
("Merck") are the two major worldwide marketers of hepatitis B vaccines. Biogen
has licensed to SmithKline exclusive rights under Biogen's hepatitis B patents
to market hepatitis B vaccines in the major countries of the world, excluding
Japan. SmithKline's vaccine is approved in the United States and in over 60
other countries. In 1990, SmithKline and Biogen entered into a sublicense
arrangement with Merck under which Biogen currently receives royalties.
Royalties from SmithKline and Merck together accounted for approximately 23% of
Biogen's revenues (excluding interest) in 1996. Biogen has also licensed rights
under its hepatitis B patents to Merck and The Green Cross Corporation on a
non-exclusive basis in Japan.
In April 1995, an arbitration panel ruled in Biogen's favor in an
arbitration initiated by SmithKline regarding the rate of royalties payable on
sales of hepatitis B vaccines by SmithKline in the United States. In June 1995,
SmithKline made a motion in the Federal District Court for the Southern District
of New York to vacate the arbitration panel award. In 1996, the court upheld the
arbitration panel's decision in Biogen's favor. SmithKline did not appeal the
court's decision.
HEPATITIS B DIAGNOSTICS
Biogen has licensed its proprietary hepatitis B rights, on an
antigen-by-antigen and nonexclusive basis, to diagnostic kit manufacturers.
Biogen currently has hepatitis B license or license and supply agreements for
diagnostic use with more than a dozen companies, including Abbott Laboratories,
the major
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worldwide marketer of hepatitis B diagnostic kits, Ortho Diagnostic Systems,
Inc., Roche Diagnostic Systems, Inc. and Organon Teknika B.V.
OTHER PRODUCTS
Under a license agreement with Eli Lilly and Company ("Lilly"), Biogen has
granted Lilly rights under certain of Biogen's patents related to gene
expression. Lilly uses the patented vectors and methods in several products that
are on the market or in development. Under the license agreement Biogen receives
royalties on sales of these products.
In 1996, Biogen Technologies, Inc., a wholly-owned subsidiary of Biogen,
Inc., granted a sublicense to Pharmacia & Upjohn AB ("Pharmacia & Upjohn") under
certain patent rights to proprietary protein secretion technology exclusively
licensed to Biogen by Harvard University. Under the terms of the license
agreement, Pharmacia & Upjohn agreed to make a one-time royalty payment to
Biogen Technologies, Inc. of $30 million, and to pay ongoing royalties on sales
of Pharmacia & Upjohn's recombinant human growth hormone product, Genotropin(R),
in the United States, Canada and Japan. As part of the agreement, Biogen and
Pharmacia & Upjohn settled their litigation related to the secretion technology
in Japan, the United States and Sweden.
HIRULOG(R) THROMBIN INHIBITOR
In March 1996, Biogen announced the results of a double-blinded,
multi-center, randomized Phase 2/3 trial of its HIRULOG(R) direct thrombin
inhibitor versus heparin for the treatment of acute myocardial infarctions
("MI") in patients also treated with streptokinase. The study, which began prior
to Biogen's 1994 decision to terminate HIRULOG(R) development, compared the
effect of high and low doses of HIRULOG(R) with heparin in reaching early
TIMI-Grade III flow patency, indicating normal flow of blood through vessels.
This endpoint in the treatment of acute MI has been directly correlated with
improvements in survival and cardiac function. All patients in the study were
treated with aspirin as well as streptokinase. In the trial, half the patients
receiving the high dose of HIRULOG(R) showed fully open vessels within 90 to 120
minutes, compared to a third of heparin-treated patients. There was no increase
in bleeding risk associated with HIRULOG(R) administration. Biogen continues to
seek to license HIRULOG(R) to a third party for further development and
marketing.
PATENTS AND OTHER PROPRIETARY RIGHTS
Biogen has filed numerous patent applications in the United States and
various other countries seeking protection of a number of its processes and
products, and patents have issued on a number of these applications. Issues
remain as to the ultimate degree of protection that will be afforded to Biogen
by such patents. There is no certainty that these patents or others, if
obtained, will be of substantial protection or commercial benefit to Biogen.
Furthermore, it is not known to what extent Biogen's other pending patent
applications will ultimately be granted as patents or whether those patents that
have been issued will prevail if they are challenged in litigation.
Trade secrets and confidential know-how are important to Biogen's
scientific and commercial success. Although Biogen seeks to protect its
proprietary information, there can be no assurance that others will not either
develop independently the same or similar information or obtain access to
Biogen's proprietary information.
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RECOMBINANT ALPHA INTERFERON
Biogen has more than 50 patents in countries around the world, including
the United States and countries of the European Patent Office, covering the
production of recombinant alpha interferons. Biogen continues to seek related
patents in the United States and other countries.
Four infringement suits have been filed in Biogen's name to enforce its
non-US alpha interferon patents. The first suit was filed in Vienna, Austria
against Boehringer Ingelheim Zentrale GmbH ("BI") and two of its subsidiaries.
The Austrian Court has stayed Biogen's infringement case pending a decision by
the Austrian Patent Office on BI's petition to revoke Biogen's European
(Austrian) patent on grounds peculiar to Austrian law. In April 1995, Biogen
received a favorable decision from the Austrian Patent Office from which BI
appealed. In June 1996, BI's appeal was rejected. A hearing before the Austrian
Court is scheduled for March 1997 to set the schedule for the infringement case.
The second suit was filed in Dusseldorf, Germany against Dr. Karl Thomae GmbH
and two other BI companies. The German trial and appeal courts ruled in favor of
Biogen and have enjoined Thomae from the further manufacture, use or sale of
recombinant alpha- 2(c) interferon. The third suit was filed in Warsaw, Poland
against Boehringer Ingelheim Pharma GmbH ("BI Pharma"). In October 1996, the
parties mutually agreed to withdraw from the infringement suit and nullity
action without decision. The fourth suit was filed in June 1994 in Tokyo, Japan
against Amgen Limited. The suit seeks to enjoin Amgen from its clinical testing
and planned commercialization of consensus interferon. Biogen does not expect a
decision in this case before 1998. In the United States, a Biogen patent
application claiming recombinant mature human alpha interferon was involved in
an interference to determine who was the first to invent that specific form of
alpha interferon. In December 1995, priority of invention was awarded by a
decision of the U.S. Patent and Trademark Office to the applicants of a patent
application owned by Genentech Inc. and Hoffman La Roche Inc. ("Roche"). In
April 1996, Biogen appealed the decision by way of a civil action against
Genentech and Roche in the U.S. District Court for the District of
Massachusetts. A decision is not expected before 1998. The U.S. patent under
which Biogen has licensed Schering Plough for alpha interferon was not involved
in the interference. Since Roche has granted certain non-exclusive rights under
its patent application to Schering Plough, the decision will not affect Schering
Plough's ability to market Intron(R) A alpha interferon. See "Principal Products
Being Marketed or Developed by Biogen's Licensees". In December 1996, Schering
Plough filed suit in its own name, as exclusive licensee, against Amgen, Inc.
("Amgen") to enforce Biogen's U.S. alpha interferon patent claiming it to be
infringed by Amgen's consensus interferon product known as "Infergen". Biogen
subsequently joined the suit as a co-plaintiff. Biogen is also a defendant in a
related declaratory judgement action filed by Amgen.
RECOMBINANT HEPATITIS B ANTIGENS
Biogen has more than 75 patents in countries around the world, including
three in the United States and two in countries of the European Patent Office,
and several patent applications, covering the recombinant production of
hepatitis B surface, core and "e" antigens. Biogen continues to seek related
patents in the United States and other countries.
Biogen's first European hepatitis B patent was opposed by five companies.
The Opposition Division of the European Patent Office maintained the patent over
those oppositions. Two of the opponents appealed the Opposition Division's
decision to the Technical Board of Appeal, which is the final arbiter of
European oppositions. In June 1994, the Technical Board maintained Biogen's
patent in amended form.
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Biogen's second European hepatitis B patent was opposed by four companies.
In 1992, the Opposition Division held that Biogen's second European hepatitis B
patent lacked inventive step. Biogen appealed this decision to the Technical
Board of Appeal. In July 1994, the Technical Board reversed the Opposition
Division and maintained the Biogen patent.
Biogen has filed three infringement suits to enforce its hepatitis B
patents, in England against Medeva plc ("Medeva"), in Israel against
Bio-Technology General (Israel) Ltd. ("BTG"), and in Singapore against Scitech
Medical Products Pte Ltd. and Scitech Genetics Pte Ltd. The action against
Medeva sought to enjoin Medeva's planned production and distribution of a
hepatitis B vaccine. In November 1993, the United Kingdom High Court of Justice
ruled in favor of Biogen and enjoined Medeva from infringement of one of
Biogen's European (UK) patents. The Court then stayed the injunction pending
Medeva's appeal. In October 1994, the United Kingdom Court of Appeal reversed
the High Court and held the Biogen patent to be invalid. In 1995, Biogen
received leave from the United Kingdom House of Lords to appeal this decision
and filed its petition in June 1995. In October 1996, the House of Lords
dismissed Biogen's appeal. The Biogen hepatitis B patent involved will no longer
be enforceable with its current claims in the United Kingdom or in any of the
various United Kingdom patent registration countries. Biogen will seek to amend
the claims. In 1992, BTG brought an action against Biogen seeking a compulsory
license under Biogen's Israeli hepatitis B patent and Biogen filed an
infringement suit against BTG, seeking to enjoin BTG's planned production, sale
and distribution of hepatitis B vaccine. In September 1995, the Israeli
Registrar of Patents, Designs and Trademarks decided that it was lawful and just
to grant to BTG a compulsory license. In November 1996, the Registrar set the
royalty terms of the compulsory license. Biogen will appeal the decision by the
Registrar to the Israeli District Court. The infringement suit continues. In
1993, Biogen sued Scitech Products and Scitech Genetics in Singapore. Since
Singapore is a United Kingdom patent registration country, Biogen's continued
prosecution of this case depends on a favorable outcome in its attempt to amend
the claims of the European (UK) patent.
In September 16, 1994, Biogen filed suit against SmithKline before the
President of the Commercial Court of Nivelles, Belgium alleging unfair trade
practices by SmithKline in refusing to provide to Biogen copies of SmithKline's
marketing authorizations for hepatitis B vaccines in various European countries
to enable Biogen to obtain supplementary protection certificates for its
hepatitis B patents in those countries. In a June 2, 1995 preliminary judgment,
the President of the Commercial Court referred questions on the subject to the
European Court of Justice. In January 1997, the European Court of Justice ruled
that the requirement for providing a marketing authorization as part of a filing
for a supplemental protection certificate is a formality designed to demonstrate
that the relevant product is on the market. The Court said that the applicable
regulatory agencies should provide appropriate documentation to national patent
offices in connection with filings for supplemental protection certificates. The
effect of this decision should be to allow Biogen to extend its hepatitis B
patents for an average of about sixteen months in those countries of the
European Union in which Biogen has not already obtained patent extension.
RECOMBINANT BETA INTERFERON
The European Patent Office and certain countries have granted patents to
Biogen covering the recombinant production of beta interferon. In other
countries, including the United States, Biogen has filed patent applications and
continues to seek patents covering the recombinant production of beta interferon
and related technology.
Biogen's European patent was opposed by one company. In December 1993, the
European Patent Office's Opposition Division dismissed the opposition and
maintained Biogen's patent. The opponent appealed this decision to the Technical
Board of Appeal. Biogen expects a decision on the appeal in the second quarter
of 1997. In the United States, Biogen's claims to key intermediates in the
recombinant
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production of beta interferon were involved in an interference to determine who
was the first to invent those intermediates in the United States. Priority of
invention was awarded to another party in the interference. Biogen's pending
United States claims to the production of recombinant beta interferon were not
part of that interference. Prosecution of these claims continues.
Other parties have also filed patent applications in various countries
covering the recombinant production of beta interferon, and, in particular, key
intermediates in that production, as well as beta interferon itself. One such
party has been granted several patents in the European Patent Office and in
certain countries on these key intermediates. The same party was awarded
priority to those intermediates in the United States interference. Biogen has
obtained non-exclusive rights to manufacture, use and sell recombinant beta
interferon under these patents in various countries of the world, including the
United States, Japan and most European countries. Another party has been
granted various patents in the United States and in other countries on beta
interferon itself. Biogen has obtained worldwide, non-exclusive rights under
these patents to make, use and sell recombinant beta interferon. In 1994 a
European patent issued to a competitor of Biogen with claims related to beta
interferon. Biogen has filed an opposition to the European patent in the
European Patent Office seeking a revocation of the entire patent on grounds of
lack of inventive step and lack of novelty. A hearing before the Opposition
Division of the European Patent Office is scheduled to begin in the second
quarter of 1997. Biogen does not believe that the European patent will prevent
Biogen's commercialization of AVONEX(TM) interferon beta 1a in Europe for the
treatment of multiple sclerosis. On July 3, 1996, Berlex Laboratories, Inc.
("Berlex") filed suit against Biogen in the United States District Court for
the District of New Jersey alleging infringement by Biogen of Berlex's "
McCormick" patent in the United States in the production of AVONEX(TM). Berlex
seeks a judgment granting it unspecified damages, a trebling of any damages
awarded and a permanent injunction restraining Biogen from alleged
infringement. Prior to the date of the suit filed by Berlex on the McCormick
patents, Biogen filed a suit against Schering AG ("Schering"), Berlex and the
Board of Trustees of the Leland Stanford Jr. University ("Stanford") in the
United States District Court for the District of Massachusetts for a
declaratory judgment of non-infringement and invalidity of the McCormick patent
contending that AVONEX(TM), its manufacturing process and intermediates used in
that process do not infringe the McCormick patent and that such patent is not
valid. In November 1996, the U.S. District Court for the District of
Massachusetts ruled that it had jurisdiction and Berlex's New Jersey action was
transferred to Massachusetts and consolidated for pre-trial purposes with the
Massachusetts case. Biogen and Stanford subsequently entered into an agreement
voluntarily dismissing Stanford from the suit. In February 1997, the U.S.
District Court in Massachusetts dismissed Biogen's declaratory judgment action
as to Schering without prejudice to reconsideration if such dismissal is later
shown to result in an injustice to Biogen. The suit involving Berlex is still
pending. A trial is not expected before 1998.
OTHER PATENTS
Biogen has granted Eli Lilly and Company ("Lilly") a non-exclusive license
under certain of Biogen's patents for gene expression. Lilly uses the patented
vectors and methods in several products that are on the market or in
development.
Biogen has granted Pharmacia & Upjohn AB ("Pharmacia & Upjohn") a
sublicense under certain of patents related to the secretion of proteins
licensed exclusively to Biogen by Harvard University. Pharmacia & Upjohn uses
the patented subject matter in connection with its Genotropin(R) recombinant
human growth hormone.
In March 1995, Biogen filed suit in the U.S. District Court for the
District of Massachusetts against Amgen Inc. ("Amgen"). The suit seeks to enjoin
Amgen from manufacturing and selling its Neupogen(R) human granulocyte colony
stimulating factor in the United States and asks for damages for infringing
activities. Biogen believes that to make Neupogen(R) Amgen uses technology
claimed in certain of Biogen's licensed patents for gene expression. Biogen does
not expect a trial in the case prior to 1998.
10
<PAGE> 11
Biogen's European patent relating to gene expression was opposed by
Biotechnology General Corp. in December 1993. A hearing was held by the
Opposition Division of the European Patent Office in March 1996. No decision has
been rendered.
THIRD PARTY PATENTS
Biogen is aware that others, including various universities and companies
working in biotechnology, have also filed patent applications and have been
granted patents in the United States and in other countries claiming subject
matter potentially useful or necessary to Biogen's business. Some of those
patents and applications claim only specific products or methods of making such
products, while others claim more general processes or techniques useful or now
used in the biotechnology industry. Genentech has been granted patents and is
prosecuting other patent applications in the United States and certain other
countries which it may allege are currently used by Biogen and the rest of the
biotechnology industry to produce recombinant proteins in microbial hosts.
Genentech has offered to Biogen and others in the industry non-exclusive
licenses under those patents and patent applications for various proteins and in
various fields of use, but not for others. Schering-Plough, Biogen's exclusive
licensee for recombinant alpha interferon, is licensed under certain of these
patents for the manufacture, use and sale of recombinant alpha interferon. The
ultimate scope and validity of Genentech's patents, of other existing patents,
or of patents which may be granted to third parties in the future, the extent to
which Biogen may wish or be required to acquire rights under such patents, and
the availability and cost of acquiring such rights currently cannot be
determined by Biogen.
There has been, and Biogen expects that there may continue to be,
significant litigation in the industry regarding patents and other intellectual
property rights. Such litigation could create uncertainty and consume
substantial resources.
COMPETITION AND MARKETING
IN GENERAL
Competition in the biotechnology and pharmaceutical industries is intense
and comes from many and varied sources. Biogen does not believe that it or any
of the other industry leaders can be considered dominant in view of the rapid
technological change in the industry. Biogen experiences significant competition
from specialized biotechnology firms in the United States, Europe and elsewhere
and from many large pharmaceutical, chemical and other companies. Certain of
these companies have substantially greater financial, marketing, research and
development and human resources than Biogen. The pharmaceutical companies have
considerable experience in undertaking clinical trials and in obtaining
regulatory approval to market pharmaceutical products. In addition, certain of
Biogen's products may be subject to competition from products developed using
alternatives to biotechnology techniques.
Much competition is directed towards establishing proprietary positions
through research and development. A key aspect of such competition is recruiting
and retaining qualified scientists and technicians. Biogen believes that it has
been successful in attracting skilled and experienced scientific personnel.
Biogen believes that leadership in the industry will be based on managerial and
technological superiority and may be influenced significantly by patents and
other forms of protection of proprietary information. See "Patents and Other
Proprietary Rights". The achievement of such a position depends upon Biogen's
ability to attract and retain skilled and experienced personnel, its ability to
identify and exploit commercially the products resulting
11
<PAGE> 12
from biotechnology and the availability of adequate financial resources to fund
facilities, equipment, personnel, clinical testing, manufacturing and marketing.
Many of Biogen's competitors are working to develop products similar to
those under development by Biogen. The timing of the entry of a new
pharmaceutical product into the market can be an important factor in determining
the product's eventual success and profitability. Early entry may have important
advantages in gaining product acceptance and market share. Moreover, for certain
diseases with limited patient populations, the FDA is prevented under the Orphan
Drug Act, for a period of seven years, from approving more than one application
for the "same" product for a single orphan drug designation, unless a later
product is considered clinically superior. Accordingly, the relative speed with
which Biogen can develop products, complete the testing and approval process and
supply commercial quantities of the product to the market is expected to have an
important impact on Biogen's competitive position. In addition, competition
among products approved for sale may be based, among other things, on patent
position, product efficacy, safety, reliability, availability and price.
AVONEX(TM) (INTERFERON BETA - 1A)
As a treatment for multiple sclerosis, AVONEX(TM) competes with interferon
beta-1b which is sold in the United States under the brand name Betaseron(R) by
Berlex Laboratories, Inc., a United States affiliate of Schering AG, Germany
("Schering AG"), and sold in Europe under the brandname Betaferon(TM) by
Schering AG. In Italy and Spain, AVONEX(TM) will also compete with an extracted
form of beta interferon sold by Ares Serono S.A. ("Serono"). In late 1996,
Serono also filed for approval in the European Union to market and sell
Rebif(R), its recombinant interferon beta-1a product, as a treatment for
multiple sclerosis. Biogen will also face competition from Teva Pharmaceuticals
("Teva") which recently received a license from the FDA to market its glatiramer
acetate (also known as copolymer-1) in the United States as a treatment for
multiple sclerosis. Teva's product will be marketed in the United States under
the brandname Copaxone(TM) through a partnership between Teva and Hoechst Marion
Roussel. Teva has also filed for marketing approvals in other countries. In
addition, a number of other companies are working to develop products to treat
multiple sclerosis which may in the future compete with AVONEX(TM). Biogen
believes that competition among treatments for multiple sclerosis will be based
on product performance, service and price.
REGULATION
Biogen's current and contemplated activities and the products and processes
that will result from such activities are and will be subject to substantial
government regulation.
Before new pharmaceutical products may be sold in the United States and
other countries, clinical trials of the products must be conducted and the
results submitted to appropriate regulatory agencies for approval. These
clinical trial programs generally involve a three-phase process. Typically, in
Phase 1, trials are conducted in volunteers or patients to determine the early
side effect profile and, perhaps, the pattern of drug distribution and
metabolism. In Phase 2, trials are conducted in groups of patients with a
specific disease in order to determine appropriate dosages, expand evidence of
the safety profile and, perhaps, determine preliminary efficacy. In Phase 3,
large scale, comparative trials are conducted on patients with a target disease
in order to generate enough data to provide the statistical proof of efficacy
and safety required by national regulatory agencies. The receipt of regulatory
approvals often takes a number of years, involving the expenditure of
substantial resources and depends on a number of factors, including the severity
of the disease in question, the availability of alternative treatments and the
risks and benefits demonstrated in clinical trials.
12
<PAGE> 13
On occasion, regulatory authorities may require larger or additional studies,
leading to unanticipated delay or expense.
In connection with the commercialization of products resulting from
Biogen's projects, it is necessary, in a number of countries, to comply with
certain regulations relating to the manufacturing and marketing of such products
and to the products themselves. For example, the commercial manufacturing,
marketing and exporting of pharmaceutical products require the approval of the
FDA in the United States and of comparable agencies in other countries. The FDA
has established mandatory procedures and safety standards which apply to the
manufacture, clinical testing and marketing of pharmaceutical products in the
United States. The process of seeking and obtaining FDA approval for a new
product and licensing of the facilities in which the product is produced is
likely to take a number of years and involve the expenditure of substantial
resources. In addition, the regulatory approval processes for products in the
United States, Canada and Europe are undergoing or may undergo changes. Biogen
cannot determine what effect any changes in regulatory approval processes may
have on its business.
In the United States, the federal government regularly considers reforming
health care coverage and costs. Resulting legislation or regulatory actions may
have a significant effect on the Company's business. Biogen's ability to
commercialize successfully human pharmaceutical products also may depend in part
on the extent to which reimbursement for the costs of such products and related
treatments will be available from government health administration authorities,
private health insurers and other organizations. Currently, substantial
uncertainty exists as to the reimbursement status of newly approved health care
products by third-party payors.
Biogen's policy is to conduct relevant research in compliance with the
current United States National Institutes of Health Guidelines for Research
Involving Recombinant DNA Molecules (the "NIH Guidelines") and all other federal
and state regulations. By local ordinance, Biogen is required, among other
things, to comply with the NIH Guidelines in relation to its facilities in
Cambridge, Massachusetts, and is required to operate pursuant to certain
permits.
Various laws, regulations and recommendations relating to safe working
conditions, laboratory practices, the experimental use of animals and the
purchase, storage, movement, import and export and use and disposal of hazardous
or potentially hazardous substances, including radioactive compounds and
infectious disease agents, used in connection with Biogen's research work are or
may be applicable to its activities. These include, among others, the United
States Atomic Energy Act, the Clean Air Act, the Clean Water Act, the
Occupational Safety and Health Act, the National Environmental Policy Act, the
Toxic Substances Control Act and the Resource Conservation and Recovery Act,
national restrictions on technology transfer and import, export and customs
regulations. The extent of government regulation which might result from future
legislation or administrative action cannot accurately be predicted. Certain
agreements entered into by Biogen involving exclusive license rights may be
subject to national or supranational antitrust regulatory control, the effect of
which also cannot be predicted.
EMPLOYEES
At December 31, 1996, Biogen employed 675 full-time employees in the United
States, of whom 108 held Ph.D. and/or M.D. degrees. Of the 675 employees,
approximately 209 were engaged in, or directly supported, research and
development, approximately 183 were involved in, or directly supported,
manufacturing, quality assurance/quality control, regulatory, medical operations
and preclinical and clinical
13
<PAGE> 14
development and approximately 91 were involved in sales and marketing. Biogen
maintains consulting arrangements with a number of scientists at various
universities and other research institutions in Europe and the United States,
including the nine outside members of its Scientific Board.
ITEM 2 - PROPERTIES
Biogen's principal executive offices and a majority of its administrative,
manufacturing and research and development facilities are located in Cambridge
Massachusetts. The Company owns a 150,000 square foot building in Cambridge
which houses laboratories and office space. The Company also leases a total of
approximately 271,000 square feet of additional office and research and
development space in all or part of five other buildings in Cambridge,
consisting of a 67,000 square foot building housing manufacturing facilities,
plant, laboratories and office space, a building with 66,000 square feet of
space containing laboratories, purification and aseptic bottling facilities and
office space, a multi tenant building where the Company occupies approximately
95,000 square feet of office space, a 17,000 square foot building housing office
space and distribution facilities and a 26,000 square foot building designed for
specialized research laboratories. The leases for the leased sites terminate in
2003, 2004, 2000, 2004 and 1999, respectively, each with the right to renew.
The Company's European headquarters consists of 1,400 square meters of
office space in a multitenant building in Nanterre, France. The lease for this
space terminates in 2003. The Company also has small offices in England, Germany
and The Netherlands.
In the second quarter of 1995, the Company began construction of a
biologics manufacturing facility in Research Triangle Park, North Carolina. The
estimated cost of construction, including land, is $59 million. The Company has
substantially completed construction of the facility.
The Company believes that its production plant in Cambridge, Massachusetts
and existing outside sources will allow it to meet its production needs for
clinical trials and its production needs for AVONEX(TM) until FDA licensing of
the North Carolina facility. Biogen believes that its existing facilities are in
compliance with appropriate regulatory standards. The Company expects that
additional facilities and outside sources will be required to meet the Company's
future research and production needs.
ITEM 3 - LEGAL PROCEEDINGS
During the fourth quarter of 1994, a total of six class action lawsuits
were initiated against the Company and several of its directors and officers. On
March 3, 1995, these cases were consolidated into a single proceeding in the
United States District Court for the District of Massachusetts. On January 23,
1996, in response to motions to dismiss the entire case filed by Biogen and the
named officer and director defendants, the District Court issued a Memorandum
and Order (dated January 22, 1996) dismissing most of the claims asserted in the
plaintiffs' Second Amended Complaint, including all claims against the Company's
outside directors. The only two claims remaining in the case pertain to
statements concerning the results of the HIRULOG(R) TIMI-7 clinical trial in
unstable angina. The Court did not reach a decision on the merits of these
claims. On October 11, 1996, the Company filed a motion for summary judgment in
the case. The plaintiffs have opposed the motion. The Company will continue to
defend vigorously the claims that remain in the case.
14
<PAGE> 15
On October 7, 1996, a judge dismissed the lawsuit filed by Berlex
Laboratories, Inc. against the FDA in the U.S. District Court for the District
of Columbia in which Berlex claimed that the FDA's approval of Biogen's
AVONEX(TM) (Interferon beta-1a) was improper. Biogen was an intervenor-defendant
in the litigation. In dismissing the suit, the judge held that the FDA acted
lawfully when it determined that AVONEX(TM) was clinically superior to Berlex's
Betaseron(R) interferon beta-1b under the Orphan Drug law and that the FDA's
determination that AVONEX(TM) was safe, pure and potent was amply supported by
the record. Berlex chose not to appeal this decision.
On July 3, 1996, Berlex filed suit against Biogen in the United States
District Court for the District of New Jersey alleging infringement by Biogen
of Berlex's "McCormick" patent in the United States in the production of
AVONEX(TM). Berlex seeks a judgment granting it unspecified damages, a trebling
of any damages awarded and a permanent injunction restraining Biogen from
alleged infringement. Prior to the date of the suit filed by Berlex on the
McCormick patents, Biogen had filed a suit against Schering AG ("Schering"),
Berlex and the Board of Trustees of the Leland Stanford Jr. University
("Stanford") in the United States District Court for the District of
Massachusetts for a declaratory judgment of non-infringement and invalidity of
the McCormick patent contending that AVONEX(TM), its manufacturing process and
intermediates used in that process do not infringe the McCormick patent and
that such patent is not valid. In November 1996, the U.S. District Court in
Massachusetts ruled that it had jurisdiction and Berlex's New Jersey action was
transferred to Massachusetts and consolidated for pre-trial purposes with the
Massachusetts case. Biogen and Stanford subsequently entered into an agreement
voluntarily dismissing Stanford from the suit. In February 1997, the U.S.
District Court in Massachusetts dismissed Biogen's declaratory judgment action
as to Schering without prejudice to reconsideration if such dismissal is later
shown to result in an injustice to Biogen. The suit involving Berlex is still
pending. A trial is not expected before 1998.
In June 1996, ASTA Medica Aktiengesselschaft filed for arbitration against
Biogen with the International Chamber of Commerce (ICC) in Paris, France. In its
complaint, ASTA alleges that Biogen's 1993 termination of a 1989 agreement
licensing ASTA to market recombinant interferon beta in certain European
territories was ineffective. The agreement at issue also included as a party
Bioferon, a Biogen joint venture that declared bankruptcy in 1993. The ASTA
complaint asks that an ICC panel declare that the 1989 license is still in
force, and, in the alternative, seeks approximately $5,000,000 in damages. The
territories included in the 1989 license were Austria, Belgium, Denmark,
Finland, France, Greece, Iceland, Ireland, Luxembourg, The Netherlands, Norway,
Portugal, Sweden, Switzerland and the United Kingdom. The arbitration will take
place in Zurich under Swiss law. Biogen expects that the arbitration proceeding
will be held in late 1997. Biogen considers the ASTA claims to be without merit.
For a description of legal proceedings relating to patent rights, see Item
1, "Business-Patents and Other Proprietary Rights."
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS
The following is a list of the executive officers of the Company and their
principal positions with the Company. Each individual officer serves at the
pleasure of the Board of Directors.
<TABLE>
<S> <C> <C>
Name Age Positions
- ---- --- ---------
James L. Vincent........... 57 Chairman of the Board of Directors
</TABLE>
15
<PAGE> 16
James R. Tobin . . . . 52 President and Chief Executive Officer
Burt A. Adelman . . . 44 Vice President - Development Operations
Michael J. Astrue . . 40 Vice President - General Counsel, Secretary
and Clerk
Frank A. Burke, Jr.... 53 Vice President - Human Resources
Lawrence S. Daniels... 54 Vice President - Strategic Planning
Joseph M. Davie....... 57 Vice President - Research
David C. Dlesk . . . .. 38 Vice President - Operations
Irving H. Fox......... 53 Vice President - Medical Affairs
Timothy M. Kish ...... 45 Vice President - Finance, Chief Financial
Officer and Treasurer
Mark W. Leuchtenberger 40 Vice President - Marketing and Sales
James C. Mullen....... 38 Vice President - International
David D. Pendergast. . 48 Vice President - QA\QC
The background of these officers is as follows:
James L. Vincent has been Chairman of the Board of Directors of the Company
since October 1985. From October 1985 until February 1997, Mr. Vincent served as
Chief Executive Officer of the Company. He also served as Chief Operating
Officer and President from April 1988 until February 1994. Before joining
Biogen, Mr. Vincent served as Group Vice President, Allied Corporation and as
President, Allied Health & Scientific Products Company, a subsidiary of Allied
Corporation. Before joining Allied Corporation, Mr. Vincent was with Abbott
Laboratories, Inc. where he served in various capacities, including Executive
Vice President, Chief Operating Officer and Director of the parent corporation.
James R. Tobin was appointed Chief Executive Officer of the Company in
February 1997. He has served as President of the Company since February 1994.
From February 1994 until February 1997, Mr. Tobin also served as Chief Operating
Officer of the Company. Prior to joining the Company, Mr. Tobin served in
various capacities at Baxter International, including Executive Vice President
from 1988 until 1992 and President and Chief Operating Officer from 1992 until
1994. Mr. Tobin is a director of Creative BioMolecules, Inc. and Genovo, Inc.
Burt A. Adelman, M.D. was appointed Vice President - Development Operations
of the Company in August 1996 after serving as Vice President - Regulatory
Affairs since May 1995. From 1991 until May 1995, Dr. Adelman was Director of
Medical Research at Biogen. Dr. Adelman has served as Lecturer of Medicine at
Harvard Medical School and Brigham and Women's Hospital since 1992.
16
<PAGE> 17
Michael J. Astrue was appointed Vice President - General Counsel, Secretary
and Clerk of the Company in June 1993. Prior to joining the Company, Mr. Astrue
was a partner in the Boston law firm of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. and a managing director of its wholly-owned consulting firm, ML
Strategies, from November 1992 to June 1993. From June 1989 through November
1992, Mr. Astrue served as General Counsel of the United States Department of
Health and Human Services. From April 1988 through June 1989, Mr. Astrue served
as Associate Counsel to the President of the United States.
Frank A. Burke, Jr., was appointed Vice President - Human Resources in May
1986 after serving for 12 years in various human resource management positions
at Allied-Signal, Inc., most recently as Director of Compensation and Employee
Benefits of the Engineered Materials Sector.
Lawrence S. Daniels was appointed Vice President - Strategic Planning of
the Company in August 1993 after serving as Vice President - Marketing and
Business Development since November 1991. Prior to joining the Company, Mr.
Daniels served for nine years in planning and administrative functions for
Allied- Signal, Inc., most recently as Vice President, Corporate Strategy
Development.
Joseph M. Davie, M.D., Ph.D. was appointed Vice President - Research of the
Company in April 1993. Prior to joining the Company, Dr. Davie was employed by
Searle Corporation where he served as Senior Vice President - Science and
Technology from January 1993 to April 1993, President - Research and Development
from July 1987 to January 1993 and Senior Vice President - Discovery Research
from January 1987 to July 1987. Dr. Davie is a director of Genovo, Inc.
David C. Dlesk was appointed Vice President - Operations of the Company in
August, 1996 after serving as Senior Director of Manufacturing and Engineering
since May 1996. Prior to joining Biogen, Mr. Dlesk was Chief Executive Officer
of Medical Media Systems, a developer of software for computer-aided surgery.
From 1981 to 1993, Mr. Dlesk held a number of positions with Baxter Healthcare
Corporation, including Director of Business Development, Venture Technology,
General Manager Bentley Laboratories B.V. and Manager of Drug Delivery
Technology Group for the I.V. Systems Division.
Irving H. Fox, M.D. was appointed Vice President - Medical Affairs in
February 1990. Dr. Fox joined Biogen following a 14-year career at the
University of Michigan, where he held professorships in internal medicine and
biological chemistry, and from 1978 to 1990, was program director of the
Clinical Research Center at the University of Michigan Hospital.
17
<PAGE> 18
Timothy M. Kish was appointed Vice President - Finance, Treasurer and Chief
Financial Officer of the Company in August 1993 after serving as Corporate
Controller of the Company since 1986. Prior to joining Biogen, Mr. Kish was
Director of Finance for Allied Health & Scientific Products Company, a
subsidiary of Allied Corporation. Before joining Allied, Mr. Kish served in
various capacities at Bendix Corp., most recently as Executive Assistant to the
President.
Mark W. Leuchtenberger was appointed Vice President - Marketing and Sales
in October 1996 after serving as Director of Distributor Operations, Europe
from September 1996 until October 1996 and Director of Marketing and Program
Executive for AVONEX(TM) from 1993 until September 1996. From 1992 to 1993, Mr.
Leuchtenberger served as a Product Manager of the Company. From 1990 to 1992,
he served as Market Development Manager. Prior to joining Biogen, Mr.
Leuchtenberger worked for the consulting firm of Bain & Company from 1987 to
1990.
James C. Mullen became Biogen's Vice President - International in August,
1996 after serving as Vice President - Operations since December 1991 and as
Senior Director - Operations from February 1991 to December 1991. Mr. Mullen
joined the Company in 1989 as Director - Facilities and Engineering and then
served as Acting Director - Manufacturing and Engineering. Before coming to
Biogen, Mr. Mullen held various positions of responsibility from 1984 through
1988 at SmithKline-Beckman Corporation, most recently as Director, Engineering -
SmithKline and French Laboratories, Worldwide.
David D. Pendergast, Ph.D. was appointed Vice President - Quality Assurance
and Quality Control of the Company in April 1996. Dr. Pendergast joined Biogen
from Fisons Pharmaceuticals, Manchester U.K. where he served as Director,
Quality Assurance/Quality Control of Fisons PLC from 1992 to 1996. Prior to
joining Fisons, Dr. Pendergast served, over a twenty year period, in various
capacities at The Upjohn Company, including Vice President - Quality Assurance
from 1989 to 1992.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The section entitled "Market for Securities" in the Company's 1996 Annual
Report to Shareholders is hereby incorporated by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The section entitled "Selected Financial Data" in the Company's 1996 Annual
Report to Shareholders is hereby incorporated by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1996 Annual Report to
Shareholders is hereby incorporated by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The sections entitled "Consolidated Balance Sheets," "Consolidated
Statements of Income," "Consolidated Statements of Cash Flows," "Consolidated
Statements of Shareholders' Equity," "Notes to Consolidated Financial
Statements" and "Report of Independent Accountants" in the Company's 1996 Annual
Report to Shareholders are hereby incorporated by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
18
<PAGE> 19
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The sections entitled "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement for
its 1997 Annual Meeting of Stockholders, which the Company intends to file with
the Commission no later than April 30, 1997, are hereby incorporated by
reference.
EXECUTIVE OFFICERS
Information concerning the Company's Executive Officers is set forth in
Part I of this Annual Report on Form 10-K.
ITEM 11 - EXECUTIVE COMPENSATION
The sections entitled "Election of Directors", "Executive Compensation",
"Joint Report on Compensation Philosophy" and "Performance Graph" in the
Company's definitive proxy statement for its 1997 Annual Meeting of
Stockholders, which the Company intends to file with the Commission no later
than April 30, 1997, are hereby incorporated by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Share Ownership" in the Company's definitive proxy
statement for its 1997 Annual Meeting of Stockholders, which the Company intends
to file with the Commission no later than April 30, 1997, is hereby incorporated
by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Employment Arrangements with the Company and Certain
Transactions" in the Company's definitive proxy statement for its 1997 Annual
Meeting of Stockholders, which the Company intends to file with the Commission
no later than April 30, 1997, is hereby incorporated by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements and Financial Statement Schedules.
The following documents are filed as a part of this report:
19
<PAGE> 20
<TABLE>
1. Financial Statements, as required by Item 8 of this Form, incorporated
by reference herein from the 1996 Annual Report to Shareholders attached hereto
as Exhibit 13:
<S> <C>
Item Location
- ---- --------
Consolidated Balance Sheets Annual Report under the caption "Biogen, Inc. and
Subsidiaries Consolidated Balance Sheets."
Consolidated Statements of Income Annual Report under the caption "Biogen, Inc. and
Subsidiaries Consolidated Statements of Income."
Consolidated Statements of Cash Flows Annual Report under the caption "Biogen, Inc. and
Subsidiaries Consolidated Statements of Cash
Flows."
Consolidated Statements of Shareholders' Equity Annual Report under the caption "Biogen, Inc. and
Subsidiaries Consolidated Statements of
Shareholders' Equity."
Notes to Consolidated Financial Statements Annual Report under the caption "Biogen, Inc. and
Subsidiaries Notes to Consolidated Financial
Statements."
Reports of Independent Accountants Annual Report under the caption "Report of
Independent Accountants."
</TABLE>
With the exception of the portions of the 1996 Annual Report to
Shareholders specifically incorporated herein by reference, such report shall
not be deemed filed as part of this Annual Report on Form 10-K.
(2) Financial Statement Schedules: None
(3) Exhibits
Exhibit No. Description
- ----------- -----------
(3.1) Articles of Organization, as amended (*)
(3.2) By-Laws, as amended (k)
(4.1) Form of Common Stock Share Certificate (m)
(4.2) Certificate of Designation of Series A Junior Participating
Preferred Stock (f)
(4.3) Rights Agreement dated as of May 8, 1989 between Registrant
and The First National Bank of Boston, as Rights Agent (f)
(10.1) Independent Consulting and Project Agreement dated as of
June 29, 1979 between Registrant and Kenneth Murray (a)**
20
<PAGE> 21
(10.2) Letter Agreement dated September 23, 1995 with Sir Kenneth
Murray relating to renewal of Independent Consulting Agreement
(r)**
(10.3) Minute of Agreement dated February 5, 1981 among Registrant,
The University Court of the University of Edinburgh and
Kenneth Murray (a)**
(10.4) Independent Consulting Agreement dated as of June 29, 1979
between Registrant and Phillip A. Sharp (a)**
(10.5) Letter Agreement dated December 15, 1995 with Phillip Sharp
relating to chairmanship of Scientific Board and renewal of
Independent Consulting Agreement (r)**
(10.6) Project Agreement dated as of December 14, 1979 between
Registrant and Phillip A. Sharp (a)**
(10.7) Share Restriction and Repurchase Agreement dated as of
December 15, 1979 between Registrant and Phillip A. Sharp
(a)**
(10.8) Consulting Agreement dated as of April 1, 1991, as amended,
between Registrant and Alexander G. Bearn (i)**
(10.9) Letter Agreement dated April 14, 1995 with Dr. Alexander
Bearn relating to renewal of Independent Consulting Agreement
(r)**
(10.10) Form of Amendment dated July 1, 1988 to Independent Consulting
Agreement between Registrant and Scientific Board Members
(e)**
(10.11) Form of Share Purchase Agreement between Registrant and
Scientific Board Members (a)**
(10.12) Form of Stock Option Agreement between Registrant and certain
outside directors (c)**
(10.13) Letter regarding employment of James L. Vincent dated
September 23, 1985 (b)**
(10.14) Form of Stock Option Agreement with James L. Vincent under
1985 Non-Qualified Stock Option Plan (k)**
(10.15) Form of Stock Option Agreement with James L. Vincent under
1985 Non-Qualified Stock Option Plan (1995) (r)**
(10.16) Letter dated December 13, 1989 regarding employment of
Dr. Irving H. Fox (h)**
(10.17) Letter dated April 7, 1993 regarding employment of
Dr. Joseph M. Davie (l)**
(10.18) Letter dated January 12, 1994 regarding employment of James R.
Tobin (n)**
21
<PAGE> 22
(10.19) Form of Indemnification Agreement between Registrant and each
Director and Executive Officer (e)**
(10.20) Second Amended and Restated Agreement and Certificate of
Limited Partnership dated as of May 15, 1984 among Biogen
Medical Products, Inc. as General Partner and certain limited
partners (g)
(10.21) First Amendment dated December 22, 1986 to Agreement and
Certificate of Limited Partnership (c)
(10.22) Technology License Agreement dated May 15, 1984 between Biogen
B.V. and Biogen Medical Products Limited Partnership (g)
(10.23) Development Contract dated May 15, 1984 between Biogen B.V.
and Biogen Medical Products Limited Partnership (g)
(10.24) Amendment dated December 22, 1986 to Development Contract (c)
(10.25) Amendment dated January 1, 1987 to Development Contract (d)
(10.26) Joint Venture Option Agreement dated May 15, 1984 between
Biogen, Inc. and Biogen Medical Products Limited Partnership
(g)
(10.27) Purchase Option Agreement dated May 15, 1984 between Biogen
B.V. and the limited partners of Biogen Medical Products
Limited Partnership (g)
(10.28) Guaranty dated May 15, 1984 to Biogen Medical Products Limited
Partnership by Registrant guaranteeing certain obligations of
Biogen Medical Products, Inc., Biogen B.V. and Biogen, Inc. to
the Partnership (g)
(10.29) Demand Loan Agreement dated October 1, 1989 between Biogen
Medical Products Limited Partnership and Biogen Medical
Products, Inc. (g)
(10.30) Certificate of Cancellation of Certificate of Limited
Partnership of Biogen Medical Products Limited Partnership
dated December 24, 1996 *
(10.31) Standard Form Commercial Lease dated January 29, 1981 between
Ira C. Foss and Ira C. Foss, Jr., as Trustees of Eastern
Realty Trust, and B. Leasing, Inc. (g)
(10.32) Letter of May 24, 1989 exercising option under Standard Form
Commercial Lease dated January 29, 1981 (g)
(10.33) Lease Extension Agreement dated February 20, 1990 between
Eastern Realty Trust and Registrant (g)
(10.34) Standard Form Commercial Lease dated June 1, 1989 between
Eastern Realty Trust and Registrant (g)
22
<PAGE> 23
(10.35) Cambridge Center Lease dated October 4, 1982 between Mortimer
Zuckerman, Edward H. Linde and David Barrett, as Trustees of
Fourteen Cambridge Center Trust, and B. Leasing, Inc. (a)
(10.36) First Amendment to Lease dated January 19, 1989 amending
Cambridge Center Lease dated October 4, 1982 (k)
(10.37) Second Amendment to Lease dated March 8, 1990 amending
Cambridge Center Lease dated October 4, 1982 (k)
(10.38) Third Amendment to Lease dated September 25, 1991 amending
Cambridge Center Lease dated October 4, 1982 (k)
(10.39) Lease dated October 6, 1993 between North Parcel Limited
Partnership and Biogen Realty Limited Partnership (n)
(10.40) 1983 Employee Stock Purchase Plan, as amended and restated
through September 22, 1995 (r)**
(10.41) 1982 Incentive Stock Option Plan as amended through
April 25, 1995 and restated with form of Option Agreement
(q)**
(10.42) 1985 Non-Qualified Stock Option Plan as amended through
April 25, 1995 and restated with form of Option Agreement
(q)**
(10.43) 1987 Scientific Board Stock Option Plan as amended through
April 3, 1992 and restated with form of Option Agreement (j)**
(10.44) Voluntary Executive Supplemental Savings Plan (p)**
(10.45) Supplemental Executive Retirement Plan (p)**
(10.46) Voluntary Board of Directors Savings Plan (p)**
(10.47) Exclusive License and Development Agreement dated
December 8, 1979 between Registrant and Schering Corporation
(a)
(10.48) Amendatory Agreement dated May 14, 1985 to Exclusive License
and Development Agreement dated December 8, 1979 (b)
(10.49) Amendment and Settlement Agreement dated September 29, 1988 to
Exclusive License and Development Agreement dated
December 8, 1979 (k)
(10.50) Amendment dated March 20, 1989 to Exclusive License and
Development Agreement dated December 8, 1979 (k)
(10.51) License Agreement (United States) dated March 28, 1988 between
Registrant and SmithKline Beecham Biologicals, s.a.
(as successor to Smith Kline-R.I.T, s.a.) (k)
(10.52) License Agreement (International) dated March 28, 1988 between
Registrant and SmithKline Beecham Biologicals, s.a.
(as successor to Smith Kline-R.I.T., s.a.) (k)
23
<PAGE> 24
(10.53) Sublicense Agreement dated as of February 15, 1990 among
Registrant, SmithKline Beecham Biologicals, s.a (as successor
to SmithKline Biologicals, s.a.) and Merck and Co., Inc. (k)
(10.54) Supplemental Amendment and Agreement dated as of March 1, 1994
between the Registrant and Schering Corporation (o)
(11) Computation of Earnings per Share *
(12) None
(13) Incorporated portions from Biogen, Inc. 1996 Annual Report to
Shareholders *
(21) Subsidiaries of the Registrant *
(24.1) Consent of Price Waterhouse LLP (Included in Part IV hereof)
(29) None
(a) Previously filed with the Commission as an exhibit to
Registration Statement on Form S-1, File No. 2-81689 and
incorporated herein by reference.
(b) Previously filed with the Commission as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1985, as amended, File No. 0-12042 and
incorporated herein by reference.
(c) Previously filed with the Commission as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1986, as amended, File No. 0-12042 and
incorporated herein by reference.
(d) Previously filed with the Commission as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1987, File No. 0-12042 and incorporated herein by
reference.
(e) Previously filed with the Commission as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988, File No. 0-12042 and incorporated herein by
reference.
(f) Previously filed with the Commission as an exhibit to
Registration Statement on Form 8-A, File No. 0-12042, filed
May 26, 1989 and incorporated herein by reference.
(g) Previously filed with the Commission as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989, File No. 0-12042, and incorporated herein
by reference.
(h) Previously filed with the Commission as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990, File No. 0-12042, and incorporated herein
by reference.
24
<PAGE> 25
(i) Previously filed with the Commission as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991, File No. 0-12042, and incorporated herein
by reference.
(j) Previously filed with the Commission as an exhibit to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992, File No. 0-12042, and incorporated herein
by reference.
(k) Previously filed with the Commission as an exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 0-12042, and incorporated
herein by reference.
(l) Previously filed with the Commission as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993, File No. 0-12042, and incorporated herein
by reference.
(m) Previously filed with the Commission as an exhibit to
Registration Statement on Form S-3, File No. 33-51639, and
incorporated herein by reference.
(n) Previously filed with the Commission as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994, File No. 0-12042, and incorporated herein
by reference.
(o) Previously filed with the Commission as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994, File No. 0-12042, and incorporated
herein by reference.
(p) Previously filed with the Commission as an exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, File No. 0-12042, and incorporated
herein by reference.
(q) Previously filed with the Commission as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, File No. 0-12042, and incorporated herein
by reference.
(r) Previously filed with the Commission as an exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 0-12042, and in incorporated
herein by reference.
* Filed herewith
** Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
During the fourth quarter of 1996, the Company filed the following report
on Form 8-K: On November 26, 1996, the Company filed a report on Form 8-K to
disclose receipt of a positive opinion from
25
<PAGE> 26
the Committee for Proprietary Medicinal Products of the European Medicines
Evaluation Agency in connection with Biogen's application for marketing approval
of its AVONEX(TM) (interferon beta-1a) in the European Union.
26
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BIOGEN, INC.
By: /s/ James L. Vincent
---------------------------------------
James L. Vincent, Chairman of the Board
Dated February 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ James R. Tobin President, Chief Executive February 21, 1997
- ---------------------- Officer and a Director
James R. Tobin (principal executive officer)
/s/ James L. Vincent Chairman of the Board February 21, 1997
- ----------------------
James L. Vincent
/s/ Timothy M. Kish Vice President - Finance, February 21, 1997
- ---------------------- Chief Financial Officer and
Timothy M. Kish Treasurer (Principal financial
and accounting officer)
/s/ Alexander Bearn Director February 21, 1997
- ----------------------
Alexander Bearn
/s/ Harold W. Buirkle Director February 21, 1997
- ----------------------
Harold W. Buirkle
/s/ Alan Belzer Director February 21, 1997
- ----------------------
Alan Belzer
/s/ Thomas F. Keller Director February 21, 1997
- ----------------------
Thomas F. Keller
/s/ Roger H. Morley Director February 21, 1997
- ----------------------
Roger H. Morley
/s/ Kenneth Murray Director February 21, 1997
- ----------------------
Kenneth Murray
/s/ Phillip A. Sharp Director February 21, 1997
- ----------------------
Phillip A. Sharp
/s/ James W. Stevens Director February 21, 1997
- ----------------------
James W. Stevens
<PAGE> 28
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
(3.1) Articles of Organization, as amended.
(10.30) Certificate of Cancellation of Certificate of Limited
Partnership of Biogen Medical Products Limited Partnership
dated December 24, 1996
(11) Computation of Earnings per Share
(13) Incorporated portions from Biogen, Inc. 1996 Annual Report to
Shareholders
(21) Subsidiaries of the Registrant
(24.1) Consent of Price Waterhouse LLP
</TABLE>
28
<PAGE> 1
Exhibit 3.1
-----------
FORM CD-26-5M-8-83
The Commonwealth of Massachusetts
Office of the Massachusetts Secretary of State
MICHAEL JOSEPH CONNOLLY, SECRETARY
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
FEDERAL IDENTIFICATION
NO. 04-3002117
----------
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS STOCK
General Laws, Chapter 156B, Section 26
---------
We, James L. Vincent, President and Frederic A. Eustis, III,
Clerk of
BIOGEN, INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 14 CAMBRIDGE CENTER, CAMBRIDGE, MASSACHUSETTS 02142 do hereby certify
that at a meeting of the directors of the corporation held on MAY 8, 1989 , the
following vote establishing and designating a series of a class of stock and
determine the relative rights and preferences thereof was duly adopted.
(see Continuation Sheets 2A through 2LL attached hereto)
NOTE: Votes for which the space provided above is not sufficient should be set
out on continuation sheets to be numbered 2A, 2B, etc. Continuation
sheets must have a left-hand margin 1 inch for binding and shall be
8 1/2" x 11". Only one side should be used.
<PAGE> 2
Continuation Sheet 2A
---------------------
Biogen, Inc.
----------------
CERTIFICATE OF DESIGNATION
OF
$2.125 CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK
(Pursuant to Section 26 of the Massachusetts Business
Corporation Law)
----------------
Biogen, Inc., a corporation organized and existing under the Business
Corporation Law of the Commonwealth of Massachusetts (hereinafter called the
"Corporation"), do hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 26 of the
Business Corporation Law (the "MBCL") at a meeting duly called and held on May
8, 1989:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" of
the "Board") in accordance with the provisions of the Articles of Organization,
the Board of Directors hereby creates a series of $2.125 Convertible
Exchangeable Preferred Stock, par value $.01 per shares, of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof (in addition to any provisions set
forth in the Articles of Organization of the Corporation which are applicable to
the preferred stock of all classes and series) as follows:
<PAGE> 3
Continuation Sheet 2B
---------------------
$2.125 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK:
Section 1. DESIGNATION AND AMOUNT. The Shares of such series shall be
designated as "$2.125 Convertible Exchangeable Preferred Stock" (the
"Exchangeable Preferred Stock") and the number of shares constituting the
Exchangeable Preferred Stock shall be 2,760,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; PROVIDED; that
no decrease shall reduce the number of shares of Exchangeable Preferred Stock to
a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding options, rights or warrants
or upon the conversion of any outstanding securities issued by the Corporation
convertible into Exchangeable Preferred Stock.
Section 2. STATED CAPITAL. The amount to be represented in stated capital
at all times for each share of Exchangeable Stock shall be $.01.
Section 3. RANK. All Exchangeable Preferred Stock shall rank prior to all
of the Corporation's Common Stock, par value $.01 per share (the "Common
Stock"), and Series A Junior Participating Preferred Stock, $.01 par value (the
"Series A Preferred Stock"), now or hereafter issued, both as to payment of
dividends and as to distributions of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary.
<PAGE> 4
Continuation Sheet 2B
---------------------
Section 4. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of
Exchangeable Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for such
purpose, dividends at the rate of $2.125 per annum per share, and no more, which
shall be fully cumulative, shall accrue without interest from the date of
original issuance and shall be payable in cash quarterly on March 15, June 15,
September 15, and December 15 of each year commencing September 15, 1989 (except
that if such date is a Saturday, Sunday or legal holiday, then such dividend
shall be payable on the next day that is not a Saturday, Sunday or legal
holiday) to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 60 nor less than 10 day
preceding the payment dates for such dividends, as shall be fixed by the Board.
The amount of dividends payable per share of Exchangeable Preferred Stock for
each quarterly dividend period shall be computed by dividing the annual dividend
amount by four. The amount of dividends payable for the initial dividend period
and any period shorter than a full quarterly dividend period shall be computed
on the basis of a 360-day year of twelve 30-day months. No dividends or other
distributions, other than dividends payable solely in shares of Common Stock or
Series A Preferred Stock or other capital stock of the Corporation ranking
junior as to dividends to the Exchangeable Preferred Stock (collectively, the
"Junior
<PAGE> 5
Continuation Sheet 2D
---------------------
Dividend Stock"), shall be paid or set apart for payment on, and no purchase,
redemption or other acquisition shall be made by the Corporation of, any shares
of Junior Dividend Stock unless and until all accrued and unpaid dividends on
the Exchangeable Preferred Stock, including the full dividend for the
then-current quarterly dividend period, shall have been paid or declared and set
apart for payment.
If at any time any dividend on any capital stock or the Corporation ranking
senior as to dividends to the Exchangeable Preferred Stock (the "Senior Dividend
Stock") shall be in default, in whole or in part, no dividend shall be paid or
declared and set apart for payment on the Exchangeable Preferred Stock unless
and until all accrued and unpaid dividends with respect to the Senior Dividend
Stock, including the full dividends for the then-current dividend period, shall
have been paid or declared and set apart for payment, without interest. No full
dividends shall be paid or declared and set apart for payment on any class or
series of the Corporation's capital stock ranking, as to dividends, on a parity
with the Exchangeable Preferred Stock (the "Parity Dividend Stock") for any
period unless full cumulative dividends have been, or contemporaneously are,
paid or declared and set apart for such payment on the Exchangeable Preferred
Stock for all dividend payment periods terminating on or prior to the date of
payment of such full cumulative dividends. No full dividends shall be
<PAGE> 6
Continuation Sheet 2E
---------------------
paid or declared and set apart for payment on the Exchangeable Preferred Stock
for any period unless full cumulative dividends have been, or contemporaneously
are, paid or declared and set apart for payment on the Parity Dividend Stock for
all dividend period terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full upon the Exchangeable
Preferred Stock and the Parity Dividend Stock, all dividends paid or declared
and set apart for payment upon shares of Exchangeable Preferred Stock and the
Parity Dividend Stock shall be paid or declared and set apart for payment pro
rata, so that the amount of dividends paid or declared and set apart for payment
per share on the Exchangeable Preferred Stock and the Parity Dividend Stock
shall in all cases bear to each other the same ratio that accrued and unpaid
dividends per share on the shares of Exchangeable Preferred Stock and the Parity
Dividend Stock bear to each other.
Any reference to "distribution" contained in this Section 4 shall be deemed
to include any stock dividend or distributions made in connection with any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
Section 5. LIQUIDATION PREFERENCE. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Exchangeable
<PAGE> 7
Continuation Sheet 2F
---------------------
Preferred Stock shall be entitled to receive out of the assets of the
Corporation, whether such assets are stated capital or surplus of any nature, an
amount equal to the dividends accrued and unpaid thereon to the date of final
distribution to such holders, whether or not declared, without interest, and a
sum equal to $25 per share, and no more, before any payment shall be made or any
assets distributed to the holders of Common Stock, Series A Preferred Stock or
any other class or series of the Corporation's capital stock ranking junior as
to liquidation rights to the Exchangeable Preferred Stock (collectively, the
"Junior Liquidation Stock"); PROVIDED, HOWEVER, that such rights shall accrue to
the holders of Exchangeable Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preferences of the
holders of capital stock of the Corporation ranking senior as to liquidation
rights to the Exchangeable Preferred Stock (the "Senior Liquidation Stock") are
fully met. The entire assets of the Corporation available for distribution after
the liquidation preferences of the Senior Liquidation Stock are fully met shall
be distributed ratably among the holders of the Exchangeable Preferred Stock and
any other class or series of the Corporation's capital stock which may hereafter
be created having a parity as to liquidation rights with the Exchangeable
Preferred Stock in proportion to the respective preferential amounts to which
each is entitled (but
<PAGE> 8
Continuation Sheet 2G
---------------------
only to the extent of such preferential amounts). Neither a consolidation or
merger of the Corporation with another corporation nor a sale or transfer of all
or part of the Corporation's assets for cash securities or other property will
be considered a liquidation, dissolution or winding up of the Corporation.
Section 6. REDEMPTION AT OPTION OF THE CORPORATION. The Corporation may not
redeem the Exchangeable Preferred Stock prior to June 15, 1991. The Corporation,
at its option, may after June 15, 1991, redeem at any time all, or from time to
time a portion, of the Exchangeable Preferred Stock on any date set by the Board
of Directors, if redeemed during the twelve-month period beginning June 15 of
the year specified below, at the following cash redemption prices per share:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
1991 $26.7000
1992 $26.4875
1993 $26.2750
1994 $26.0625
1995 $25.8500
1996 $25.6375
1994 $25.4250
1998 $25.2125
</TABLE>
and thereafter at $25 per share, plus, in each case an amount in cash equal to
all dividends on the Exchangeable Preferred Stock accrued and unpaid thereon,
whether or not declared, pro rata to the date fixed for redemption, each sum
being hereinafter referred to as the "Redemption Price."
<PAGE> 9
Continuation Sheet 2H
---------------------
In case of the redemption of less than all of the then outstanding
Exchangeable Preferred Stock, the Corporation shall designate by lot, or in such
other manner as the Board of Directors may determine, the shares to be redeemed,
or shall effect such redemption pro rata. Notwithstanding the foregoing, the
Corporation shall not redeem less than all of the Exchangeable Preferred Stock
at any time outstanding until all dividends accrued and in arrears upon all
Exchangeable Preferred Stock than outstanding shall have been paid for all past
dividend periods.
Not more than 60 nor less than 30 days prior to the redemption date, notice
by first class mail, postage prepaid, shall be given to the holders of record of
the Exchangeable Preferred Stock to be redeemed, address to such stockholders at
their last addresses as shown on the books of the Corporation. Each such notice
of redemption shall specify the date fixed for redemption, the redemption price,
the place or places of payment, the then effective conversion price and that the
right of holders of shares of Exchangeable Preferred Stock being redeemed to
exercise their conversion right shall terminate as to such shares at the close
of business on the date fixed for redemption (PROVIDED that no default by the
Corporation in the payment of the Redemption Price shall have occurred and be
continuing), that payment will be made upon presentation and surrender of the
shares of Exchangeable
<PAGE> 10
Continuation Sheet 2I
---------------------
Preferred Stock, that accumulated but unpaid dividends to the date fixed for
redemption will be paid on the date fixed for redemption, and that on and after
the redemption date, dividends will cease to accumulate on such shares.
Any notice which is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not the holder of the Exchangeable
Preferred Stock receives such notice; and failure to give such notice by mail,
or any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other shares of Exchangeable Preferred Stock. On or after the date fixed
for redemption as stated in such notice, each holder of the shares called for
redemption shall surrender the certificate (or certificates) evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price. If fewer than
all shares represented by any such surrendered certificate (or certificates) are
redeemed, a new certificate shall be issued representing the unredeemed shares.
If, on the date fixed for redemption, funds necessary for the redemption shall
be available therefor and shall have been irrevocably deposited or set aside,
then, notwithstanding that the certificates evidence any shares so called for
redemption shall not have been surrendered, the dividends with respect to the
shares so called shall cease to
<PAGE> 11
Continuing Sheet 2J
-------------------
accrue after the date fixed for redemption, the shares shall no longer be deemed
outstanding, the holders thereof shall cease to be stockholders, and all rights
whatsoever with respect to the shares so called for redemption (except the right
of the holders to receive the Redemption Price without interest upon surrender
of their certificates therefor) shall terminate Shares of Exchangeable Preferred
Stock redeemed by the Corporation shall be restored to the status of authorized
but unissued shares of preferred stock of the Corporation shall be restored to
the status of authorized but unissued shares of preferred stock of the
Corporation, pursuant to Section 21A of the MBCL, without designation as to
series, and may thereafter be reissued, but not as shares of Exchangeable
Preferred Stock.
Section 7. REDEMPTION AT OPTION OF HOLDERS. In the event that (i) any
person (with the defined meaning as used in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) becomes the beneficial
owner (as defined in Ruled 13d-3 under the Exchange Act) of more than 50% of the
Common Stock other than: (x) in a transaction or series of transactions in which
such person acquires at least 50% of the total securities beneficially owned by
such person in direct issuances from the Corporation or (y) by means of a merger
of the Corporation with or into a subsidiary or affiliate of such person (a
"Share Acquisition"), or (ii) the Corporation is a party to a business
combination, including a merger or consolidation or the sale of all or
substantially all
<PAGE> 12
Continuation Sheet 2K
---------------------
of its assets and as a result of such business combination, the Exchangeable
Preferred Stock thereafter is not convertible into common stock of the
Corporation or of the ultimate parent of the Corporation which common stock is
traded on the New York Stock Exchange, the American Stock Exchange or through
the NASDAQ National Market System, each holder of Exchangeable Preferred Stock,
subject to the conditions of this Section 7, shall have the option to require
the Corporation to redeem all, but not less than all, of the Exchangeable
Preferred Stock owned by such holder at $25 per share plus accrued and unpaid
dividends, whether or not declared, pro rata to the redemption date.
In the event of any Share Acquisition, the Corporation shall, at the close
of business on the date which is 45 days after the date of such Share
Acquisition, upon the written demand of any record holder of Exchangeable
Preferred Stock who so requests, redeem all of the Exchangeable Preferred Stock
owned by such holder at $25 per share plus accrued and unpaid dividends to but
not including such 45th day. Within five days after the Corporation has
knowledge that such Share Acquisition has occurred, it shall mail to each record
holder of Exchangeable Preferred Stock a form of written demand to be used by
such holder to exercise his right of redemption (a "Demand Form") and a notice
which shall disclose the occurrence of the Share Acquisition and the right of
such holder to
<PAGE> 13
Continuation Sheet 2L
---------------------
require the Corporation to redeem such Exchangeable Preferred Stock pursuant to
this Section 7 and shall state the redemption date, the redemption price, the
place or places of payment, that payment will be made upon presentation and
surrender of the shares of Exchangeable Preferred Stock and the date by which
such holder must notify the Corporation if it elects to require the Corporation
to make such redemption. Within 15 days after the Corporation has knowledge that
a Share Acquisition has occurred, it also shall deposit in trust with The First
National Bank of Boston ("The Bank of Boston") or a bank having a combined
capital and surplus in excess of $50,000,000, as trustee, for the benefit of
holder of Exchangeable Preferred Stock which elect to require the Corporation to
redeem such stock pursuant to this Section 7, funds sufficient to redeem on the
redemption date of all of the Exchangeable Preferred Stock outstanding on the
date of delivery of the notice referred to above. Each record holder of
Exchangeable Preferred Stock which elects to require the Corporation to redeem
on the redemption date all of the Exchangeable Preferred Stock which such holder
owns shall deliver to eh Company not later than the redemption date a completed
Demand Form relating to the Exchangeable Preferred Stock to be redeemed. After
the redemption date, the Corporation shall be entitled to receive from the funds
which it deposited in trust for the redemption of Exchangeable Preferred Stock
on such redemption date an amount equal
<PAGE> 14
Continuation Sheet 2M
---------------------
to that portion of such funds which was deposited in respect of shares of
Exchangeable Preferred Stock which the holders thereof did not elect to have
redeemed pursuant to this Section 7. The term "redemption date," as used in
connection with a redemption resulting from a Share Acquisition shall mean the
close of business on the 45th day after the date of the Share Acquisition.
In the event of any business combination described in the first paragraph
of this Section 7, the Corporation shall, immediately prior to the effectiveness
of such business combination, upon demand of any record holder of Exchangeable
Preferred Stock which so requests, redeem all of the Exchangeable Preferred
Stock owned by each such holder at $25 per share plus accrued and unpaid
dividends to the date on which such business combination occurs. Not later than
35 days prior to the effectiveness of any such business combination, the
Corporation shall mail to each record holder of Exchangeable Preferred Stock a
Demand Form and a notice which shall disclose such business combination and the
right of such holder of Exchangeable Preferred Stock pursuant to this Section 7
and shall state the anticipated redemption date, the redemption price, the place
of places that payment will be made upon presentation and surrender of the
shares of Exchangeable Preferred Stock and the date by which
<PAGE> 15
Continuation Sheet 2N
---------------------
such holder must notify the Corporation if its elects to require the Corporation
to make such redemption. Prior to the effectiveness of such business
combination, the Corporation also shall deposit in trust it The Bank of Boston
or a bank having a combined capital and surplus in excess of $50,000,00, as
trustee, for the benefit of holders of Exchangeable Preferred Stock which elect
to require the Corporation to redeem such stock pursuant to this Section 7,
immediately available funds sufficient to redeem on the redemption date all of
the Exchangeable Preferred Stock which, pursuant to this Section 7, holders have
elected to require the Corporation to redeem. Each record holder of Exchangeable
Preferred Stock which elects to require the Corporation to redeem on the
redemption date all of the Exchangeable Preferred Stock which it owns must
submit to the Corporation not later than the redemption date a completed Demand
Form relating to the Exchangeable Preferred Stock to be redeemed. The
Corporation agrees that it will not complete any business combination described
in this Section 7 unless proper provision has been made to satisfy its
obligations under this Section 7. The term "redemption date," as used in
connection with a redemption upon the occurrence of a business combination under
this Section 7, shall mean the time immediately prior to the effectiveness of
such business combination referred to therein.
Any notice by the Corporation which is mailed as herein provided shall be
conclusively presumed to have been
<PAGE> 16
Continuation Sheet 2O
---------------------
duly given, whether or not the holder of Exchangeable Preferred Stock receives
such notice; and failure to give such notice by mail, or any defect in such
notice, to the holders of any shares shall not affect the validity of the
proceedings for the redemption of any other shares of Exchangeable Preferred
Stock. An election by a holder of Exchangeable Preferred Stock to have the
Corporation redeem such stock pursuant to this Section 7 shall become
irrevocable on the relevant redemption date. On or after the date fixed for
redemption as stated in any notice delivered by the Corporation, each holder of
the shares called for redemption shall surrender the certificates evidence such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the relevant redemption price in
accordance with the terms of this Section 7. If any such certificates shall be
so surrendered in connection with a redemption required to be made as a result
of any business combination described in the first paragraph of this Section 7
and for whatever reason such business combination shall cause such certificates
to be returned promptly to the respective holder thereof.
If, on the date fixed for redemption under any provision of this Section 7,
funds necessary for the redemption shall be available therefor and shall have
been deposited in trust as required by this Section 7, then in the case of any
<PAGE> 17
Continuation Sheet 2P
---------------------
shares of Exchangeable Preferred Stock to be redeemed as a result of a Share
Acquisition, after the close of business on the redemption date and, in the case
of any shares of Exchangeable Preferred Stock to be redeemed as a result of a
business combination described in this first paragraph of this Section 7, after
the effectiveness of the business combination, notwithstanding that the
certificates evidencing any shares which the holders thereof had elected to have
redeemed shall not have been surrendered, the dividends with respect to such
shares shall cease to accrue, such shares shall no longer be deemed outstanding,
the holders thereof shall cease to be stockholders, and all rights whatsoever
with respect to such shares (except the right of the holders to receive the
relevant redemption price without interest upon surrender of this certificates
therefor) shall terminate. Shares of Exchangeable Preferred Stock redeemed by
the Corporation shall be restored to the status of authorized but unissued
shares of preferred stock of the Corporation, pursuant to Section 21A of the
MBCL, without designation as to series, and may thereafter be reissued, but not
as shares of Exchangeable Preferred Stock.
Section 8. NO SINKING FUND. The shares of Exchangeable Preferred Stock
shall not be subject to the operation of a purchase, retirement or sinking fund.
Section 9. CONVERSION. The holders of the Exchangeable Preferred Stock may,
upon surrender of the
<PAGE> 18
Continuation Sheet 2Q
---------------------
certificates therefor, convent any or all of their shares of Exchangeable
Preferred Stock into fully paid and nonassessable shares of Common Stock and
such other securities and property as hereafter provided at any time after
issuance thereof, but not later than (i) the close of business on the date, if
any, fixed for redemption thereof in any notice of redemption given pursuant to
the provisions of Section 6 hereof if there is no default in payment of the
Redemption Price, (ii) in the case of Exchangeable Preferred Stock which the
holder thereof has elected to require the Corporation to redeem in the event of
a Share Acquisition pursuant to Section 7 hereof, the closet of business on the
date fixed for the redemption thereof in any notice of redemption given pursuant
to the provisions of Section 7 hereof and, in the case of a redemption to be
made as a result of a business combination described in the first paragraph of
Section 7 hereof, immediately prior to the effectiveness of such business
combination, in either case if there is no default in payment of the relevant
redemption price or (iii) the close of business on the date, if any, as may have
been fixed for the exchange thereof in any notice of exchange given pursuant to
the provisions of Section 11 hereof if any amount equal to all accrued and
unpaid dividends to the date of exchange shall have been paid or declared and
set apart for payment and the Debentures, as defined in Section 11, are legally
and validly issuable upon surrender of shares of
<PAGE> 19
Continuation Sheet 2R
---------------------
Exchangeable Preferred Stock. Each share of Exchangeable Preferred Stock shall
be convertible at the office of any transfer agent for the Exchangeable
Preferred Stock, and at such other office or offices, if any, as the Board of
Directors may designate, into that number of fully paid and nonassessable shares
of Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) as shall be equal to the Conversion Rate, determined as hereinafter
provided, in effect at the time of conversion. Shares of Exchangeable Preferred
Stock may initially be converted into full shares of Common Stock at the rate of
1,6393 shares of Common Stock for each share of Exchangeable Preferred Stock,
subject to adjustment as hereinafter provided (the "Conversion Rate"). The
"Conversion Price" shall be made in respect of cash dividends on Common Stock or
Exchangeable Preferred Stock that may be accrued and unpaid at the date of
surrender for conversion. Notwithstanding anything in this Section 9 to the
contrary, no change in the Conversion Rate shall actually be made until the
cumulative effect of the adjustments called for by this Section 9 since the date
of the last change in the Conversion Rate would change the Conversion Rate by
more than 1%. However, once the cumulative effect would result in a change, then
the Conversion Rate shall actually be changed to reflect all adjustments called
for by his Section 9 and not previously
<PAGE> 20
Continuation Sheet 2S
---------------------
made. Notwithstanding anything in this Section 9, no change in the Conversion
Rate shall be made which would result in a Conversion Price of less than the par
value of the Common Stock into which shares of Exchangeable Preferred Stock are
at the time convertible.
Each share of Common Stock issued upon conversion of the Exchangeable
Preferred Stock will be accompanied by one Right to Purchase Series A Preferred
Stock (the "Right") which shall entitle the registered holder of the related
share of Common Stock to the privileges relating to such Right as specified in
the Rights Agreement, dated as of May 8, 1989, between the Corporation and The
First National Bank of Boston, unless such conversion occur after May 8, 1999 or
the Rights are redeemed by the Corporation prior to such conversion.
The right of the holders of Exchangeable Preferred Stock to convert their
shares shall be exercised by surrendering for such purpose to the Corporation or
its agent, as provided above, certificates representing shares to be converted,
duly endorsed in blank or accompanied by proper instruments or transfer. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery upon conversion of
shares of Common Stock or other securities or property in a name other than that
of the holder of the shares of the Exchangeable Preferred Stock being converted
and the
<PAGE> 21
Continuation Sheet 2T
---------------------
Corporation shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of any such tax
or shall have established to the satisfaction of the Corporation that such tax
has been paid.
A number of shares of the authorized but unissued Common Stock sufficient
to provide for the conversion of the Exchangeable Preferred Stock outstanding
upon the basis hereinbefore provided shall at all times be reserved by the
Corporation, free from preemptive rights, for such conversion, subject to the
provisions of the next succeeding paragraph. If the Corporation shall issue any
securities or make any change in its capital structure which would change the
number of shares of Common Stock into which each share of the Exchangeable
Preferred Stock shall be convertible as herein provided, the Corporation shall
at the same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Exchangeable Preferred
Stock on the new basis.
In case of any consolidation or merger of the Corporation with any other
corporation (other than a wholly owned subsidiary of the Corporation), or in
case of any sale or transfer of all or substantially all of the assets of the
<PAGE> 22
Continuation Sheet 2U
---------------------
Corporation, or in the case of any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, the Corporation shall make appropriate provision or cause appropriate
provision to be made so that holders of each share of Exchangeable Preferred
Stock then outstanding shall have the right thereafter to convert such share of
Exchangeable Preferred Stock into the kind and amount of shares of stock and
other securities and property receivable upon such consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
into which such shares of Exchangeable Preferred Stock might have been converted
immediately prior to that effective date of such consolidation, merger, sale,
transfer or share exchange. If in connection with any such consolidation,
merger, sale, transfer or share exchange, each holder of shares of Common Stock
is entitled to elect to receive either securities, case or other assets upon
completion of such transaction, the Corporation shall provide or cause to be
provided to each holder of Exchangeable Preferred Stock the right to elect the
securities, cash or other assets into which the Exchangeable Preferred Stock
held by such holder shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect,
<PAGE> 23
Continuation Sheet 2V
---------------------
limitations on the period in which such election shall be made and the effect of
failing to exercise the election). The Corporation shall not effect any such
transaction unless the provisions of this paragraph have been compiled with. The
above provisions shall similarly apply to successive consolidations, mergers,
sales, transfers or share exchanges.
Upon the surrender of certificates representing shares of Exchangeable
Preferred Stock, the person converting shall be deemed to be the holder or
record of the Common Stock issuable upon such conversion and all rights with
respect to the shares surrendered shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets as herein
provided.
No fractional shares of Common Stock shall be issued upon conversion of
Exchangeable Preferred Stock but, in lieu of any fraction of a share of Common
Stock which would otherwise be issuable in respect to the aggregate number of
such shares surrendered for conversion at one time by the same holder, the
Corporation shall pay in cash an amount equal to the product of (i) the Closing
Price of a share of Common Stock on the last trading day before the conversion
date and (ii) such fraction of a share.
The "Closing Price" for each day shall be the last reported sales price
regular way or, in case no sale takes place on such day, the average of the
closing bid and asked
<PAGE> 24
Continuation Sheet 2W
---------------------
prices regular way on such day, in either case as reported on the New York Stock
Exchange Composite Tape, or, if the Common Stock is not listed or admitted to
trading on such Exchange, on the principal national securities exchange on which
the Common Stock is listed or admitted to trading, or, if not listed or admitted
to trading on any national securities exchange, on the NASDAQ National Market
System, or, if not admitted for quotation on the NASDAQ National Market System,
the average of the high bid and low asked prices on such day as recorded by the
National Association of Securities Dealers, Inc. through NASDAQ shall not have
reported any hid and asked prices for the Common Stock on such day, the average
of the bid and asked prices for such day as furnished by any New York Stock
Exchange member firm selected from time to time by the Corporation for such
purpose, or if no such bid and asked prices can be obtained from any such firm,
the fair market value of one share of Common Stock on such day as determined in
good faith by the Board of Directors of the Corporation.
The Conversion Rate shall be adjusted from time to time under certain
circumstances, subject to the provisions of the last three sentences of the
first paragraph of this Section 9 as follows:
(1) In case the Corporation shall (w) pay a dividend or make a distribution
on its Common Stock in shares of its
<PAGE> 25
Continuation Sheet 2X
---------------------
capital stock, (x) subdivide its outstanding Common Stock into a greater number
of shares, (y) combine the shares of its outstanding Common Stock into a smaller
number of shares, or (z) issue by reclassification of its Common Stock any
shares of its capital stock, then in each such case the Conversion Rate in
effect immediately prior thereto shall be proportionately adjusted so that the
holder of any Exchangeable Preferred Stock thereafter surrendered for conversion
shall be entitled to receive, to the extent permitted by applicable law, the
number and kind of shares of capital stock of the Corporation which it would
have owned or have been entitled to receive after the happening of such event
had such Exchangeable Preferred Stock been converted immediately prior to the
record date (or if no record date has been established in connection with such
event, the effective date for such action). An adjustment pursuant to this
subparagraph (1) shall become effective immediately after the record date in the
case of a stock dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
(2) In the case the Corporation shall issue rights or warrants to all
holders of the Common Stock entitling such holders to subscribe for or purchase
Common Stock on the record date referred to below at a price per share less
<PAGE> 26
Continuation Sheet 2Y
---------------------
than the average daily Closing Price of the Common Stock for the 30 consecutive
business days commencing 45 business days before the record date (the "Current
Market Price"), then in each such case the Conversion Rate in effect on such
record date shall be adjusted in accordance with the formula
O + N
C' = C x ---------------
O + N x P
-----
M
where
<TABLE>
<S> <C> <C>
C' = the adjusted Conversion Rate.
C = the current Conversion Rate.
O = the number of shares of Common Stock
outstanding on the record date.
N = the number of additional shares of Common
Stock offered.
P = the offering price per share of the
additional shares.
M = the Current Market Price per share of Common Stock
on the record date.
</TABLE>
Such adjustment shall become effective immediately after the record ate for the
determination of stockholders entitled to receive such rights or warrants. If
any or all of such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Rate then in effect shall appropriately
readjusted.
(3) In the case the Corporation shall, by dividend or otherwise, distribute
to all holders of its Junior Stock
<PAGE> 27
Continuation Sheet 2Z
---------------------
(as hereinafter defined) evidence of its indebtedness or assets (including
securities, but excluding any warrants or subscription rights referred to in
subparagraph (2) above, any dividend or distribution paid in cash out of the
retained earnings of the Corporation and any dividend or distribution referred
to in subparagraph (1) above), then in each such case the Conversion Rate then
in effect shall be adjusted in accordance with the formula
M
C' = C x ---------------
M - F
where
<TABLE>
<S> <C> <C>
C' = the adjusted Conversion Rate.
C = the current Conversion Rate.
M = the Current Market Price per share of Common Stock
on the record date mentioned below.
F = the amount of such cash dividend and/or the fair
market value on the record date of the assets,
securities, rights or warrants to be distributed
divided by the number of shares of Common Stock
outstanding on the record date. The Board of
Directors of the Corporation shall determine the fair
market value.
</TABLE>
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (3), "Junior Stock" shall include any class of
capital stock ranking junior or PARI PASSU as to dividends or upon liquidation
to the Exchangeable Preferred Stock.
<PAGE> 28
Continuation Sheet 2AA
----------------------
(4) All calculations hereunder shall be made to the nearest cent or to the
nearest 1/100 of a share, as the case may be.
(5) In the event that at any time, as a result of an adjustment made
pursuant to subparagraph (1) of this Section 9, the holder of any Exchangeable
Preferred Stock thereafter surrendered for conversion shall become entitled to
receive securities, cash or assets other than common Stock, the number or amount
of such securities or property so receivable upon conversion shall be subject of
adjustment form time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (1) to (4), inclusive, above.
Except as otherwise provided above in this Section 9 above, no adjustment
in the Conversion Rate shall be made in respect of any conversion for share
distributions or dividends theretofore declared and paid or payable on the
Common Stock.
Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall send to each transfer agent for the Exchangeable Preferred
Stock, and to the principal securities exchange, if any, on which the
Exchangeable Preferred Stock is traded, a statement signed by the Chairman of
the Board, the President or any Vice President of the Corporation and by its
Treasurer or its Clerk stating the adjusted Conversion Rate determined as
provided in this Section
<PAGE> 29
Continuation Sheet 2BB
----------------------
9 and any adjustment so evidenced, given in good faith, shall be binding upon
all stockholders and upon the Corporation. Whenever the Conversion Rate is
adjusted the Corporation will give notice by mail stating the adjustment and the
Conversion Rate at the time of, and together with, the next dividend payment to
the holders of record of Exchangeable Preferred Stock. Notwithstanding the
foregoing notice provisions, failure by the Corporation to give such notice or a
defect in such notice shall not affect the binding nature of such corporate
action of the Corporation.
Whenever the Corporation shall propose to take any of the actions specified
in the fifth paragraph or in subparagraphs (1), (2), (3) of the ninth paragraph
of this Section 9 which would result in any adjustment in the Conversion Rate
under this Section 9, the Corporation shall cause a notice to be mailed at least
15 days prior to the date on which the books of the Corporation will close or on
which a record will be taken for such action, to the holders of record of the
outstanding Exchangeable Preferred Stock on the date of such notice. Such notice
shall specify the action proposed to be taken by the Corporation and the date as
of which holders of record of the Common Stock shall participate in any such
actions or be entitled to exchange their Common Stock for securities or other
property, as the case may be. Failure by
<PAGE> 30
Continuation Sheet 2CC
----------------------
the Corporation to mail the notice or defect in it shall not affect the
validity of the transaction.
Notwithstanding any other provision of this Section 9, no adjustment in the
Conversion Rate need to be made (1) for a transaction referred to in
subparagraphs (1), (2) or (3) of the ninth paragraph of this Section 9 if
holders or Exchangeable Preferred Stock are to participate in the transaction on
a basis and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
or, in the case of a transaction referred to in said subparagraph (3), holders
of Junior Stock participate in the transaction; (ii) for sales of Common Stock
pursuant to a plan for reinvestment of dividends and interest or pursuant to any
plan adopted by the Corporation for the benefit of its employees or consultants;
(iii) for a change in par value of the Common Stock; or (iv) after the
Exchangeable Preferred Stock becomes convertible into cash (no interest shall
accrue on the cash).
Section 10. VOTING RIGHTS. The holders of Exchangeable Preferred Stock will
not have any voting rights except as set forth below or as otherwise from time
to time required by law. Whenever dividends on the Exchangeable Preferred Stock
or any other class or series of Parity Dividend Stock shall be in arrears in an
equal to at least six quarterly dividends (whether or not consecutive) the
holders of
<PAGE> 31
Continuation Sheet 2DD
----------------------
the Exchangeable Preferred Stock (voting separately as a class with all other
affected classes or series of the Parity Dividend Stock upon which like voting
rights have been conferred and are exercisable will be entitled to vote for and
elect two additional directors. Such right of the holders of Exchangeable
Preferred Stock to vote for the election of such two directors may be exercised
at any annual meeting or at any special meeting called for such purpose as
hereinafter provided or at any adjournment thereof, until dividends in default
on such outstanding shares of Exchangeable Preferred Stock shall have been paid
in full (or such dividends shall have been declared and funds sufficient
therefor set apart for payment), at which time the term of office of the two
directors so elected shall terminate automatically (subject to revesting in the
event of each and every subsequent default of the character specified in the
preceding sentence). So long as such right to vote continues, the Clerk of the
Corporation may call, and upon the written request of the holders of record of
10% of the outstanding shares of Exchangeable Preferred Stock addressed to him
at the principal office of the Corporation shall call, a special meeting of the
holders of such shares for the election of such two directors, as provided
herein. Such meeting shall be held not less than 45 nor more than 90 days after
the accrual of such right, at the place and upon the notice provided by law and
in the By-laws of the Corporation for the holding of meetings of stockholders.
No such special meeting
<PAGE> 32
Continuation Sheet 2EE
----------------------
or adjournment thereof shall be held on a date less than 30 days before an
annual meeting of stockholders or any special meeting in lieu thereof, PROVIDED
that at such annual meeting appropriate provisions are made to allow the holders
of the Exchangeable Preferred Stock to exercise such right at such meeting. If
at any such annual or special meeting or any adjournment thereof the holders of
a majority of the then outstanding shares of Exchangeable Preferred Stock
entitled to vote in such election shall be present or represented by proxy, then
the authorized number of directors of the Corporation shall be increased by two,
and the holders of Exchangeable Preferred Stock shall be entitled to elect such
two additional directors. Directors so elected shall serve until the next annual
meeting or until their successors shall be elected and shall qualify, unless the
term of office of the persons so elected as directors shall have terminated by
virtue of the payment in full of all dividends in arrears (or such dividends
shall have been declared and funds sufficient therefor set apart for payment.)
In case of any vacancy occurring among the directors so elected by the holders
of Exchangeable Preferred Stock, the remaining director who shall have been so
elected may appoint a successor to hold office for the unexpired term of the
director whose place shall be vacant, and such successor shall be deemed to have
been elected by the holders of Exchangeable Preferred Stock. If both directors
so elected by the holders of Exchangeable Preferred Stock shall cease to
<PAGE> 33
Continuation Sheet 2FF
----------------------
serve as directors before their terms shall expire, the holders of Exchangeable
Preferred Stock then outstanding and entitled to vote for such directors may, at
a special meeting of such holders called as provided above, elect successors to
hold office for the unexpired terms of the directors whose places shall be
vacant.
Without the consent or affirmative vote of the holders of at least a
majority of the outstanding shares of Exchangeable Preferred Stock, voting
separately as a class, the Corporation shall not authorize, create or issue any
shares of any other class or series of capital stock ranking senior to the
Exchangeable Preferred Stock as to dividends or upon liquidation. The
affirmative vote or consent of the holders of at least a majority of the
outstanding shares of the Exchangeable Preferred Stock voting separately as a
class, will be required for any amendment, alternative or repeal, whether by
merger or consolidation or otherwise, of the Corporation's Articles of
Organization if the amendment, alternative or repeal adversely affects the
powers, preferences or special rights of the Exchangeable Preferred Stock. To
the extent that under Massachusetts law the vote of the holders of the
Exchangeable Preferred Stock, voting separately as a class, may be required to
authorize a given action of the Corporation, including, but not limited to, an
action pursuant to Section 78 of the Massachusetts Business Corporation Law, the
affirmative vote or consent of the holders of at least a majority of the
outstanding shares of the
<PAGE> 34
Continuation Sheet 2GG
----------------------
Exchangeable Preferred Stock shall constitute the approval of such action by the
class.
Section 11. EXCHANGE. The Exchangeable Preferred Stock is exchangeable at
the option only of the Corporation in whole, but not in part, on any dividend
payment date beginning June 15, 1991 for the Corporation's 8 1/2% Convertible
Subordinated Debentures Due 2014 (the "Debentures"), PROVIDED that prior to the
dividend payment date on which the Exchangeable Preferred Stock is to be
exchanged for the Debentures, the Corporation shall have delivered to the
Trustee under the Indenture between the Corporation and the Bank of Boston, as
Trustee, relating to the Debentures (the "Indenture"), an Option of Counsel (as
such term is defined in the Indenture), dated the dividend payment date,
substantially to the following effect, with such changes therein as such Trustee
shall approve:
As of the date of such opinion, (1) the Corporation has duly
authorized the exercise of its right to redeem the Exchangeable Preferred
Stock in exchange for th Debentures and has exercised such option; (2) the
Corporation has full corporate power and authority to enter into the
Indenture and to perform its obligations under the Indenture and to issue
and deliver the Debentures; (3) the Indenture has been duly authorized,
execute and delivered and, assuming the due authorization, execution and
delivery of the Indenture by the Trustee, is a valid and binding obligation
of the Corporation enforceable against the Corporation in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable principles;
(4) no consent or approval of any governmental authority or other person or
entity is required in
<PAGE> 35
Continuation Sheet 2HH
----------------------
connection with the issuance of the Debentures (other than qualification or
registration of the Debentures or the offer or sale thereof under the
securities or Blue Sky laws of the various jurisdictions in which the
Debentures would be offered, as to which no opinion need be expressed); (5)
the Debentures will be, when issued in accordance with the terms of the
Indenture, validity issued and outstanding obligations of the Corporation
in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and by general
equitable principles; and (6) the issuance of the Debentures and the
performance by the Corporation of its obligations under the Indenture will
not be in conflict with or constitute a breach of or a default (with the
passage of time or otherwise) under (w) the Articles of Organization or
By-Laws of the Corporation in effect at the date of such opinion, (x) the
certificate of incorporation or by-laws of any subsidiary of the
Corporation (which conflict, breach or default is material to the
Corporation and its subsidiaries taken as a whole) in effect at the date of
such opinion, (y) any agreement or instrument (which is, individually or in
the aggregate, material to the Corporation and its subsidiaries taken as a
whole) to which the Corporation or any of its subsidiaries is a party or by
which it or any of its subsidiaries is bound, or (z) any statute, law or
regulation in effect at the date of such opinion to which the Corporation
or any of its subsidiaries or any of their respective properties is subject
or any judgment, decree or order, known to such counsel, if any court of
governmental agency or authority presently in effect and applicable to the
Corporation or any of its subsidiaries (which conflict, breach or default
is, in the case of this clause (z), individually or in the aggregate,
material to the Corporation and its subsidiaries taken as a whole.
Holders of the outstanding shares of Exchangeable Preferred Stock will be
entitled to receive $25 principal amount of the Debentures in exchange for each
share of Exchangeable Preferred Stock held by them at the time of exchange plus
an amount in cash equal to all dividends on the Exchangeable Preferred Stock
accrued and unpaid to the date of such exchange. At such time,
<PAGE> 36
Continuation Sheet 2II
----------------------
the rights of the holders of Exchangeable Preferred Stock as stockholders of the
Corporation shall cease (except the right to receive on the date of exchange an
amount equal to the amount of accrued and unpaid dividends on the Exchangeable
Preferred Stock to the date of exchange and the Debentures), and the person or
persons entitled to receive the Debentures issuable upon such redemption and
exchange shall be treated for all purposes as the registered holder or holders
of such Debentures. The Debentures will be issued under and shall have the terms
and benefits provided in the Indenture. The Corporation will mail to each record
holder of the Exchangeable Preferred Stock written notice of its intention to
exchange the Exchangeable Preferred Stock not less than 15 nor more than 60 days
prior to the exchange date. Such notice shall state; (i) the exchange date; (ii)
the place or places where certificates for such shares are be surrendered for
exchange for Debentures; and (iii) that dividends on the shares to be exchanged
will cease to accrue on such exchange date. Upon surrender in accordance with
said notice of the certificates for any shares so exchanged (properly endorsed
or assigned for transfer, if the Board of Directors shall so require and the
notice shall so state), the Corporation will cause the Debentures to be
authenticated and issued in exchange for such shares of Exchangeable Preferred
Stock to be mailed to the holder of the shares of Exchangeable Preferred Stock
at such
<PAGE> 37
Continuation Sheet 2JJ
----------------------
holder's address of record or such other address as the holder shall specify
upon such surrender of such certificates. All shares of Exchangeable Preferred
Stock which shall at any time have been exchanged shall, after such exchange, be
restored to the status of authorized but unissued shares of preferred stock of
the Corporation, pursuant to Section 21A of the MBCL, without designation as to
series, and may thereafter by reissued, but not as shares of Exchangeable
Preferred Stock. If on the exchange date the Corporation shall be in default in
the payment of any dividends (including cumulative dividends, if applicable) on
the Exchangeable Preferred Stock or on any shares of Senior Dividend Stock or
Parity Dividend Stock, or if such exchange shall on such date be prohibited by
applicable law, then no shares of the Exchangeable Preferred Stock shall be
exchanged.
Section 12. OUTSTANDING SHARES. For purposes of this Certificate of
Designation, all shares of Exchangeable Preferred Stock shall be deemed
outstanding except (i) from the date fixed for redemption pursuant to Section 6
or 7 hereof, all shares of Exchangeable Preferred Stock which have been so
called for redemption under Section 6 or have been required to be redeemed by
the holder thereof under Section 7, if funds necessary for the redemption for
the of such shares are available, and in the case of a redemption under Section
7, have been deposited in trust with The Bank of Boston or a bank having a
<PAGE> 38
Continuation Sheet 2KK
----------------------
combined capital and surplus in excess of $50,000,000, as trustee, for the
benefit of the holders of such shares to be redeemed for payment of the relevant
redemption price; (ii) from the date of exchange determined pursuant to Section
11 hereof, all shares of Exchangeable Preferred Stock so called for exchange for
Debentures if any amount equal to all accrued and unpaid dividends on such
shares has been set apart for payment and the Debentures are issuable upon
surrender of such shares; (iii) from the date of surrender of certificates
representing shares of Exchangeable Preferred Stock, all shares of Exchangeable
Preferred Stock, converted into Common Stock; and (iv) from the date of
registration of transfer, all shares of Exchangeable Preferred Stock held of
record by the Corporation or any subsidiary of the Corporation.
Section 13. PARTIAL PAYMENTS. If at any time the Corporation does not pay
amounts sufficient to redeem all Exchangeable Preferred Stock required to be
redeemed by the Corporation at such time pursuant to Section 6 or 7 or hereof,
then such funds which are paid shall be applied to redeem such Exchangeable
Preferred Stock as the Corporation may designate by lot.
Section 14. RIGHT OF ACTION. Notwithstanding any other provision of this
Certificate of Designation, if the Corporation shall default in the payment of
any amount required to be paid by it in respect of the Exchangeable Preferred
<PAGE> 39
Continuation Sheet 2LL
----------------------
Stock, each holder of Exchangeable Preferred Stock, individually, shall have a
right to bring an action for payment.
IN WITNESS WHEREOF, Biogen, Inc. has caused its corporate seal to be
hereunto affixed and this certificate to be signed by James L. Vincent, its
President, and attested by Frederic A. Eustis III, its Clerk, this 20th day of
June, 1989.
BIOGEN, INC.
By s/s James L. Vincent
-----------------
President
Attest:
By s/s Frederic A. Eustis, III
-----------------------
Clerk
<PAGE> 40
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MA 02108
FEDERAL IDENTIFICATION
NO. 04-3002117
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
----
We, Frederic A. Eustis, III Vice President, and
Sarah P. Cecil Assistant Clerk of
Biogen, Inc.
located at 14 Cambridge Center, Cambridge, MA 02142 do hereby certify that at a
meeting of the directors of the corporation held on May 8, 1989, the following
vote establishing and designating a series of a class of stock and determining
the relative rights and preferences thereof was duly adopted:
See attached Pages 2A-2G
Note: Votes for which the space provided above is not sufficient should be set
out on continuation sheets to be numbered 2A, 2B, etc. Continuation
sheets must have a lefthand margin 1 inch wide for binding and shall be
8 1/2 x 11". Only one side should be used.
<PAGE> 41
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
BIOGEN, INC.
(Pursuant to Section 26 of the
Massachusetts Business Corporation Law)
------------------------------
Biogen, Inc., a corporation organized and existing under the Business
Corporation Law of The Commonwealth of Massachusetts (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 26 of the
Business Corporation Law at a meeting duly called and held on May 8, 1989:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the Board of Directors" or
the "Board") in accordance with the provisions of the Articles of Organization,
the Board of Directors hereby creates a series of Preferred Stock, $.01 par
value (the "Preferred Stock"), of the Corporation and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof (in addition to any provisions set forth in the Articles
of Organization of the Corporation which are applicable to the Preferred Stock
of all classes and series) as follows:
Series A Junior Participating Preferred Stock:
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 400,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; PROVIDED, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior
to the Series A Preferred Stock with respect to dividends, the holders
of shares of Series A Preferred Stock, in preference to the
<PAGE> 42
holders of Common Stock, $.01 par value (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable
in cash on the first day of March, June, September and December in
each year each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of share
of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or,
with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1 per share on the Series A
Preferred Stock shall
<PAGE> 43
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the
date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
<PAGE> 44
(B) Except as otherwise provided herein, in any other Certificate
of Designation creating a series of Preferred Stock or any similar
stock, or by law, the holders of shares of Series A Preferred Stock
and the holders of shares of Common Stock and any other capital stock
of the Corporation having general voting rights shall vote together as
one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
<PAGE> 45
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock or any shares of stock ranking on a
parity with the Series A Preferred Stock, excerpt in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized by unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Organization, or in any other Certificate of Designation creating a
series of Preferred Stock or any similar stock or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock, and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock,
<PAGE> 46
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case, the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation at any time declares or pays any dividend on the
Common Stock payable in shares of Common Stock, or effects a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise then by payment of a dividend in shares of Common
Stock) into a greater or less number of shares of Common Stock, then in each
such case the number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock shall not
be redeemable.
Section 9. RANK. The Series A Preferred Stock shall rank junior with
respect to the payment of dividends and the distribution of assets to all other
series of the Corporation's Preferred Stock.
Section 10. AMENDMENT. The Articles of Organization of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
<PAGE> 47
IN WITNESS WHEREOF, BIOGEN, INC. has caused this certificate to be executed
by its President and attested by its Assistant Clerk this 25th day of May, 1989.
s/s Frederic A. Eustis, III
-----------------------------
Vice President-General Counsel
Attest:
s/s Sarah P. Cecil
------------------
Assistant Clerk
<PAGE> 48
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 25th day of May in the year 1989.
___________________________________ Vice President
___________________________________ Assistant Clerk
<PAGE> 49
THE COMMONWEALTH OF MASSACHUSETTS
Certificate of Vote of Directors Establishing
A Series of a Class of Stock
(General Laws, Chapter 156B, Section 26)
I hereby approve the within certificate and, the
filing fee in the amount of $100.00
having been paid, said certificate is hereby filed this
25th day of May,
1989
s/s_______________________
Michael Joseph Connolly
Secretary of State
To be Filled in By Corporation
Photo Copy of Certificate to Be Sent
To: Anne L. Bruno, Esquire
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
<PAGE> 50
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MA 02108
ARTICLES OF ORGANIZATION
(Under G.L. Ch. 156B)
ARTICLE I
The name of the corporation is:
BIOGEN MASSACHUSETTS, INC.
ARTICLE II
The purpose of the corporation is to engage
in the following business activities
(See Pages 2(a) - 2(b) attached)
Note: If the space provided under any article or item on this form
in insufficient, additions shall be set forth on separate
8 1/2 x 11 sheets of paper leaving a left hand margin of at
least 1 inch. Additions to more than one article may be
continued on a single sheet so long each article requiring
each such addition is clearly indicated.
<PAGE> 51
ARTICLE III
The type and classes of stock and the total number of shares and par value, if
any, of each type and class of stock which the corporation is authorized to
issue is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -------------------------------------------------------------------------------
TYPE NUMBER OF TYPE NUMBER OF PAR VALUE
SHARES SHARES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON: COMMON: 200,000 $.01
PREFERRED: PREFERRED: 100,000 $.01
- -------------------------------------------------------------------------------
</TABLE>
ARTICLE IV
If more than one type, class or series is authorized, a description of each
with, if any, the preferences, voting powers, qualifications, a special or
relative rights or privileges as to each type and class thereof and any series
now established.
(See Pages 4(a) - 4(c) attached)
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are as follows:
None.
ARTICLE VI
Other lawful provisions, if any, for the conduct and regulation of business and
affairs of the corporation, for its voluntary dissolution, or for limiting,
defining, or regulating the powers of the corporation, or its directors or
stockholders, or of any class of stockholders: (If there are no provisions state
"None").
(See Pages 6(a) - 6(b) attached)
Note: The preceding six (6) articles are considered to be
permanent and may ONLY be charged by filing appropriate Articles
of Amendment.
<PAGE> 52
FOURTEEN CAMBRIDGE CENTER, CAMBRIDGE, MA 02142 617-864-8900 - TWX 740-320-1478
- -------------------------------------------------------------------------------
BIOGEN
June 28, 1988
Office of the Massachusetts
Secretary of State
Michael J. Connolly, Secretary
One Ashburton Place
Boston, MA
Dear Sir:
This is to inform you that the undersigned, Biogen Research Corp.,
organized under the laws of the Commonwealth of Massachusetts on May 29, 1980,
hereby consents to the use of the name "Biogen Massachusetts, Inc." by F.
Augusta Crease as incorporator of a new corporation under the laws of the
Commonwealth of Massachusetts to be named "Biogen Massachusetts, Inc."
Very truly yours,
Biogen Research Corp.
By: s/s
-----------------------------------
Frederic A. Eustis, III
Clerk
<PAGE> 53
FOURTEEN CAMBRIDGE CENTER, CAMBRIDGE, MA 02142 617-864-8900 - TWX 740-320-1478
- -------------------------------------------------------------------------------
BIOGEN
June 28, 1988
Office of the Massachusetts
Secretary of State
Michael J. Connolly, Secretary
One Ashburton Place
Boston, MA
Dear Sir:
This is to inform you that the undersigned, Biogen Medical Products, Inc.
organized under the laws of the Commonwealth of Massachusetts on July 29, 1983,
hereby consents to the use of the name "Biogen Massachusetts, Inc." by F.
Augusta Crease as incorporator of a new corporation under the laws of the
Commonwealth of Massachusetts to be named "Biogen Massachusetts, Inc."
Very truly yours,
Biogen Medical Products, Inc.
By:
---------------------------------
Frederic A. Eustis, III
Clerk
<PAGE> 54
FOURTEEN CAMBRIDGE CENTER, CAMBRIDGE, MA 02142 617-864-8900 - TWX 740-320-1478
- -------------------------------------------------------------------------------
BIOGEN
June 28, 1988
Office of the Massachusetts
Secretary of State
Michael J. Connolly, Secretary
One Ashburton Place
Boston, MA
Dear Sir:
This is to inform you that the undersigned, Biogen Marketing Corp.,
previously known as Biogen Inc., organized under the laws of the Commonwealth of
Massachusetts on May 28, 1980 and qualified as a Foreign Corporation with the
Commonwealth of Massachusetts on February 4, 1983, hereby consents to the use of
the name "Biogen Massachusetts, Inc." by F. Augusta Crease as incorporator of a
new corporation under the laws of the Commonwealth of Massachusetts to be named
"Biogen Massachusetts, Inc."
Very truly yours,
Biogen Marketing Corp.
By: _________________________________
Frederic A. Eustis, III
Secretary
<PAGE> 55
In WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this 20th day of June, in the year 1989.
s/s ____________________________________________, President
James L. Vincent
s/s ____________________________________________, Clerk
Frederic A. Eustis, III
<PAGE> 56
THE COMMONWEALTH OF MASSACHUSETTS
Certificate of Vote of Directors Establishing
A Series of a Class of Stock
(General Laws, Chapter 156B, Section 26)
I hereby approve the within certificate and, the
filing fee in the amount of $100.00
having been paid, said certificate is hereby filed this
20th day of June, 1989
s/s_______________________
MICHAEL JOSEPH CONNOLLY
Secretary of State
To be Filled in By Corporation
Photo Copy of Certificate to Be Sent
To: Elisabeth A. Sottile, L.A.
Mintz, Levin, et al.
One Financial Center
Boston, MA 02111
Telephone: 617/542-6000
<PAGE> 57
ARTICLES OF ORGANIZATION (CONTINUED)
BIOGEN MASSACHUSETTS, INC.
2. CORPORATE PURPOSES
The purposes for which the Corporation is formed are as follows:
To engage in or cause to be carried out research, development,
manufacturing and marketing in the field of biotechnology and generally in the
biological, chemical, pharmaceutical, agricultural, energy, nutritional, mining
and other related fields and to engage in related commercial activities;
To develop and acquire, manage, exploit, license and alienate patents,
processes or formulate, trademarks and copyrights, including all related rights;
To purchase or otherwise acquire, invest in, own mortgage, pledge, sell,
assign and transfer or otherwise dispose of, trade and deal in and with personal
property of every kind, class and description (including, without limitation,
goods, wares and merchandise of every kind, class and description), to
manufacture goods, wares and merchandise of every kind, class and description,
both on its own account and for others;
To borrow or lend money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether or not secured
by mortgage, pledge or otherwise, without limit as to amount, and to secure the
same by mortgage, pledge, or otherwise, and generally to make and perform
agreements and contracts of every kind and description.
To purchase, receive, take by grant, lease or otherwise acquire, own, hold,
improve, employ, use, mortgage, pledge, assign, transfer or otherwise dispose of
and otherwise deal in and with, real property, or any interest therein, wherever
situated;
To subscribe for, take, acquire, hold, sell exchange and deal in shares,
bonds, obligations and securities of any corporation, government, authority or
company and to make such other investments as the Corporation may see fit;
To establish, participate in, promote, subsidize and assist companies ,
syndicates, or partnerships of all kinds and to finance and refinance the same;
To guarantee to the fullest extent permitted by law the payment of
principal, premium (if any), interest, or dividends with respect to bonds,
debentures, bills of exchange, notes and other evidences of indebtedness, stock
and other securities, and to guarantee the performance of any contract or
obligation,
<PAGE> 58
entered into by any corporation, partnership, association, trust or
any other entity or natural person whether established or domiciled within or
outside the Corporation's jurisdiction of incorporation;
To operate branches in various foreign countries and generally to engage in
or carry on foreign operations; and
Generally to engage in or carry on any business permitted by the laws of
the Commonwealth of Massachusetts to a corporation organized under the
Massachusetts Business Corporation Law or any successor statute.
<PAGE> 59
ARTICLES OF ORGANIZATION (CONTINUED)
BIOGEN MASSACHUSETTS, INC.
4. DESCRIPTION OF CLASSES OF STOCK
Any and all shares of stock issued, and for which the full consideration
has been paid or delivered, shall be deemed fully paid stock; and the holder of
such shares shall not be liable for any further call or assessment of any other
payment thereon.
(a) Each holder of Common Stock shall at every meeting of stockholders be
entitled to one vote in person or by proxy for each share of Common Stock held
by him. The holders of the Common Stock shall be entitled to such dividends as
may from time to time be declared by the Board of Directors out of any funds
legally available for the declaration of dividends, subject to any provision of
these Articles of Organization, as amended from time to time, and subject to the
relative rights and preferences of any shares of Preferred Stock authorized and
issued hereunder. No share of Common Stock shall entitle its holder to have any
preemptive right in or preemptive right to subscribe to any additional shares of
Common Stock or any shares of any other class of stock which may at any time be
authorized or issued, or any bonds, debentures or other securities convertible
into shares of stock of any class of the Corporation, or options or warrants
carrying rights to purchase such shares or securities;
(b) The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article 4, to provide for the issuance of the
shares of Preferred Stock, with or without series, and, by filing a certificate
pursuant to the applicable law of the Commonwealth of Massachusetts (the
"Certificate of Designation"), to establish from time to time the number of
shares to be included in each such series and to fix the designation,
preferences, voting powers, qualifications and special or relative rights or
privileges of the shares of each such series. In the event that at any time the
Board of Directors shall have established and designated one or more series of
Preferred Stock consisting of a number of shares less than all of the authorized
number of shares of Preferred Stock, the remaining authorized shares of
Preferred Stock shall be deemed to be shares of an underdesignated series of
Preferred Stock until designated by the Board of Directors as being a part of a
series previously established or a new series then being established by the
Board of Directors. Notwithstanding the fixing of the number of shares
constituting a particular series, the Board of Directors may at any time
thereafter authorize the issuance of additional shares of the same series except
as set forth in the Certificate of Designation.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
<PAGE> 60
(i) the number of shares constituting that series and the
distinctive designation of that series, and whether
additional shares of that series may be issued;
(ii) whether any dividends shall be paid on shares of that
series, and, if so, the dividend rate on the shares of that
series; whether dividends shall be cumulative and, if so,
from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that
series;
(iii) whether shares of that series shall have voting rights in
addition to the voting rights provided by law and, if so,
the terms of such voting rights;
(iv) whether shares of that series shall be convertible into
shares of Common Stock or another security and, if so, the
terms and conditions of such conversion, including
provisions for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(v) whether or not the shares of that series shall be
redeemable and, if so, the terms and conditions of such
redemption, including the date or dates upon or after
which they shall be redeemable and the amount per share
payable in cash of redemption, which amount may vary under
different conditions and at different redemption dates;
and whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if
so, the terms and amount of such sinking fund;
(vi) whether, in the event of purchase or redemption of the
shares of that series, any shares of that series shall be
restored to the status of authorized by unissued shares or
shall have such other status as shall be set forth in the
Certificate of Designation;
(vii) the rights of the shares of that series in the event of the
sale, conveyance, exchange or transfer of all or
substantially all of the property and assets of the
Corporation, or the merger
<PAGE> 61
or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it,
or the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of
priority, if any, of shares of that series to payment in any
such event;
(viii) whether the shares of that series shall carry any
preemptive right in or preemptive right to subscribe for any
additional shares of Preferred Stock or any shares of any
other class of stock which may at any time be authorized or
issued, or any bonds, debentures or other securities
convertible into share of stock of any class of the
Corporation, or options or warrants carrying rights to
purchase such shares or securities; and
(ix) any other designation, preferences, voting powers,
qualifications, and special or relative rights or privileges
of the shares of that series.
<PAGE> 62
ARTICLES OF ORGANIZATION (CONTINUED)
BIOGEN MASSACHUSETTS, INC.
6A. CERTAIN BUSINESS COMBINATIONS
(a) Vote Required for Certain Business Combinations.
-----------------------------------------------
(1) HIGHER VOTE FOR CERTAIN BUSINESS COMBINATIONS. In addition to any
affirmative vote required by law or these Articles of Organization, and except
as otherwise expressly provided in paragraph (b) of this Article 6A:
(i) any merger or consolidation of the Corporation or any Subsidiary
(an hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined) or (b) any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Stockholder; or
(ii) any sale, lease, license, exchange, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
transactions) to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any Subsidiary
having an aggregate Fair Market Value (as hereinafter defined) equal to or
greater than 10% of the combined assets of the Corporation and its
Subsidiaries; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market
Value equal to or greater than 10% of the combined assets of the
Corporation and its Subsidiaries, except pursuant to an employee benefit
plan of the Corporation or any Subsidiary thereof; or
(iv) any reclassification of securities of the Corporation (including
any reverse stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
which are directly or indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder; or
<PAGE> 63
(v) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder
shall require the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote in the election of directors (the "Voting Stock"),
voting together as a single class (it being understood that for purposes of this
Article 6A, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article 4 of these Articles of Organization). Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or by any other
provisions of these Articles of Organization or any Certificate of Designation
(as defined in Article 4 of these Articles of Organization), or in any agreement
with any national securities exchange or otherwise.
(2) DEFINITION OF "BUSINESS COMBINATION". The term "Business Combination"
as used in this Article 6A shall mean any transaction which is referred to in
any one or more of clauses (i) through (v) of subparagraph (a).
(b) WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of paragraph (a) of this
Article 6A shall not be applicable to any particular Business Combination, and
such Business Combination shall require only such affirmative vote as is
required by law and any other provisions of these Articles of Organization, if,
in the case of any Business Combination that does not involve any cash or other
consideration being received by the stockholders of the Corporation solely in
their capacity as stockholders of the Corporation, the condition specified in
the following subparagraph (b)(1) is met, or, in the case of any other Business
Combination, all of the conditions specified in either of the following
subparagraphs (b)(1) or (b)(2) are met:
(1) APPROVAL BY DISINTERESTED DIRECTORS. The Business Combination shall
have been approved by a majority of the members of the Board of Directors (the
"Board") who are Disinterested that this condition shall not be capable of
satisfaction unless there is at least on Disinterested Director.
(2) PRICE AND PROCEDURAL REQUIREMENTS. All of the following conditions
shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration
other than cash to be received per share by the holders of Common Stock of
the Corporation in such Business Combination shall be at least equal to the
higher or the following:
<PAGE> 64
(A) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder or any of its Affiliates for any
shares of Common Stock of the Corporation acquired by it (1) within
the two-year period immediately prior to the first public announcement
of the proposal of the Business Combination (the "Announcement Date")
or (2) in the transaction in which it became an Interested
Stockholder, whichever is higher; or
(B) the Fair Market Value per share of Common Stock of the
Corporation on the Announcement Date or on the date on which the
Interested Stockholder became an Interested Stockholder (the
"Determination Date"), whichever is higher.
(ii) The aggregate amount of the cash and the Fair Market, Value as or
the date of the consummation of the Business Combination of consideration
other than cash to be received per share by holders of shares of
outstanding Voting Stock other than Common Stock shall be at least equal to
the highest of the following (it being intended that the requirements of
this subparagraph (b)(2)(ii) shall be required to be met with respect to
every class of outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular class of
Voting Stock);
(A) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers fees)
paid by the Interested Stockholder or any of its Affiliates for any
shares of such class of Voting Stock acquired or beneficially owned by
it that were acquired (1) within the two-year period immediately prior
to the Announcement Date or (2) in the transaction in which it became
an Interested Stockholder, whichever is higher; or
(B) (if applicable) the highest preferential amount per share to
which the holders of shares of such class of Voting Stock are entitled
in the event of any voluntary liquidation, dissolution or winding up
of the Corporation; or
(C) the Fair Market Value per share of such class of Voting Stock
on the Announcement Date or on the Determination Date, whichever is
higher.
(iii) The price determined in accordance with subparagraphs (i) and
(ii) of this subparagraph (b)(2) shall be subject to appropriate adjustment
in the event of any stock dividend, stock split, combination of shares or
similar event.
<PAGE> 65
(iv) The holders of all outstanding shares of Voting Stock not
beneficially owned by the Interested Stockholder immediately prior to the
consummation of any Business Combination shall be entitled to receive in
such Business Combination cash or the consideration for their shares meting
all of the terms and conditions of this paragraph (2) (provided, however,
that the failure of any stockholders who are exercising their statutory
rights to dissent from such Business Combination and receive payment of the
fair value of their shares to exchange their shares in such Business
Combination shall not be deemed to have prevented the condition set forth
in this subparagraph (2)(iv) from being satisfied).
(v) The consideration to be received by holders of any particular
class of outstanding Voting Stock (including Common Stock) shall be in cash
or in the same form as the Interested Stockholder has previously paid for
shares of such class of Voting Stock. If the Interested Stockholder has
paid for shares of any class of Voting Stock with varying forms of
consideration, the form of consideration to be received per share by
holders of such class of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class of Voting Stock
previously acquired by the Interested Stockholder.
(vi) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (A)
except as approved by a majority of the Disinterested Director, there shall
have been no failure to declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative) on any outstanding
Preferred Stock of the Corporation; (B) there shall have been (I) no
reduction in the annual rate of dividends paid on the Common Stock of the
Corporation (except as necessary to reflect any subdivision of the Common
Stock), except as approved by a majority of the Disinterested Directors,
and (II) an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the
effect of reducing the number of outstanding shares of the Common Stock,
unless the failure to increase such annual rate is approved by a majority
of the Disinterested Directors; and (C) neither such Interested Stockholder
nor any of its Affiliates shall have become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested Stockholder.
(vii) After such Interested Stockholder has become a Interested
Stockholder, such Interested Stockholder, such Interested Stockholder shall
not have received the benefit, directly or indirectly (except
proportionately as a
<PAGE> 66
stockholder), of any loans, advances, guarantees, pledges or the financial
assistance or any tax credits or other tax advantages provided by the
Corporation, whether in anticipation of or in connection with such Business
Combination or otherwise.
(viii) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations thereunder (or any subsequent provisions replacing the Exchange
Act or such rules or regulations) shall be mailed to stockholders of the
Corporation at least thirty (30) days prior to the consummation of such
Business Combination (whether or not such proxy or information statement is
required to be mailed pursuant to the Exchange Act or subsequent
provisions). Such proxy or information statement shall contain, if a
majority of the Disinterested Directors so requests, an opinion of a
reputable investment banking firm which shall be selected by majority of
the Disinterested Directors, furnished with all information such investment
banking firm reasonably requests and paid a reasonable fee for its services
by the Corporation upon the Corporation's receipt of such opinion, as to
the fairness (or lack of fairness) of the terms of the proposed Business
Combination from the point of view of the holders of shares of Voting Stock
(other than the Interested Stockholder).
(c) Certain Definitions. For the purposes of this Article 6A:
-------------------
(1) A "person" shall include any individual, group acting in concert,
corporation, partnership, association, joint venture, pool, joint stock company,
trust, unincorporated organization or similar company, syndicate, or any group
formed for the purpose of acquiring, holding or disposing of securities.
(2) "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of more than
fifteen percent (15%) of the voting power of the then outstanding Voting
Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of more than fifteen percent
(15%) of the voting power of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested
Stockholder, if such assignment or succession shall have occurred in the
<PAGE> 67
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be a "beneficial owner" of any shares of Voting Stock:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly within the
meaning of Rule 13d-3 of the Exchange Act, as in effect on March 31, 1988;
or
(ii) which such person or any of its Affiliates or Associates has (A)
the right to require (whether such right is exercisable immediately or only
after the passage of time), pursuant to an agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
exchange rights, warrants or options, or otherwise; provided, however, that
a person shall not be deemed the beneficial owner of securities tendered
pursuant to a tender or exchange offer made by or on behalf of such person
or any of such person's Affiliates or Associates until such tendered
securities are accepted for purchase; or (B) the right to vote pursuant to
any agreement, arrangement, understanding or otherwise; provided, however,
that a person shall not be deemed the beneficial owner of any security if
the agreement, arrangement or understanding to vote such security (I)
arises solely from a revocable proxy or consent solicitation made pursuant
to, and in accordance with, the Exchange Act and (II) is not also then
reportable on Schedule 13D under the Exchange Act (or a comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly within the
meaning of Rule 13d-3 under the Exchange Act, as in effect on March 31,
1988, by any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except to the extent permitted by
the provision of subparagraph (c)(3)(ii)(B) above) or disposing of any
shares of Voting Stock;
provided, however, that in the case of any employee stock ownership or similar
plan of the Corporation or of any Subsidiary in which the beneficiaries thereof
possess the right to vote any shares of Voting Stock held by such plan, no such
plan nor any trustee with respect thereto (nor any Affiliate of such trustee),
solely by reason of such capacity of such trustee, shall be deemed, for any
purposes hereof, to beneficially own any shares of Voting Stock held under any
such plan.
(4) For the purposes of determining whether a person is a Interested
Stockholder pursuant to subparagraph (c)(2), the
<PAGE> 68
number of shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of subparagraph (c)(3), but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(5) "Affiliate" and "Associate" shall have the meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act,
as in effect on March 31, 1988.
(6) "Subsidiary" means any corporation of which a majority of any class of
equity security is owned, directly or indirectly, by the Corporation; provided,
however, that for the purposes of the definition of Interested Stockholder set
forth in subparagraph (c)(2), the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security is owned,
directly or indirectly, by the Corporation.
(7) "Disinterested Director" means any Director of the Corporation who is
not an Affiliate or Associate of the Interested Stockholder and was a member of
the Board prior to the time that the Interested Stockholder became an Interested
Stockholder, and any Director who is thereafter chosen to fill any vacancy on
the Board or who is elected and who, in either event, is not an Affiliate or
Associate of the Interested Stockholder and in connection with his or her
initial assumption of office is recommended for appointed or election by a
majority of Disinterested Directors then serving on the Board.
(8) "Fair Market Value" means: (i) in the case of stock the highest closing
sale price during the 30-day period immediately preceding ad including the date
in question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Exchange Act on which such stock is listed, or, if such stock is not listed
on any such exchange, the highest closing bid quotation with respect to a share
of such stock during the 30-day period preceding and including the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or, if no such quotations are
available, the fair market value on the date in question of a share of such
stock as determined in good faith by a majority of the Disinterested Directors;
and (ii) in the case of property other than cash or stock, the fair market value
of such property on the date in question as determined in good faith by a
majority of the Disinterested Directors.
(9) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash
<PAGE> 69
to be received" as used in subparagraphs (b)(2)(i) and (ii) of this Article 6A
shall include the shares of Common Stock of the Corporation and/or the shares of
any other class of outstanding Voting Stock retained by the holders of such
shares.
(10) For the purposes of determining the "Announcement Date," in the event
that the first public announcement of the proposal of the Business Combination
is made after the close on such date of any securities exchange registered under
the Exchange Act on which any shares of the Voting Stock of the Corporation
traded, or of the National Association of Securities Dealers, Inc. Automated
Quotations System or any other system on which any shares of the Voting Stock of
the Corporation are listed, then the Announcement Date shall be deemed to be the
next day on which such exchange or quotations system is open.
(d) POWERS OF THE BOARD OF DIRECTORS. A majority of the Board shall have the
power and duty to determine for the purposes of this Article 6A, on the basis of
information known to them after reasonable inquiry, whether a person is an
Interested Stockholder, which determination shall be conclusive. Once the Board
has made a determination, pursuant to the preceding sentence, that a person is
an Interested Stockholder, then a majority of Disinterested Directors shall have
the power and duty to determine for the purposes of this Article 6A, on the
basis of information known to them after reasonable inquiry, (i) the number of
shares of Voting Stock beneficially owned by any person, (ii) whether a person
is an Affiliate or Associate of another, (iii) whether the assets which may be
the subject of any Business Combination have, or the consideration which may be
received for the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value equal
to or greater than 10% of the combined assets of the Corporation and its
subsidiaries and (iv) whether all of the applicable conditions set forth in
subsection (b)(2) shall have been met with respect to any Business Combination,
any of which determinations by a majority of the Disinterested Directors shall
be conclusive. A majority of the Disinterested Directors shall have the further
power to interpret all of the terms and provision of this Article 6A, which
interpretation shall be conclusive.
(e) NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED STOCKHOLDERS. Nothing
contained in this Article 6A shall be construed to relieve any Interested
Stockholder of any fiduciary obligation imposed by law.
(f) AMENDMENT, REPEAL, ETC. Notwithstanding any other provisions of these
Articles of Organization or the By-Laws of the Corporation (and notwithstanding
the fact that a lesser percentage or no vote may be specified by law, these
Articles of Organization or the By-Laws of the Corporation), and in addition to
any affirmative vote of the holders of Preferred Stock or any other class of
capital stock of the Corporation or any series of
<PAGE> 70
the foregoing then outstanding which is required by law or pursuant to these
Articles of Organization, the affirmative vote of the holders of eighty percent
(80%) or more of the voting power of the outstanding Voting Stock, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, this Article 6A.
<PAGE> 71
6B. CERTAIN TRANSACTIONS APPROVED BY THE BOARD OF DIRECTORS
Except as provided in Article 6A of, or as otherwise provided in, these
Articles of Organization, the Corporation may authorize, by a vote of a majority
of the shares of each class of stock outstanding and entitled to vote thereon,
(a) the sale, lease or exchange of all or substantially all of its property and
assets, including its goodwill, upon such terms and conditions as it deems
expedient, and (b) the merger or consolidation of the Corporation with or into
any other corporation, provided, however, that such sale, lease, exchange,
merger or consolidation shall have been approved by a majority of the members of
the Board of Directors.
<PAGE> 72
6C. BOARD OF DIRECTORS
(a) MANDATE AND NUMBER. The business and affairs of the Corporation shall
be managed under the direction of the Board of Directors, the number of which,
subject to any right of the elect additional directors under specified
circumstances, shall be fixed from time to time by the Board of Directors
pursuant to the By-Laws of the Corporation.
(b) TERM. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, the directors shall be divided into three classes, as
nearly equal in number as possible, with the term of office of the first class
to expire at the 1989 Annual Meeting of Stockholders or any special meting in
lieu thereof, the term of office of the second class to expire at the 1990
Annual Meeting of Stockholders or any special meeting in lieu thereof and the
term of office of the third class to expire at the 1991 Annual Meeting of
Stockholders or any special meeting in lieu thereof. At each Annual Meeting of
Stockholders or special meeting in lieu thereof following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Stockholders or special meeting in lieu thereof
after their election and until their successors are duly elected and qualified.
(c) NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to the rights of the
holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the directors then in office even though less than a
quorum, or by a sole remaining director. In the event of any vacancy resulting
other than from an increase in the authorized number of directors, the director
elected as provided in the foregoing sentence shall serve for the remainder of
the full term of the class in which the vacancy occurred rather than until the
next Annual Meeting of Stockholders. In the event of any increase or decrease in
the authorized number of directors, (i) each director then serving as such shall
nevertheless continue as director of the class of which he is a member until the
expiration of his current term or his prior death, retirement or resignation and
(ii) 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 ensure that no one class has more than one
director more than any other class. To the extent one director more than any
other class. To the extent possible, consistent with the foregoing rule, any
newly created directorships shall be subtracted from those classes whose terms
of office terms of office are to expire at the latest dates following such
allocation and any newly eliminated directorships shall be subtracted from those
classes whose terms of office are to expire at the
<PAGE> 73
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board of Directors until the vacancy is filled.
(d) REMOVAL. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time (i) only for cause and (ii)
only by the affirmative vote of the holders of at least 80% of the voting power
of all of the then outstanding shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, or by
the affirmative vote of three-fourths of the directors then serving. A director
may be removed for cause only after a reasonable notice and opportunity to be
heard before the body proposing to remove him.
(e) AMENDMENT, REPEAL, ETC. Notwithstanding anything contained in these
Articles of Organization to the contrary, the affirmative vote of the holders of
at least 80% of the total voting power of all of the outstanding shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend or repeal this
Article entitled "Board of Directors" or adopt any provision in these Articles
of Organization of the By-Laws inconsistent with this Article entitled "Board of
Directors."
<PAGE> 74
6D. INDEMNIFICATION
(a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation, including,
without limitation, any corporation or other entity of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation (a
"Subsidiary") or any Affiliate of the Corporation as such term is defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer, or in any other
capacity while serving as a director or officer, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Massachusetts Business 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
such law permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties, costs of investigation and
preparation of defense and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such indemnitee in connection therewith; provided,
however that, except as provided in Section (c) hereof with respect to
proceedings to enforce rights of indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
(b) ADVANCE OF EXPENSES. The right to indemnification conferred in Section
(a) of this Article 6D shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that
an advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to the indemnified
for such expenses under this Section or otherwise. The rights to indemnification
and to the advancement of expenses conferred in Sections (a) and (b) of this
<PAGE> 75
Article shall be contract rights ad such rights shall continue as to an
indemnitee who has ceased to be a director or officer and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
(c) RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section (a) or (b)
of this Article is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period shall
be twenty days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(ii) in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the Massachusetts
Business Corporation Law. 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 suit that indemnification of
the indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Massachusetts Business
Corporation Law, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article or otherwise
shall be on the Corporation.
(d) RIGHTS NOT EXCLUSIVE. The rights to indemnification and to the
advancement of expenses conferred in this Article shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
these Articles of Organization, the Corporation's By-Laws, or any agreement,
vote of stockholders or disinterested directors or otherwise.
(e) INSURANCE. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director
<PAGE> 76
officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise, including, without
limitation, any Subsidiary or Affiliate or any employee benefit plan, against
any expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss, whether
or not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Massachusetts Business Corporation
Law. The Corporation's obligation to provide indemnification under this Article
shall be offset to the extent of any payment received by the indemnitee from any
other source of indemnification or pursuant to any otherwise applicable
insurance coverage under a policy maintained by the Corporation or any other
person.
(f) EMPLOYEES AND AGENTS. The Corporation may, to the extent authorized
from time to time by the Board of Directors, grant rights to indemnification and
to the advancement of expenses to any employee or agent of the Corporation or
any Subsidiary or Affiliate to the fullest extent of the provisions of this
Article with respect to the indemnification of and advancement of expenses to
directors and officers of the Corporation.
(g) AGREEMENTS. The Corporation may, to the extent authorized from time to
time by the Board of Directors, enter into agreements with any director,
officer, employee or agent of the Corporation or any Subsidiary or Affiliate to
the fullest extent of the provisions of this Article with respect to the
indemnification of and advancement of expenses to such person.
(h) AMENDMENT. Without the consent of a person entitled to the
indemnification and other rights provided in this Article (unless otherwise
required by the Massachusetts Business Corporation Law), no amendment modifying
or terminating such rights shall adversely affect such person's rights under
this Article with respect to the period prior to such amendment.
(i) SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each indemnitee as to any liabilities
and expenses with respect to any proceeding to the fullest extent permitted by
any applicable portion of this Article that shall not have been invalidated and
to the fullest extent permitted by applicable law.
<PAGE> 77
6E. LIMITATION OF LIABILITY OF DIRECTORS
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any provision of law imposing such liability;
provided, however, that this Article shall not eliminate or limit any liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Sections 61 or 62 of the Massachusetts Business Corporation Law, or (iv) with
respect to any transaction from which the director derived an improper personal
benefit.
The provisions of this Article shall not eliminate or limit the liability
of a director of this Corporation for any act or omission occurring prior to the
date on which this Article became effective. No amendment or repeal of this
Article shall adversely affect the rights and protection afforded to a director
of this Corporation under this Article for acts or omissions occurring while
this Article is in effect.
Is the Massachusetts Business Corporation Law is subsequently amended to
further eliminate or limit personal liability of directors or to authorize
corporate action to further eliminate or limit such liability, then the
liability of the directors of this Corporation shall, without any further action
of the Board of Directors or the stockholders of this Corporation, be eliminated
or limited to the fullest extent permitted by the Massachusetts Business
Corporation Law as so amended.
<PAGE> 78
6F. INTERCOMPANY DEALINGS
The Corporation may enter into contracts or transact business with one or
more of its directors, officers or stockholders or with any corporation,
organization or other concern in which one or more of its directors, officers or
stockholders are directors, officers, stockholders or are otherwise interested
and may enter into other contracts or transactions in which one or more of its
directors, officers or stockholders are in any way interested. In the absence of
fraud, no such contract or transaction shall be invalidated or in any way
affected by the fact that such one or more of the directors, officers or
stockholders of the Corporation have or may have any interest which is or might
be adverse to the interest of the Corporation even though the vote or action of
directors, officers or stockholders having such adverse interest may have been
necessary to obligate the Corporation under such contract or transaction.
At any meeting of the Board of Directors of the Corporation (or of any duly
authorized committee thereof) at which any such contract or transaction shall be
authorized or ratified, any such director or directors may vote or act thereat
with like force and effect as if he had not such interest, provided in such case
that the nature of such interest (though not necessarily the extent or details
thereof) shall be disclosed or shall have been known to the directors. A general
notice that a director or officer is interested in any corporation or other
concern of any kind referred to above shall be a sufficient disclosure as to the
interest of such director or officer with respect to all contracts and
transactions with such corporation or other concern. No director shall be
disqualified from holding office as a director or an officer of the Corporation
by reason of any such adverse interest, unless the Board of Directors shall
determine that such adverse interest is detrimental to the Corporation. In the
absence of fraud no director, officer or stockholder having such adverse
interest shall be liable on account of such adverse interest to the Corporation
or to any stockholder or creditor thereof or to any other person for any loss
incurred by it under or by reason of such contract or transaction, nor shall any
such director, officer or stockholder be accountable on such ground for any
gains or profits realized thereon.
<PAGE> 79
6G. MAKING, AMENDING AND REPEALING BY-LAWS
The directors of the Corporation shall have power to make, alter, amend and
repeal the By-Laws of the Corporation in whole or in part except with respect to
any provision thereof which requires action by the stockholders, who shall also
have power to make, alter, amend and repeal the By-Laws of the Corporation. Any
By-Laws made by the directors under the powers conferred hereby may be altered,
amended, or repealed by the directors or the stockholders. Notwithstanding the
foregoing and anything contained in these Articles of Organization to the
contrary, Articles II and VII and Sections 2 and 3 of Article I of the By-Laws,
and this Article 6G, shall not be altered, amended or repealed, and no provision
inconsistent therewith or herewith shall be adopted, without the affirmative
vote of the holders of at least eighty percent (80%) of the voting power of all
shares of the shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class.
<PAGE> 80
6H. PLACE OF MEETINGS OF STOCKHOLDERS
Meetings of stockholders of the Corporation may be held anywhere in the
United States to the extent permitted by the By-Laws.
<PAGE> 81
6I. PARTNERSHIP IN ANY BUSINESS ENTERPRISE
The Corporation may be a partner in any business enterprise which the
Corporation would have the power to conduct by itself.
<PAGE> 82
ARTICLES OF ORGANIZATION (CONTINUED)
BIOGEN MASSACHUSETTS, INC.
<TABLE>
<CAPTION>
NAME Residence Post Office Address
- ---- --------- -------------------
<S> <C> <C>
Harold W. Buirkle 150 Broad Avenue 150 Broad Avenue
Leonia, N.J. 07605 Leonia, N.J. 07605
Stuart F. Feiner 830 Cranford Avenue 830 Cranford Avenue
Westfield, N.J. Westfield, N.J.
Walter Gilbert 107 Upland Road 107 Upland Road
Cambridge, MA Cambridge, MA
02140 02140
Jeremy R. Knowles 44 Coolidge Avenue 44 Coolidge Avenue
Cambridge, MA Cambridge, MA
02140 02140
Roger H. Morley L'Horizon L'Horizon
Clos Barnier Clos Barnier
06530, Speracedes 06530, Speracedes
France France
Kenneth Murray 4 Blackford Hill 4 Blackford Hill
View View
Edinburgh EH9 3HD Edinburgh EH9 3HD
Scotland Scotland
Phillip A. Sharp 119 Grasmere Street 119 Grasmere Street
Newton, MA 02158 Newton, MA 02158
James W. Stevens 332 East 30th 332 East 30th
Street Street
New York, N.Y. New York, N.Y.
10016 10016
James L. Vincent 7 Audubon Road 7 Audubon Road
Weston, MA 02193 Weston, MA 02193
</TABLE>
<PAGE> 83
ARTICLE VII
The effective date of organization of the corporation shall be the date approved
and filed by the Secretary of the Commonwealth. If a later effective date is
desired, specify such date which shall not be more than thirty days after the
date of filing.
The information contained in ARTICLE VIII is NOT a PERMANENT part of the
Articles of Organization and may be changed ONLY by filing the appropriate form
provided therefor.
ARTICLE VIII
a. The post office address of the corporation in MASSACHUSETTS
is:
14 Cambridge Center, Cambridge, A 02142
b The name, residence and post office address (if different)
of the directors and officers of the corporation are as follows:
<TABLE>
<CAPTION>
POST OFFICE
NAME RESIDENCE ADDRESS
<S> <C> <C> <C>
President: James L. Vincent 7 Auburn Road 7 Auburn Road
Weston, MA 02193 Weston, MA 02193
Treasurer: Brooks Boveroux 42 Chatham Circle 42 Chatham Circle
Wellesley, MA 02181 Wellesley, MA 02181
Clerk: Frederic A. 221 Mt. Auburn St. 221 Mt. Auburn St.
Eustis, III Apartment 111 Apartment 111
Cambridge, MA 02138 Cambridge, MA 02138
Directors: (See Page 8(a)
attached)
</TABLE>
c. The fiscal year (i.e. tax year) of the corporation shall end in the last
day of the month of: December
d. The name and BUSINESS address of the RESIDENT AGENT of the corporation,
if any, is: N/A
<PAGE> 84
ARTICLE IX
By-laws of the corporation have been duly adopted and the president,
treasurer, clerk and directors whose names are set forth above, have been duly
elected.
IN WITNESS WHEREOF and under the pains and penalties of perjury, I whose
signature appear below as incorporator and whose names and business address(es)
ARE CLEARLY TYPED OR PRINTED beneath each signature do hereby associate with the
intention of forming this corporation under the provisions of General Laws
Chapter 156B and do hereby sign these Articles of Organization as incorporated
this 29th day of June, 1988.
- --------------------------------------------------------------------------------
F. Augusta Crease, Legal Assistant
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
NOTE: If an already-existing corporation is acting as incorporator,
type in the exact name of the corporation, the state or other
jurisdiction where it was incorporated, the name of the person
signing on behalf of said corporation and the title he/she
holds or other authority by which such action is taken.
<PAGE> 85
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156 B, SECTION 12
I hereby certify that, upon an examination of these articles of
organization, duly submitted to me, it appears that the provisions of the
General Laws relative to the organization of corporation have been complied
with, and I hereby approve said articles; and the filing fee in the amount of
$150.00 having been paid, said articles are deemed to have been filed with me
this 29th day of June, 1988.
Effective date
MICHAEL J. CONNOLLY
Secretary of State
FILING FEE: 1/20 of 1% of the total amount of the authorized capital
stock with par value, and one cent a share for all authorized shares
without par value, but not less than $150 General Laws, Chapter 156B.
Shares of stock with a par value less than one dollar shall be deemed
to have par value of one dollar per share.
PHOTOCOPY OF ARTICLES OF ORGANIZATION TO BE SENT
F. Augusta Crease, Legal Assistant
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Tel: (617) 542-6000
<PAGE> 86
THE COMMONWEALTH OF MASSACHUSETTS
FEDERAL ID.
MICHAEL JOSEPH CONNOLLY NO. 04-3002117
Secretary of State
ONE ASHBURTON PLACE
BOSTON, MASS. 02108 FEDERAL ID.
NO. 00-0275985
ARTICLES OF MERGER*
Pursuant to General Laws, Chapter 156B Section 79
The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114
Make checks payable to the Commonwealth of Massachusetts.
Merger of Biogen Inc.
Biogen Massachusetts, Inc.
the constituent corporations
into
Biogen Massachusetts, Inc.
the surviving* corporation organized under the laws of the Commonwealth of
Massachusetts as specified in the agreement referred to in Paragraph 1 below.
The undersigned officers of each of the constituent corporations certify
under the penalties of perjury as follows:
1. An agreement of merger* has been duly adopted in compliance with the
requirements of subsections (b) and (c) of General Laws, Chapter 156B, Section
79, and will be kept as provided by subsection (c) thereof. The surviving*
corporation will furnish a copy of said agreement to any of its stockholders, or
to any person who was a stockholder of any constituent corporation, upon written
requires and without charge.
2. The effective date of the merger* determined pursuant to the agreement
referred to in paragraph 1 shall be September 30, 1988 at 12:00 o'clock
midnight.
3. (For a merger)
** The following amendments to the articles of
organization of the SURVIVING corporation to be
effected pursuant to the agreement of merger referred
to in paragraph 1 are as follows: That upon the
effective date and time of the merger, Article 1 shall be amended to provide
that the name of the Corporation be changed to Biogen, Inc., and Article 3 shall
be amended to provide that the Corporation is authorized to issue 55,000,000
shares of common stock having a par value of $.01 per share and 20,000,000
shares of preferred stock having a par value of $.01 per share.
<PAGE> 87
(For a consolidation)
(a) The purposes of the RESULTING corporation are as follows:
*Delete the in applicable words.
**If there are no provisions state "NONE".
NOTE: If the space provided under article 3 is insufficient, additions shall be
set forth on separate 8 1/2 x 11 inch sheets of paper, leaving a left hand
margin of at least 1 inch for binding. Additions to more than one article may be
continued on a single sheet so long as each article requiring each such addition
is clearly indicated.
(b) The total number of shares and the par value, if any, of each class of
stock which the resulting corporation is authorized is as follows: N/A
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
- -------------------------------------------------------------------------------
CLASS OF PAR
STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred $
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Common
- -------------------------------------------------------------------------------
<FN>
**(c) If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established.
N/A
**(d) Other lawful provisions, if any, for the conduct and regulation of
the business and affairs of the corporation, for its voluntary dissolution, for
restrictions upon the transfer of shares of stock of any class, or for limiting,
defining, or regulating the powers of the corporation, or if its directors or
stockholders, or of any class of stockholders:
N/A
</TABLE>
4. (This paragraph 4 may be deleted if the surviving* corporation is
organized under the laws of the state other than Massachusetts.)
The following information shall not for any purpose be treated as a permanent
part of the articles of organization of the surviving* corporation.
<PAGE> 88
(a) The post office address of the principal office of the surviving*
corporation in Massachusetts is:
14 Cambridge Center, Cambridge, Massachusetts 02142
(b) The name, resident and post office address of each of the directors
and President, Treasurer and Clerk of the surviving* corporation is as
follows:
*Delete the inapplicable words.
**If there are no provisions state "NONE."
NOTE: If the space provided under article 3 is insufficient, additions shall be
set forth on separate 8-1/2 x 11 inch sheets of paper, leaving a left hand
margin of at least 1 inch for binding. Additions to more than one article may be
continued on a single sheet so long as each article requiring each such addition
is clearly indicated.
<PAGE> 89
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
NAME RESIDENCE POST OFFICE ADDRESS
- --------------------------------------------------------------------------------
<S> <C> <C>
President
James L. Vincent 7 Audubon Road 7 Audubon Road
Weston, MA 02193 Weston, MA 02193
- --------------------------------------------------------------------------------
Treasurer
Brooks Boveroux 42 Chatham Circle 42 Chatham Circle
Wellesley, MA Wellesley, MA
02181 02181
- --------------------------------------------------------------------------------
Clerk
Frederic A. 221 Mt. Auburn 221 Mt. Auburn
Eustis, III Street Street
Apartment 111 Apartment 111
Cambridge, MA 02138 Cambridge, MA
02138
- --------------------------------------------------------------------------------
Director
Harold W. Buirkle 150 Broad Avenue 150 Broad Avenue
Leonia, NJ 07605 Leonia, NJ 07605
- --------------------------------------------------------------------------------
Director
Stuart F. Feiner 830 Cranford Avenue 830 Cranford Avenue
Westfield, NJ Westfield, NJ
- --------------------------------------------------------------------------------
Director
Walter Gilbert 107 Upland Road 107 Upland Road
Cambridge, MA Cambridge, MA
02140 02140
- --------------------------------------------------------------------------------
Director
Jeremy R. Knowles 44 Coolidge Avenue 44 Coolidge Avenue
Cambridge, MA Cambridge, MA
02140 02140
- --------------------------------------------------------------------------------
Director
Roger H. Morley L'Horizon L'Horizon
Clos Barnier Clos Barnier
06530, Speracedes, 06530, Speracedes,
France France
- --------------------------------------------------------------------------------
Director
Kenneth Murray 4 Blackford Hill 4 Blackford Hill
View View
Edinburgh EH9 3HD Edinburgh EH9 3HD
Scotland Scotland
- --------------------------------------------------------------------------------
Director
Phillip A. Sharp 119 Grasmere Street 119 Grasmere Street
Newton, MA 02158 Newton, MA 02158
- --------------------------------------------------------------------------------
Director
James W. Stevens 332 East 30th 332 East 30th
Street Street
New York, NY 10016 New York, NY 10016
- --------------------------------------------------------------------------------
Director
James L. Vincent 7 Audubon Road 7 Audubon Road
Weston, MA 02193 Weston, MA 02193
- --------------------------------------------------------------------------------
<FN>
(c) The date adopted on which the fiscal year of the surviving* corporation
ends is: December 31.
(d) The date fixed in the by-laws for the Annual Meeting of stockholders of
the surviving* corporation: On a date to be determined by the Board of Directors
within six months after the end of each fiscal year, on any day that is not a
Saturday, Sunday or legal holiday.
</TABLE>
<PAGE> 90
5. (This paragraph 5 may be deleted if the surviving* corporation is
organized under the laws of Massachusetts)
N/A
The resulting* surviving* corporation hereby agrees that it may be sued in
the Commonwealth of Massachusetts for any prior obligation of any constituent
foreign corporation qualified under General Laws, Chapter 181, and any
obligations hereafter incurred by the resulting* surviving* corporation,
including the obligation created by General Laws, Chapter 156B, Section 85, so
long as any liability remains outstanding against the corporation in the
Commonwealth of Massachusetts, and it hereby irrevocably appoints the Secretary
of the Commonwealth as its agent to accept service of process in any action for
the enforcement of any such obligation, including taxes, in the same manner as
provided in Chapter 181.
*Delete the inapplicable words.
FOR MASSACHUSETTS CORPORATIONS
The undersigned President* and Clerk** of Biogen Massachusetts, Inc., a
corporation organized under the laws of Massachusetts further state under the
penalties of perjury that the agreement of merger* referred to in paragraph 1
has been duly executed on behalf of such corporation and duly approved in the
manner required by General Laws, Chapter 156B, Sections 79.
s/s James L. Vincent , President*
-----------------------------
James L. Vincent
s/s Frederic A. Eustis, III , Clerk
----------------------------
Frederic A. Eustis, III
*Delete the inapplicable words.
<PAGE> 91
FOR CORPORATIONS ORGANIZED OTHER THAN IN MASSACHUSETTS
The undersigned President* and Secretary** of Biogen, Inc., a corporation
organized under the laws of Delaware further state under the penalties of
perjury that the agreement of merger* referred to in paragraph 1 has been duly
adopted by such corporation in the manner required by the laws of Delaware.
s/s James L. Vincent , President*
-----------------------------
James L. Vincent
s/s Frederic A. Eustis, III , Clerk*
-----------------------------
Frederic A. Eustis, III
*Delete the inapplicable words.
*Specify the officer having powers and duties corresponding to those of the
President or Vice President of a Massachusetts corporation organized under
General Laws, Chapter 156B.
**Specify the officer having power and duties corresponding to the Clerk or
Assistant Clerk of such a Massachusetts corporation.
<PAGE> 92
282280 001904
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF MERGER*
(General Laws, Chapter 156B, Section 79)
I hereby approve the within articles of merger* and, the filing fee in the
amount of $37,350.00 having been paid, said articles are deemed to have been
filed with me this 28th day of September, 1988.
Effective Date: September 30, 1988
- -----------------------------------
s/s MICHAEL JOSEPH CONNOLLY
------------------------
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of Articles of Merger To Be Sent
TO: SEAL
F. Augusta Crease, Legal Assistant
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
*Delete the inapplicable words.
<PAGE> 93
CD 78 5m-10/85 081-$200.00
FEDERAL IDENTIFICATION
THE COMMONWEALTH OF MASSACHUSETTS NO. 04-2712513
MICHAEL JOSEPH CONNOLLY
Secretary of State
ONE ASHBURTON PLACE
BOSTON, MASS. 02108 FEDERAL ID.
NO. 04-3002117
Biogen Inc.
ARTICLES OF MERGER*
Pursuant to General Laws, Chapter 156B Section 78
The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114
Make checks payable to the Commonwealth of Massachusetts.
Merger* of BIOGEN RESEARCH CORP.
BIOGEN, INC.
the constituent corporations
into
BIOGEN, INC.,
the surviving* corporation.
The undersigned officers of each of the constituent corporations certify
under the penalties of perjury as follows:
1. An agreement of merger* has been duly adopted in compliance with the
requirements of subsections (b) and (c) of General Laws, Chapter 156B, Section
78, and will be kept as provided by subsection (d) thereof. The surviving*
corporation will furnish a copy of said agreement to any of its stockholders, or
to any person who was a stockholder of any constituent corporation, upon written
request and without charge.
*Delete the inapplicable words.
2. The effective date of the merger* determined pursuant to the agreement
referred to in paragraph 1 shall be December 31, 1988.
3. (For a merger)
** The following amendments to the articles of organization of the
SURVIVING corporation to be effected pursuant to the agreement of
merger referred to in paragraph 1 are as follows: None
(For a consolidation) N/A
<PAGE> 94
(a) The purposes of the RESULTING corporation are as follows:
(b) The total number of shares and the par value, if any, of each class of
stock which the resulting corporation is authorized is as follows:
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
CLASS OF PAR
STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred $
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Common
- -------------------------------------------------------------------------------
<FN>
*Delete the inapplicable words.
**If there are no provisions state "NONE".
NOTE: If the space provided under article 3 is insufficient, additions shall be
set forth on separate 8 1/2 x 11 inch sheets of paper, leaving a left hand
margin of at least 1 inch for binding. Additions to more than one article may be
continued on a single sheet so long as each article requiring each such addition
is clearly indicated.
</TABLE>
<PAGE> 95
**(c) If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established.
**(d) Other lawful provisions, if any, for the conduct and regulation of
the business and affairs of the corporation, for its voluntary dissolution, for
restrictions upon the transfer of shares of stock of any class, or for limiting,
defining, or regulating the powers of the corporation, or of its directors or
stockholders, or of any class of stockholders:
4. The following information shall not for any purpose be treated as a
permanent part of the articles of organization of the surviving* corporation.
(a) The post office address of the principal office of the surviving*
corporation in Massachusetts is:
14 Cambridge Center, Cambridge, Massachusetts 02142
(b) The name, resident and post office address of each of the directors
and President, Treasurer and Clerk of the surviving* corporation is as follows:
*Delete the inapplicable words.
**If there are no provisions state "NONE."
NOTE: If the space provided under article 3 is insufficient, additions shall be
set forth on separate 8-1/2 x 11 inch sheets of paper, leaving a left hand
margin of at least 1 inch for binding. Additions to more than one article may be
continued on a single sheet so long as each article requiring each such addition
is clearly indicated.
<PAGE> 96
================================================================================
NAME RESIDENCE POST OFFICE ADDRESS
- --------------------------------------------------------------------------------
President
James L. Vincent 7 Audubon Road 7 Audubon Road
Weston, MA 02193 Weston, MA 02193
- --------------------------------------------------------------------------------
Treasurer
John W. Catterall 70 South Terrace 70 South Terrace
Short Hill, NJ 07078 Short Hill, NJ 07078
- --------------------------------------------------------------------------------
Clerk
Frederic A. Eustis, III 221 Mt. Auburn Street 221 Mt. Auburn Street
Cambridge, MA 02138 Cambridge, MA 02138
- --------------------------------------------------------------------------------
Director
BUIRKLE, Harold W. Mr. THE HENLEY GROUP 150 Broad Avenue
375 Park Avenue Leonia, NJ 07605
New York, NY 10152
- --------------------------------------------------------------------------------
Director
FEINER, Stuart F. Mr. President 830 Cranford Avenue
INCO Venture Capital Westfield, NJ
Mgmnt.
One New York Plaza
New York, NY 10004
- --------------------------------------------------------------------------------
Director
GILBERT, Walter Biological DELIVER PACKAGES
Prof. Laboratories TO HOME ADDRESS
HARVARD UNIVERSITY 107 Upland Road
16 Divinity Avenue Cambridge, MA 02138
Cambridge, MA 02138
- --------------------------------------------------------------------------------
Director
KNOWLES, Jeremy R. Department of 44 Coolidge Avenue
Prof. Chemistry Cambridge, MA 02138
Hallinckrodt Hall,
Room 202
HARVARD UNIVERSITY
12 Oxford Street
Cambridge, MA 02138
- --------------------------------------------------------------------------------
Director
MORLEY, Roger H. Mr. Vice President, L'Horizon
Schiller Clos Barnier
International 06530, Speracedes,
University FRANCE
- --------------------------------------------------------------------------------
Director
MURRAY, Kenneth Prof. Dept. of Molecular 4 Blackford Hill View
Biology Edinburgh EH9 3HD
UNIVERSITY OF Scotland
EDINBURGH
King's Buildings
Mayfield Road
Edinburgh EE9 3JR
SCOTLAND
- --------------------------------------------------------------------------------
<PAGE> 97
- --------------------------------------------------------------------------------
Director
SHARP, Phillip A. Prof. Center for Cancer 119 Grasmere Street
Research Newton, MA 02158
MIT
40 Ames Street, E17-
529B
Cambridge, MA 02139
- --------------------------------------------------------------------------------
Director
STEVENS, James V. Mr. Executive Vice 332 East 30th Street
President New York, NY 10016
PRUDENTIAL INVESTMENT
CORP.
4 Gateway Center
Newark, NJ 07102-4007
- --------------------------------------------------------------------------------
Director
VINCENT, James L. Mr. Chairman 7 Audubon Road
Chief Operating Weston, MA 02193
Officer
BIOGEN INC.
14 Cambridge Center
Cambridge, MA 02142
================================================================================
(c) The date adopted on which the fiscal year of the
surviving* corporation ends is: December 31.
(d) The date fixed in the by-laws for the Annual Meeting of
stockholders of the surviving* corporation is: as determined by
the Board of Directors.
The undersigned officers of the several constituent corporations listed
above further state under the penalties of perjury as to their respective
corporations that the agreement of merger* referred to in paragraph 1 has been
duly executed on behalf of such corporation and duly approved by the
stockholders of such corporation in the manner required by General Laws, Chapter
156B, Section 78.
s/s , Vice President*
-----------------------------
Brooks Boveroux
s/s , Clerk*
--------------------------------------
Frederick A. Eustis, III
of BIOGEN, RESEARCH CORP. (name of constituent corporation)
----------------------
s/s , Vice President*
-----------------------------
Brooks Boveroux
s/s , Clerk*
--------------------------------------
Frederick A. Eustis, III
of BIOGEN, INC. (name of constituent corporation)
------------
*Delete the inapplicable words.
<PAGE> 98
288556 002080
Received THE COMMONWEALTH OF MASSACHUSETTS
Dec. 16, 1988 ARTICLES OF MERGER*
Secretary of State
Corporation Division
(General Laws, Chapter 156B, Section 78)
I hereby approve the within articles of consolidation* merger* and, the
filing fee in the amount of $200.00 having been paid, said articles are deemed
to have been filed with me this 16th day of December, 1988.
Effective Date: December 31, 1988
- ----------------------------------
s/s Michael Joseph Connolly
----------------------------
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of Articles of Merger To Be Sent
SEAL
TO: Molly Mille
Biogen. Inc.
14 Cambridge Center
Cambridge, MA 02142
Telephone (617) 864-8900
*Delete the inapplicable words.
<PAGE> 99
CD 82 10M-10/80 D630976
FEDERAL IDENTIFICATION
NO. 04-3002117
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of State
ONE ASHBURTON PLACE,
BOSTON, MASSACHUSETTS 02108-1512
ARTICLES OF
MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
PURSUANT TO GENERAL LAWS, CHAPTER 156B, SECTION 72
The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114.
Make check payable to the Commonwealth of Massachusetts.
* * * *
We, Kenneth M. Bate and Daniel A. Cuoco Vice President* and Clerk* of
Biogen, Inc. organized under the laws of the Commonwealth of Massachusetts and
herein called the parent corporation, do hereby certify as follows:
1. That the subsidiary corporation(s) to be merged into the parent
corporations is as follows:
State of Date of
Name Organization Organization
Biogen Medical Products, Inc. Massachusetts 7/29/83
2. That the parent corporation owns at least ninety percent of the
outstanding shares of each class of the stock of each subsidiary corporation to
be merged into the parent corporation.
* Delete the inapplicable words. In case the parent corporation is organized
under the laws of a state other than Massachusetts these articles are to be
signed by officers having corresponding powers and other duties.
<PAGE> 100
4. That a meeting of the directors of the parent corporation the
following vote, pursuant to subsection (a) of General Laws, Chapter 156B,
Section 82, was duly adopted:
(See Page 4A and Page 4B attached hereto and made a part hereof.)
------- -------
NOTE: Votes for which the space provided above is not sufficient should be set
out on continuations sheets to be numbered 2A, 2B, etc. Continuation sheets must
have a left-hand margin 1 inch wide for finding. Only one side should be used.
<PAGE> 101
PAGE 4A
Biogen, Inc.
Articles of Merger of Parent and Subsidiary Corporations
- --------------------------------------------------------------------------
VOTED: To authorize and direct the merger of Biogen Medical Products, Inc.,
------ a Massachusetts corporation and a wholly-owned subsidiary of this
corporation (the "terminating corporation"), into this corporation
(sometimes referred to as the surviving corporation"), pursuant to
Chapter 156B Section 82, of the Massachusetts General Laws.
VOTED: That the effective date of the merger shall be the date of filing with
- ------ and acceptance by the Secretary of State of the Commonwealth of
Massachusetts of "Articles of Merger of Parent and Subsidiary
Corporations" relative to the within merger.
VOTED: The authorize the President and any Vice President and the Clerk or
- ------ any Assistant Clerk of this corporation, by and on behalf of this
corporation, to execute and deliver said "Articles of Merger of Parent
and Subsidiary Corporations" to the Secretary of State of the
Commonwealth of Massachusetts in substantially the form attached
hereto and made a part hereof as EXHIBIT A.
VOTED: That, pursuant to the provisions of the Business Corporation Law of
- ------ the Commonwealth of Massachusetts, the separate existence of the
terminating corporation shall cease upon the effective date of the
merger and that this corporation shall continue its existence as the
surviving corporation.
VOTED: That this corporation shall, upon the effective date of the merger,
- ------ succeed to and be liable for all of the rights and obligations of
the terminating corporation including, without limitation, the
terminating corporation's general partnership interest in Biogen
Medical Products Limited Partnership.
VOTED: That the Articles of Organization, as amended, of this corporation as
- ------ in effect upon the date of the merger shall continue to be the
Articles of Organization of the surviving corporation until amended
or changed in accordance with the applicable provisions of the
Business Corporation Law of the Commonwealth of Massachusetts.
<PAGE> 102
Page 4B
-------
Biogen, Inc.
Articles of Merger of Parent and Subsidiary Corporations
--------------------------------------------------------
VOTED: That the By-Laws, as amended, of this corporation as in effect upon
- ------ the date of the merger shall continue to be the By-Laws of the
surviving corporation and shall continue in full force and effect
until changed, altered or amended as therein provided and in the
manner as prescribed by the Business Corporation Law of the
Commonwealth of Massachusetts.
VOTED: That the officers and Directors of this corporation holding office on
- ------ the date of merger shall continue to be the officers and Directors of
the surviving corporation, all of whom shall hold their offices and
directorships until the election and qualification of their respective
successors or until their tenure is otherwise terminated in accordance
with the By-Laws of the surviving corporation.
VOTED: That all of the issued and outstanding capital stock of the
- ------ terminating corporation shall be surrendered and cancelled as of the
effective date of the merger and the issued and outstanding capital
stock of the surviving corporation shall not be converted in any
manner.
VOTED: That the Directors and any and all officers of this corporation are
- ------ hereby authorized, empowered and directed to do any and all acts and
things and to make, execute, deliver, file and/or record any and all
instruments, papers and documents which shall be or become necessary,
proper or convenient in order to carry into effect the full intention
of the merger provided for herein, including, but not limited to, the
"Articles of Merger of Parent and Subsidiary Corporations" described
hereinabove.
5. The effective date of the merger as specified in the vote set out
under Paragraph 4 is upon filing and acceptance by the office of the Secretary
of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF and under the penalties of perjury we have hereto signed
out names this 9th day of June, 1993.
s/s Vice President*
--------------------------
Kenneth M. Bate
s/s Clerk*
-----------------------------------
Daniel A. Cuoco
* Delete the inapplicable words. In case the parent corporation is organized
under the laws of a state other than Massachusetts these articles are to be
signed by officers having corresponding powers and duties.
<PAGE> 103
6381
432481
COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
(General Laws, Chapter 156B, Section 82)
I hereby approve the within articles of merger of parent and subsidiary
corporation, and the filing fee in the amount of $250.00 having been paid, said
articles are deemed to have been filed with me this 9th day of June, 1993.
s/s Michael Joseph Connolly
Michael Joseph Connolly
Secretary of State
TO BE FILLED IN BY CORPORATION
Photo Copy of Merger To Be Sent
SEAL
TO: Elisabeth Sottile Lewin, L.A.
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
<PAGE> 104
FEDERAL IDENTIFICATION
NO. 04-3002117
--------------
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, Michael J. Astrue , *Vice President,
------------------------------------------------------
and Michael J. Astrue , *Clerk
------------------------------------------------------
of Biogen, Inc. ,
------------------------------------------------------
(Exact name of corporation)
located at 14 Cambridge Center, Cambridge, Massachusetts 02142,
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting article numbered: Three
-------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended) of the
Articles of Organization were duly adopted at a meeting held on May 31, 1996,
-------- --
by vote of:
28,797,384 shares of Common Stock of 35,676,575 shares outstanding,
- ---------- ------------ ----------
(type, class & series, if any)
shares of of shares outstanding, and
- ------------- -------------- -------------
(type, class & series, if any)
shares of of shares outstanding.
- ------------- -------------- -------------
(type, class & series, if any)
l**being at least a majority of each type, class or series outstanding and
entitled to vote thereon.
*Delete the inapplicable words. **Delete the inapplicable clause.
1 For amendments adopted pursuant to Chapter 156B, Section 70.
2 For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more than
one article may be made on a single sheet so long as each article requiring each
addition is clearly indicated.
<PAGE> 105
To change the number of shares and the par value (if any) of any type,
class or series of stock which the corporation is authorized to issue,
fill in the following:
The total presently authorized is:
================================================================================
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common: 55,000,000 $.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 20,000,000* $.01
- --------------------------------------------------------------------------------
================================================================================
*400,000 shares Series A Junior Participating Preferred Stock and 2,760,000
shares $2.125 Convertible Exchangeable Preferred Stock
Change the total authorized to:
================================================================================
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common: 110,000,000 $.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 20,000,000* $.01
- --------------------------------------------------------------------------------
================================================================================
*400,000 shares Series A Junior Participating Preferred Stock and 2,760,000
shares $2.125 Convertible Exchangeable Preferred Stock
<PAGE> 106
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: N/A .
----------------------------------------------------
SIGNED UNDER THE PENALTIES OF PERJURY, this 5TH day of NOVEMBER, 1996.
s/s , *Vice President
----------------------------------
Michael J. Astrue
s/s , *Clerk
--------------------------------------------
Michael J. Astrue
*Delete the inapplicable words.
<PAGE> 107
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
================================================
I hereby approve the within Articles of Amendment and, the filing
fee in the amount of $ having been paid, said articles are deemed
to have been filed with me this day of , 19 .
--- -------------- --
Effective date:
------------------------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Anne Marie Cook, Esquire
Esquire Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142
<PAGE> 1
Exhibit 10.30
-------------
CERTIFICATE OF CANCELLATION OF
CERTIFICATE OF LIMITED PARTNERSHIP OF
BIOGEN MEDICAL PRODUCTS LIMITED PARTNERSHIP
This Certificate of Cancellation of Certificate of Limited Partnership of
Biogen Medical Products Limited Partnership (the "Partnership") is being
executed by the undersigned for the purpose of cancelling a limited partnership
pursuant to the Massachusetts Uniform Limited Partnership Act.
1. The name of the Partnership is Biogen Medical Products Limited
Partnership.
2. The date of the filing of the Certificate of Limited Partnership of
the Partnership in the Commonwealth of Massachusetts was August 3,
1983, which was amended on September 2, 1983 and May 15, 1984.
3. The reason for the filing of the Certificate of Cancellation is that
the Partners have approved the dissolution and winding-up of the
affairs of the Partnership in accordance with the partnership
agreement.
4. The effective date of the cancellation shall be upon the filing of
this Certificate with the Secretary of State of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the undersigned, being the sole general partner of the
Partnership, has caused this Certificate of Cancellation of Certificate of
Limited Partnership to be duly executed as of this 24th day of December, 1996.
BIOGEN MEDICAL PRODUCTS
LIMITED PARTNERSHIP
By: Biogen, Inc.,
Its General Partner
By: s/s
-------------------------------
Its duly authorized officer
Michael J. Astrue
Vice President - General Counsel
and Clerk
FILED
DEC 24 1996
SECRETARY OF THE COMMONWEALTH
CORPORATIONS DIVISION
<PAGE> 1
EXHIBIT 11
<TABLE>
BIOGEN, INC AND SUBSIDIARIES
Computation of Earnings Per Share
(in thousands, except per share amounts)
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Primary earnings(loss) per share
Weighted average number of
shares outstanding ............ 71,595 67,950 65,548
Shares deemed outstanding from
the assumed exercise of stock
options and warrants .......... 1,626 4,940 --
------- ------- -------
Total .......................... 73,221 72,890 65,548
======= ======= =======
Net income (loss) .............. $40,530 $ 5,660 $(4,897)
======= ======= =======
Primary earnings (loss) per
Share of common stock ......... $ 0.55 $ 0.08 $ (0.07)
======= ======= =======
Fully diluted earnings (loss)
per share (a)
Weighted average number of
shares ........................ 71,595 67,950 65,548
Shares deemed outstanding from
the assumed exercise of stock
options and warrants .......... 1,998 5,569 --
------- ------- -------
Total .......................... 73,593 73,519 65,548
======= ======= =======
Net income (loss) .............. $40,530 $ 5,660 $(4,897)
======= ======= =======
Fully diluted earnings(loss)
per share of common stock ...... $ 0.55 $ 0.08 $ (0.07)
======= ======= =======
</TABLE>
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by Footnote 2 to Paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%.
<PAGE> 1
EXHIBIT 13
<TABLE>
SELECTED FINANCIAL DATA
(in thousands, except per share amounts)
<CAPTION>
Years Ended December 31, 1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total revenues............. $135,114 $149,287 $156,344 $151,691 $277,090
Product revenue............ -- -- -- -- 78,202
Royalties revenue.......... 121,714 136,418 140,433 134,653 181,502
Total expenses and taxes... 96,803 116,870 161,241 146,031 236,560
Net income(loss)(a)....... 38,311 32,417 (4,897) 5,660 40,530
Earnings(loss) per common
share(b)................ 0.56 0.47 (0.07) 0.08 0.55
Cash and marketable
securities............... 227,888 270,351 267,802 307,948 321,381
Total assets............... 311,192 356,950 377,862 469,201 634,572
Long-term debt, less
current portion.......... -- -- -- 32,826 62,254
Shareholders' equity(b).... 284,953 325,174 329,934 382,980 484,370
Average shares outstanding(b) 68,396 69,440 65,548 72,890 73,221
<FN>
(a) Net loss for the year ended December 31, 1994 includes a pre-tax charge of
$25 million as a result of the Company's decision to discontinue its major
activities associated with the development of its HIRULOG[registered trademark]
thrombin inhibitor product.
(b) On October 22, 1996, the Board of Directors declared a two-for-one stock
split effected in the form of a stock dividend of one share of Common Stock for
each share outstanding to shareholders of record on November 4, 1996. The
distribution date of the stock dividend was November 15, 1996. All references to
the number of shares and per share amounts in the financial statements have been
restated to reflect the effect of the stock split.
</TABLE>
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Biogen, Inc. (the "Company" or "Biogen") is a biopharmaceutical company
principally engaged in the business of developing, manufacturing and marketing
drugs for human health care. The Company currently derives revenues from sales
of AVONEX[trademark] under the Biogen name and from royalties on worldwide sales
by the Company's licensees of a number of products covered under patents
controlled by the Company, including alpha interferon and hepatitis B products.
In May 1996, the Company received approval from the United States Food and Drug
Administration ("FDA") to market its new product AVONEX[trademark] as a
treatment for relapsing forms of multiple sclerosis ("MS"). MS is a chronic
inflammatory disease of the central nervous system that affects over one million
people worldwide. The successful launch of AVONEX[trademark] in the United
States resulted in product revenues of $76.5 million in 1996. In the last
quarter of 1996, the Company received regulatory approval to market and sell
AVONEX[trademark] in Israel. The Company also expects to receive regulatory
approval for AVONEX[trademark] in the European Union and Switzerland and to
begin selling AVONEX[trademark] in certain European markets in the first half of
1997. The Company is also seeking approval for AVONEX[trademark] in Canada and
several other countries.
The Company expects the percentage of product sales as a percentage of total
revenues to increase in the near term as the Company continues to market its new
product AVONEX[trademark]. The Company's revenues and profitability will be
significantly impacted by the level of sales from AVONEX[trademark]. The Company
also expects to face increasing competition in the MS marketplace from existing
and recently approved treatments for MS. Due to these factors, the Company
anticipates increasing expenditures to support AVONEX[trademark], including
product marketing efforts, investments in manufacturing facilities, distribution
arrangements and ongoing research.
The Company also continues to invest and devote resources to ongoing research
and development efforts related to other potential products in its pipeline. The
Company focuses on research programs it believes have the greatest competitive
advantages and viable commercial markets.
On October 22, 1996, the Board of Directors declared a two-for-one stock split
effected in the form of a stock dividend of one share of Common Stock for each
share outstanding to shareholders of record on November 4, 1996. The
distribution date of the stock dividend was November 15, 1996. All references to
the number of shares and per share amounts in the financial statements have been
restated to reflect the effect of the stock split.
<PAGE> 3
RESULTS OF OPERATIONS
1996 AS COMPARED TO 1995
REVENUES Total revenues in 1996 were $277.1 million, as compared to $151.7
million in 1995, an increase of approximately 83%. The increase in total
revenues in 1996 was primarily due to the successful launch of the Company's
AVONEX[trademark] product in the United States in May 1996, which accounted for
$76.5 million of product revenues. Currently, AVONEX[trademark] competes in the
U.S. market against only one other product. The Company expects to face
additional competition in the United States when a third product, which was
recently approved by the FDA, enters the market as a treatment for MS. In the
fourth quarter of 1996, the Company received regulatory approval to market and
sell AVONEX[trademark] in Israel. The Company also expects to receive regulatory
approval in the European Union and Switzerland in the first half of 1997. The
Company expects product sales as of a percentage of total revenues to increase
in the near term as the Company continues to market its new product
AVONEX[trademark].
Revenues from royalties in 1996 were $181.5 million, an increase of $46.8
million or 34.8% as compared to 1995. Included in royalty revenue in 1996 is a
one-time royalty payment of $30 million received under a license agreement with
Pharmacia & Upjohn A.B. ("Pharmacia & Upjohn"). Under the terms of the license
agreement Biogen granted Pharmacia & Upjohn a sublicense under certain patents
related to proprietary protein secretion technology licensed exclusively to
Biogen by Harvard University. In addition to the one-time $30 million payment,
Pharmacia & Upjohn agreed to pay ongoing royalties on sales of Pharmacia &
Upjohn's product Genotropin in the United States, Canada and Japan. Excluding
the one-time royalty payment, royalty revenues increased 12.5%, primarily as a
result of an increase in ongoing royalties received from Schering-Plough
Corporation ("Schering-Plough"), the Company's licensee for alpha interferon.
In the near term, the Company expects overall sales of licensee products and
royalty revenues to grow. The level of anticipated royalty growth may fluctuate
depending on changes in sales volumes for specific products, patent expirations
or other developments and new licensing arrangements, if any. There are a number
of other factors which could also cause the actual level of royalty revenue to
differ from the Company's expectations, for example, pricing reforms, health
care reform initiatives, other legal and regulatory developments and the
introduction of competitive products may have an impact on product sales by the
Company's licensees. Since the Company is not involved in the development or
sale of products by licensees, it is unable to predict the timing or potential
impact of factors which may affect licensee sales. In addition, licensee sales
levels may fluctuate from quarter to quarter due to the timing and extent of
major events such as new indication approvals or vaccination programs.
Interest income in 1996 was $17.4 million, an increase of $348,000 or 2% as
compared to 1995 and is primarily a result of increased funds invested.
<PAGE> 4
EXPENSES
Total expenses in 1996 were $236.3 million as compared to $144.2 million in
1995. Cost of sales in 1996 was $28.5 million, an increase of $18 million or
171.6% as compared to 1995. Included in cost of sales in 1996 is $11.4 million
from product sales and $17.1 million relating to royalty revenue. The gross
margin in 1996 for product revenue was approximately $66.8 million or 85.4%.
Cost of sales relating to royalty revenue for 1996 increased $6.6 million, or
approximately 63%. Excluding the costs of sales relating to the one-time royalty
payment from Pharmacia & Upjohn, cost of sales relating to royalty revenue
increased $3.6 million or approximately 34% primarily due to the increased level
of royalty revenues and royalty obligations to third parties.
Research and development expenses in 1996 were $132.4 million, an increase of
$44.9 million or 51.4% as compared to 1995. This increase was primarily due to
new research collaboration agreements, an increase in clinical trial costs and
an increase in the Company's development efforts related to other research and
development programs in its pipeline. In 1996, the Company entered into a
research collaboration and license agreement with Creative BioMolecules, Inc.
("CBM") under which Biogen obtained rights to develop and market CBM's
morphogenic protein, OP-1, for the treatment of kidney diseases and disorders,
including acute and chronic renal failure. Included in research and development
expense in 1996 is $13.2 million relating to the research collaboration and
license agreement with CBM. Biogen currently has two early stage compounds in
clinical trials. They are LFA3TIP, a T-cell inhibiting protein being tested as a
potential treatment for severe psoriasis and Gelsolin, a mucolytic agent, that
is being studied for treatment of cystic fibrosis, chronic bronchitis and
several other pulmonary diseases. Biogen plans to move CD40, a ligand monoclonal
antibody, into the clinic in 1997. The drug will be studied for potential use in
the treatment of inflammatory and autoimmune diseases. The Company expects that,
in the long-term, research and development expenses will increase as the Company
expands its pipeline and related development efforts with respect to potential
new products and begins clinical trials on potential products.
Selling, general and administrative expenses in 1996 were $73.6 million, an
increase of $33.3 million or 82.7% as compared to 1995. This increase was
primarily due to the costs associated with the commercial launch of
AVONEX[trademark] in the United States, including the formation of a domestic
sales organization. In addition, the Company has invested resources in market
development efforts in Europe related to AVONEX [trademark]. During 1996, the
Company substantially completed the hiring of its domestic sales force and the
build-up of its corporate and administrative departments to support the
Company's ongoing commercial operations. The Company expects that selling,
general and administrative expenses will increase in the near and long-term as
compared to 1996 as the Company continues to put in place the commercial
infrastructure and sales and marketing organizations necessary to sell
AVONEX[trademark] worldwide. The anticipated level of expense will depend on the
overall sales levels achieved by AVONEX[trademark] and the status of
applications for marketing approvals for AVONEX[trademark] in the European Union
and in several other jurisdictions, including Canada.
<PAGE> 5
Other expenses in 1996 were $1.7 million, a decrease of $4.3 million or 39.5% in
1996 as compared to 1995, primarily due to gains recorded on foreign exchange
related contracts.
Income tax expense for 1996 and 1995 varied from the amount computed at U.S.
federal statutory rates primarily because of the impact of net operating loss
carry forwards. As of December 31, 1995, the Company had a net deferred tax
asset of $57.1 million (before valuation allowance) consisting of the future tax
benefits from net operating loss carry forwards and other tax credits. Due to
the sustained growth during the third quarter of 1996 in sales and profitability
of the Company's first commercial product, AVONEX[trademark], the Company made
the determination that it is more likely than not that it will realize the
benefits of the net deferred tax assets, and it therefore reversed all of the
related valuation allowance. The Company's reversal of the valuation allowance
in the third quarter resulted in a realization of income tax benefit of
approximately $23 million representing the balance of net operating loss carry
forwards and tax credits that had not been recognized at the beginning of the
quarter as well as tax credits generated during the quarter. The reversal of the
valuation allowance in the third quarter also resulted in an increase in
additional paid-in capital of $38.6 million relating to deductions for
non-qualified stock options.
RESULTS OF OPERATIONS
1995 AS COMPARED TO 1994
Total revenues in 1995 were $151.7 million, as compared to $156.3 million in
1994, a decrease of 3%. Revenues from royalties for 1995 decreased approximately
$5.8 million or 4% as compared to 1994, primarily due to the inclusion in the
first quarter of 1994 of a one-time payment of approximately $10 million in
royalties from Eli Lilly & Co. ("Lilly") under a licensing agreement covering
certain patent rights for gene expression methods. This one-time payment related
to sales that occurred after issuance of the patent but before the licensing
agreement was signed. Licensee sales of products from which Biogen derives
royalties increased from approximately $1.7 billion in 1994 to approximately
$1.8 billion in 1995. Royalty revenue from these licensee sales increased
approximately $5 million primarily as a result of an increase in sales of
hepatitis B vaccines sold by SmithKline Beecham plc ("SmithKline") and Merck &
Co., Inc. ("Merck"). This increase was primarily attributable to a vaccination
program in France for infants and adolescents which began in late 1994.
Worldwide hepatitis B vaccine sales in 1995 reached the billion dollar level
with sales outside the United States increasing approximately 25% in 1995 as
compared to 1994. The increase in royalty revenue from hepatitis B vaccines was
partially offset by a slight decline in royalty revenue from sales of alpha
interferon by Schering Plough Corporation ("Schering Plough") in 1995 as
compared to 1994.
Interest income for 1995 increased by $1.1 million from 1994 due primarily to
higher returns on invested funds.
<PAGE> 6
EXPENSES
Total expenses for 1995 were $144.2 million as compared to $158.3 million in
1994. Cost of sales increased $0.6 million, or 6% in 1995 as compared to 1994,
primarily due to increased royalty obligations to third parties. Research and
development expenses for 1995 were $87.4 million, a decrease of $3.8 million, or
4% in 1995 as compared to 1994. The decrease was primarily due to higher costs
in 1994 associated with the clinical development of HIRULOG[registered
trademark] thrombin inhibitor, partially offset by costs incurred in 1995 for
the production of clinical material by a contract manufacturer and an increase
in personnel costs.
General and administrative expenses increased by $15.6 million, or 63% in 1995
as compared to 1994, due primarily to higher costs for market development
efforts related to AVONEX[trademark], including costs related to the Company's
European headquarters, and legal and personnel-related costs.
Other expenses decreased by $26.4 million in 1995 as compared to 1994, primarily
due to a $25 million pre-tax charge in 1994 as a result of the Company's
decision to discontinue its major activities associated with the development of
its HIRULOG[Registered Trademark] thrombin inhibitor product.
Income tax expense for 1995 and 1994 varied from the amount computed at U.S.
federal statutory rates, primarily as a result of the impact of net operating
loss carryforwards. As of December 31, 1995, the Company had a net deferred tax
asset of $57.1 million (before valuation allowance) consisting primarily of the
future tax benefits from net operating loss carryforwards and other tax credits.
At December 31, 1995, the Company had a 100% valuation allowance against the net
deferred tax asset. The valuation allowance was reversed in the third quarter of
1996.
FINANCIAL CONDITION
At December 31, 1996, cash, cash equivalents and marketable securities were
$321.4 million compared with $307.9 million at December 31, 1995, an increase of
$13.5 million. Working capital increased $60.9 million to $347.8 million. The
increase in working capital is primarily due to the reversal of the deferred tax
asset valuation allowance in the third quarter. Net cash provided by operating
activities for the year ended December 31, 1996 was $46.5 million compared with
$9.4 million in 1995. Cash outflows included investments in property and
equipment and patents of $65.6 million and $16.8 million for equity investments
in companies with which Biogen has signed research collaboration agreements.
Cash inflows included $33.4 million from loan agreements with banks and $20
million from common stock option and purchase plans activity.
In March 1995, the Company completed construction of its research laboratory and
office building in Cambridge, Massachusetts and entered into a $25 million loan
with a bank (the "Term Loan"), secured by the building. As of December 31, 1996
there was $22.5 million outstanding under the Term Loan.
<PAGE> 7
In the second quarter of 1995, the Company began construction of its biologics
manufacturing facility in Research Triangle Park, North Carolina. The Company
plans to manufacture AVONEX[trademark] at the facility upon the facility's
licensing by the FDA. Until the facility is licensed, the Company will continue
to manufacture AVONEX[trademark] in its Cambridge, Massachusetts facility. The
estimated cost of construction, including land, of the Research Triangle Park
facility is $59 million. As of December 31, 1996, the Company had paid or been
invoiced approximately $57 million and had additional commitments totaling
approximately $2 million on this project. In August 1995, the Company entered
into a loan agreement with a bank for financing of this project (the
"Construction Loan"). Under the terms of the Construction Loan, the Company may
be advanced funds during the construction period up to $50 million. As of
December 31, 1996 there was $43.8 million outstanding under the Construction
Loan. The Company limits its exposure to fluctuations in interest rates with
interest rate swap agreements which fixes its interest rates on the loans
outstanding between 6.39% and 7.75%.
The Company has several research programs and collaborations underway. Under the
research collaboration and license agreement with CBM, Biogen paid a license fee
of $10 million and purchased 1.5 million shares of CBM common stock for $18
million. The Company also has agreed to fund $10.5 million of research
activities over the next three years assuming continuation of the collaboration.
Effective July 1, 1996, the Company signed a collaborative research and
commercialization agreement with Ontogeny, Inc. ("Ontogeny"), a private
biotechnology company, for the development and commercialization of three
specific Hedgehog cell differentiation proteins. The Company acquired a minority
equity interest in Ontogeny as well as certain exclusive, worldwide rights
related to products based on the Hedgehog proteins for most disease areas. The
Company has agreed to fund approximately $6 million in research and development
costs of Ontogeny over two years and to make license fees and milestone payments
to Ontogeny of up to $27 million per Hedgehog protein, depending on the
achievement of certain clinical, regulatory and commercial milestones over the
life of the agreement.
In August 1995, the Company signed a collaborative research agreement for the
development of human gene therapy treatments with Genovo, Inc. ("Genovo"), a
gene therapy research company. The Company acquired a minority equity interest
in Genovo as well as certain licensing rights. The Company has agreed to fund
research and development costs to Genovo up to approximately $37 million over
the life of the agreement, depending on achievement of scientific milestones.
During the fourth quarter of 1994, a total of six class action lawsuits were
initiated against the Company and several of its directors and officers. On
March 3, 1995, these cases were consolidated into a single proceeding in the
United States District Court for the District of Massachusetts. On January 23,
1996, in response to motions to dismiss the entire case filed by Biogen and the
named officer and director defendants, the District Court issued a
<PAGE> 8
memorandum and Order (dated January 22, 1996) dismissing most of the claims
asserted in the plaintiffs' Second Amended Complaint, including all claims
against the Company's outside directors. The only two claims remaining in the
case pertain to statements concerning the results of the HIRULOG[registered
trademark] TIMI-7 clinical trials in unstable angina. The Court did not reach a
decision on the merits of these claims. On October 11, 1996, the Company filed a
motion for summary judgment in the case. The plaintiffs have opposed the motion.
On October 7, 1996, a judge dismissed the lawsuit filed by Berlex Laboratories,
Inc. against the FDA in the U.S. District Court for the District of Columbia in
which Berlex claimed that the FDA's approval of Biogen's AVONEX[trademark] was
improper. Biogen was an intervenor-defendant in the litigation. In dismissing
the suit, the judge held that the FDA acted lawfully in approving
AVONEX[trademark]. Berlex chose not to appeal this decision.
On July 3, 1996, Berlex filed suit against Biogen in the United States District
Court for the District of New Jersey alleging infringement by Biogen of Berlex's
"McCormick" patent in the United States in the production of AVONEX[trademark].
Berlex seeks a judgment granting it unspecified damages, a trebling of any
damages awarded and a permanent injunction restraining Biogen from alleged
infringement. An unfavorable ruling in the Berlex suit could have a material
adverse effect on the Company's results of operations and financial position.
The Company believes that it has meritorious defenses to the Berlex claim. Prior
to the date of the suit filed by Berlex on the McCormick patents, Biogen had
filed a suit against Schering AG ("Schering"), Berlex and the Board of Trustees
of the Leland Stanford Jr. University ("Stanford") in the United States District
Court for the District of Massachusetts for a declaratory judgment of
non-infringement and invalidity of the McCormick patent contending that
AVONEX[trademark], its manufacturing process and intermediates used in that
process do not infringe the McCormick patent and that such patent is not valid.
In November 1996, the U.S. District Court in Massachusetts ruled that it had
jurisdiction and Berlex's New Jersey action was transferred to Massachusetts.
Biogen and Stanford subsequently entered into an agreement voluntarily
dismissing Stanford from the suit. A trial is not expected before the latter
part of 1998.
In June 1996, ASTA Medica Aktiengesselschaft filed for arbitration against
Biogen with the International Chamber of Commerce (ICC)in Paris, France. In its
complaint, ASTA alleges that Biogen's 1993 termination of a 1989 agreement
licensing ASTA to market recombinant interferon beta in certain European
territories was ineffective. The agreement at issue also included as a party
Bioferon, a Biogen joint venture that declared bankruptcy in 1993. The ASTA
complaint asks that an ICC panel declare that the 1989 licence is still in
force, and, in the alternative, seeks approximately $5 million in damages. The
territories included in the 1989 license were Austria, Belgium, Denmark,
Finland, France, Greece, Iceland, Ireland, Luxembourg, The Netherlands, Norway,
Portugal, Sweden, Switzerland and the United Kingdom. The arbitration will take
place in Zurich under Swiss law.
The Company's management believes that it has meritorious defenses to the
<PAGE> 9
preceding claims and given these defenses, believes the ultimate outcome of
these legal proceedings will not have a material adverse effect on the results
of operations or financial position of the Company.
OUTLOOK
SAFE HARBOR STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In addition to historical information, this annual report contains
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those reflected in such forward-looking
statements. Reference is made in particular to forward-looking statements
regarding the anticipated level of future royalty revenues, product sales,
expenses and profits and predictions as to the anticipated outcome of regulatory
approval applications and pending litigation. These and all other
forward-looking statements are made based on the Company's current belief as to
the outcome and timing of such future events. Factors which could cause actual
results to differ from the Company's expectations and which could negatively
impact the Company's results of operation are discussed below and elsewhere in
this Management's Discussion and Analysis of Financial Condition and Results of
Operation.
DEPENDENCE ON AVONEX[trademark] SALES AND ROYALTY REVENUE
While in the past the Company's ability to achieve profitability has been
dependent mainly on the level of royalty revenues as compared to expenses, in
the future, continued profitability will also be highly dependent on the level
of revenues and profitability from AVONEX[trademark] sales. The Company's
ability to achieve profitability from sales of AVONEX[trademark] will depend on
a number of factors, including: continued market acceptance of AVONEX[trademark]
in the United States; the Company's ability to maintain a high level of patient
satisfaction with AVONEX[trademark] in treating the relapsing form of multiple
sclerosis, a disease which is characterized by an uneven pattern of disease
progression; receipt of timely regulatory approval for AVONEX[trademark] in the
European Union, which is subject to the discretion of regulatory authorities;
the nature of regulatory and pricing decisions related to AVONEX[trademark]
worldwide and the extent to which AVONEX[trademark] receives reimbursement
coverage; market acceptance of AVONEX[trademark] outside the United States;
successful resolution of the lawsuit with Berlex related to the "McCormick
patent"; which if decided in Berlex's favor could have a material adverse effect
on the Company's operations; the Company's ability to sustain market share of
AVONEX[trademark] in light of the introduction of competitive products for the
treatment of multiple sclerosis, such as Teva Pharmaceuticals'
Copaxone[registered trademark] glatiramer acetate, which was recently approved
in the United States, and Ares-Serono's Rebif[registered trademark], an
interferon beta-1a product, which is the subject of a pending application in the
European Union; the success of ongoing development work related to
AVONEX[trademark] in expanded multiple sclerosis indications and the continued
accessibility of third parties to vial, label, and distribute AVONEX[trademark]
on acceptable terms. The Company's ability to increase the level of its royalty
revenues will depend on sustaining the scope and validity of existing patents;
<PAGE> 10
the efforts of licensees in the clinical testing and marketing of products from
which the Company derives revenue; and the timing and extent of royalties from
additional licensing opportunities. There can be no assurance that the Company
will achieve a positive outcome with respect to any of the factors discussed in
this Section or that the timing and extent of the Company's success with respect
to any combination of these factors will be sufficient to result in the
sustained profitability of the Company. For a further discussion of risks
regarding drug development, patent matters, including the Berlex lawsuit on the
"McCormick patent," competition in the multiple sclerosis market and regulatory
matters, see the Company's Annual Report on Form 10-K for the period ended
December 31, 1996 under the headings "Business - Risks Associated with Drug
Development", "Business - Patents and Other Proprietary Rights", "Business -
Competition and Marketing -AVONEX[trademark](interferon beta 1a)", "Business -
Regulation" and "Legal Proceedings."
NEW PRODUCTS
AVONEX[trademark] is currently the only product sold by the Company. The
Company's long-term viability and growth will depend on the successful
development and commercialization of other products from its research activities
and collaborations. The Company has begun to expand its development efforts
related to other potential products in its pipeline. The expansion of the
pipeline may include increases in spending on internal projects, the acquisition
of third party technologies or products or other types of investments. Product
development involves a high degree of risk. Many important factors affect the
Company's ability to successfully develop and commercialize drugs, including the
ability to obtain and maintain necessary patents and licenses, to demonstrate
safety and efficacy of drug candidates at each stage of the clinical trial
process, to meet applicable regulatory standards and receive required regulatory
approvals, to be capable of producing drug candidates in commercial quantities
at reasonable costs, to compete successfully against other products and to
market products successfully. There can be no assurance that the Company will be
successful in its efforts to develop and commercialize new products.
<PAGE> 11
<TABLE>
BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<CAPTION>
As of December 31, 1996 1995
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................... $ 62,032 $ 45,770
Marketable securities ............................... 259,349 262,178
Accounts receivable, less allowances of $1,480
in 1996; none in 1995 ............................. 42,952 19,612
Deferred tax asset, net ............................. 47,888 --
Other ............................................... 23,533 12,749
-------- --------
Total current assets .............................. 435,754 340,309
-------- --------
PROPERTY AND EQUIPMENT, NET ........................... 165,323 115,048
-------- --------
OTHER ASSETS
Patents, net ........................................ 10,458 7,988
Marketable securities ............................... 16,003 --
Other ............................................... 7,034 5,856
-------- --------
Total other assets ................................ 33,495 13,844
-------- --------
$634,572 $469,201
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .................................... $ 15,722 $ 12,512
Current portion of long-term debt ................... 4,017 1,667
Accrued expenses and other .......................... 68,209 39,216
-------- --------
Total current liabilities ......................... 87,948 53,395
-------- --------
LONG-TERM DEBT, LESS CURRENT PORTION .................. 62,254 32,826
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $0.01 per share
(110,000,000 shares authorized; issued:
1996 - 72,526,009; 1995 - 71,011,002) ............. 725 710
Additional paid-in capital .......................... 471,623 408,793
Retained earnings (deficit) ......................... 12,831 (27,699)
Unrealized gains(losses) on
marketable securities .............................. (743) 1,245
Cumulative translation adjustment ................... (66) (69)
-------- --------
Total shareholders' equity ........................ 484,370 382,980
-------- --------
$634,572 $469,201
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 12
<TABLE>
BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<CAPTION>
Years Ended December 31, 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Product .......................... $ 78,202 $ -- $ --
Royalties ........................ 181,502 134,653 140,433
Interest ......................... 17,386 17,038 15,911
-------- -------- --------
Total revenues ................. 277,090 151,691 156,344
-------- -------- --------
EXPENSES:
Cost of sales .................... 28,525 10,504 9,948
Research and development ......... 132,384 87,448 91,213
Selling general and administrative 73,632 40,293 24,686
Other,net ........................ 1,720 6,001 32,404
-------- -------- --------
Total expenses ................. 236,261 144,246 158,251
-------- -------- --------
Income(loss) before income
taxes ....................... 40,829 7,445 (1,907)
INCOME TAXES ....................... 299 1,785 2,990
-------- -------- --------
Net income(loss) ............. $ 40,530 $ 5,660 $ (4,897)
======== ======== ========
EARNINGS (LOSS) PER SHARE OF
COMMON STOCK ....................... $ 0.55 $ 0.08 $ (0.07)
======== ======== ========
Average number of shares
outstanding ....................... 73,221 72,890 65,548
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 13
<TABLE>
BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Years Ended December 31, 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .................. $ 40,530 $ 5,660 $ (4,897)
Adjustments to reconcile net income
(loss) to net cash provided from
operating activities:
Depreciation and amortization ...... 15,264 10,916 8,056
Other .............................. 682 (3,177) 3,484
Deferred income taxes .............. (5,541) -- --
Changes in:
Accounts receivable .............. (23,340) (1,110) 13,193
Other current assets ............. (7,727) (4,269) (1,102)
Accounts payable, accrued
expenses and other liabilities . 26,671 1,429 16,152
--------- --------- ---------
Net cash provided from operating
activities ....................... 46,539 9,449 34,886
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable
securities ........................ (369,893) (349,025) (312,057)
Proceeds from sales of marketable
securities ........................ 370,252 307,021 285,432
Investment in research collaboration (16,774) -- --
Acquisitions of property
and equipment ..................... (62,030) (47,998) (40,540)
Additions to patents ............... (3,606) (2,311) (3,130)
--------- --------- ---------
Net cash used by investing
activities ........................ (82,051) (92,313) (70,295)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt .................... 33,444 35,326 --
Repayments on long-term debt ....... (1,666) (833) --
Issuance of common stock and warrant
and option exercises .............. 19,996 39,459 15,545
--------- --------- ---------
Net cash provided from financing
activities ........................ 51,774 73,952 15,545
--------- --------- ---------
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS ................... 16,262 (8,912) (19,864)
--------- --------- ---------
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR............................. 45,770 54,682 74,546
--------- --------- ---------
CASH AND CASH EQUIVALENTS,
END OF YEAR......................... $ 62,032 $ 45,770 $ 54,682
========= ========= =========
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the year for:
Interest .......................... 4,038 2,000 400
Income Taxes ...................... 1,516 591 170
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 16
BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
(in thousands)
Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
Unrealized
Gains
Additional Retained (Losses) on Cumulative
Common Paid-in Earnings Marketable Translation Shareholders'
Stock Capital (Deficit) Securities Adjustment Equity
------- -------- -------- ------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1993 ........ $ 646 $352,924 $(28,462) $ -- $ 66 $325,174
Conversion of warrants ... 11 10,883 10,894
Issuance of common stock . 457 457
Exercise of options ...... 6 4,188 4,194
Unrealized losses on
marketable securities ... (5,867) (5,867)
Net loss ................. (4,897) (4,897)
Translation adjustment ... (21) (21)
------- -------- -------- ------- ---- --------
Balance, December 31, 1994 $ 663 $368,452 $(33,359) $(5,867) $ 45 $329,934
Conversion of warrants ... 36 30,564 30,600
Issuance of common stock . 470 470
Exercise of options,
including tax benefits .. 11 9,307 9,318
Unrealized gain on
marketable securities ... 7,112 7,112
Net income ............... 5,660 5,660
Translation adjustment ... (114) (114)
------- -------- -------- ------- ---- --------
Balance, December 31, 1995 $ 710 $408,793 $(27,699) $ 1,245 $(69) $382,980
Exercise of option ....... 15 19,288 19,303
Issuance of common stock . 693 693
Tax benefit related to
stock options ........... 42,849 42,849
Unrealized losses on
marketable securities,
net of taxes ............ (1,988) (1,988)
Net income ............... 40,530 40,530
Translation adjustment ... 3 3
------- -------- -------- ------- ---- --------
Balance, December 31, 1996 $ 725 $471,623 $ 12,831 $ (743) $(66) $484,370
======= ======== ======== ======= ==== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 17
BIOGEN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Biogen, Inc. (the "Company") is a biopharmaceutical company principally engaged
in the business of developing, manufacturing and marketing drugs for human
health care. The Company currently derives revenues from sales of
AVONEX[trademark] under the Biogen name and from worldwide sales of the
Company's licensees of a number of products covered under patents controlled by
the Company, including alpha interferon and hepatitis B products. In May 1996,
the Company received approval from the United States Food and Drug
Administration ("FDA") to market its new product AVONEX [trademark] as a
treatment for relapsing forms of multiple sclerosis ("MS").
Consolidation Principles
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated. Certain items in prior years' financial
statements have been reclassified to conform with the current year's
presentation.
Translation of Foreign Currencies
Adjustments resulting from the translation of the financial statements of the
Company's foreign operations into U.S. dollars are excluded from the
determination of net income and are accumulated in a separate component of
shareholders' equity. Foreign exchange translation gains and losses are included
in the results of operations. Such amounts for the years presented were
insignificant.
Cash and Cash Equivalents
The Company considers only those investments which are highly liquid, readily
convertible to cash and which mature within three months from date of purchase
to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market with cost determined under
the first-in/first-out ("FIFO") method and are classified as other current
assets. Included in inventory are raw materials used in the production of
pre-clinical and clinical products which are expensed as research and
development costs when consumed. The components of inventories, net of
applicable reserves and allowances, as of December 31, are as follows:
(in thousands) 1996 1995
------- ------
<PAGE> 18
<TABLE>
<S> <C> <C>
Raw materials $ 3,262 $3,051
Work in process 7,801 2,968
Finished goods 5,495 1,112
------- ------
$16,558 $7,131
======= ======
</TABLE>
Marketable Securities
As of January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" which had no effect on net income. In accordance with SFAS 115, the
Company classified its marketable securities as "available for sale" with the
securities recorded at fair market value and unrealized gains and losses
included in shareholders' equity, net of related tax effects.
Accounts Receivable
During the first quarter of 1994, the Company entered into an agreement with a
bank to sell certain foreign based accounts receivable, with recourse. At
December 31, 1996, the Company had approximately $14.9 million of foreign based
accounts receivable outstanding under the agreement. The exposure to credit risk
under the recourse provision is minimal since the debtors are highly rated
companies. The selling price is partially determined by foreign exchange rates
at the end of each quarter. Resulting gains and losses are recorded in other
expenses when the receivables are sold.
Property and Equipment
Property and equipment is carried at cost and depreciation is calculated on the
straight-line basis over the estimated useful lives of the assets. Leasehold
improvements are amortized over the lesser of the useful life or the term of the
respective lease. The Company capitalizes, to construction in progress, the
incremental costs associated with the validation effort required for licensing
by the FDA of a manufacturing facility for the production of a commercially
approved drug. These costs include direct labor and material. Buildings and
equipment are depreciated over estimated useful lives ranging from 30 to 40 and
5 to 10 years, respectively.
Patents
The costs of patents and patent applications are capitalized and amortized on
the straight-line basis over estimated useful lives up to 15 years. Accumulated
amortization of patent costs was $11.3 million and $9.3 million as of December
31, 1996 and 1995, respectively. The carrying value of patents is reviewed by
the Company and impairments are recognized when the expected future operating
cash flows derived from the patent are less than their carrying value.
Revenues
<PAGE> 19
Revenues from product sales are recognized when product is shipped and are net
of applicable allowances. The Company receives revenues under license agreements
with a number of third parties that sell products based on technology developed
by the Company. All of the license agreements provide for the payment of
royalties to the Company based on sales of the licensed product. The Company
records these revenues based on estimates of the sales that occurred during the
relevant period. Many of the license agreements also provide for the payment of
one-time, non-refundable fees when the agreement is signed or when commercial
goals are achieved. These fees are recorded as revenue in accordance with the
terms of the particular agreement.
Research and Development Expenses
Research and development costs are expensed as incurred.
Per Share Data
Earnings (loss) per share is based upon the weighted average number of common
shares and, if dilutive, common stock equivalents outstanding, which include
options and warrants.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and use assumptions
that affect certain reported amounts and disclosures; actual amounts may differ.
Stock Based Compensation
In 1996, the Company adopted, through disclosure only, Statement of Financial
Accounting Standards Number 123 "Accounting for Stock Issued to Employees"("SFAS
123"). The disclosures include pro forma net income and earnings per share as if
the fair value-based method of accounting had been used. Stock issued to
non-employees is accounted for in accordance with SFAS
123.
2. FINANCIAL INSTRUMENTS
<TABLE>
The following is a summary of marketable securities as of December 31,:
<CAPTION>
Unrealized
Fair ---------- Amortized
(In thousands) Value Gains Losses Cost
-------- ------ ---- --------
December 31, 1996:
- -----------------
<S> <C> <C> <C> <C>
U.S. Government securities $146,707 $ 111 $718 $147,314
Corporate debt securities 112,642 350 184 112,476
-------- ------ ---- --------
$259,349 $ 461 $902 $259,790
======== ====== ==== ========
</TABLE>
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C>
Marketable securities, noncurrent $ 16,003 $ -- $771 $ 16,774
======== ====== ==== ========
December 31, 1995:
- -----------------
U.S. Government securities $136,218 $1,021 $535 $135,732
Corporate debt securities 125,960 758 -- 125,202
-------- ------ ---- --------
$262,178 $1,779 $535 $260,934
======== ====== ==== ========
</TABLE>
The average maturity of the Company's marketable securities as of December 31,
1996 was 15 months. Proceeds from maturities and other sales of marketable
securities, which were primarily reinvested, for the year ended December 31,
1996, were $370.3 million. Realized losses on these sales for the years ended
December 31, 1996, 1995 and 1994 were $783,000, $58,000 and $3.4 million,
respectively.
Financial instruments that potentially subject the Company to concentrations of
credit risk are accounts receivable and marketable securities. Wholesale
distributors and large pharmaceutical companies account for the majority of the
accounts receivable and collateral is generally not required. To mitigate the
risk, the Company monitors the financial performance and credit worthiness of
its customers. The Company invests its excess cash balances in marketable debt
securities, primarily U.S. government securities and corporate bonds and notes,
with strong credit ratings. The Company limits the amount of investment exposure
as to institution, maturity and investment type. The Company uses the swap
agreements to manage interest costs and risk associated with the floating rate
debt and, accordingly, accounts for the swap agreements under the accrual basis,
recording the differential to be paid or received as interest expense. The fair
value of the swap agreements at December 31, 1996 and 1995, representing the
cash requirements of the Company to settle the agreements, approximated $580,000
and $3.2 million, respectively.
3. LONG-TERM DEBT
<TABLE>
Long-term debt consists of the following as of December 31,(in thousands):
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Term Loan due 2005............................. $22,499 $24,167
Construction Loan due 2007...................... 43,772 10,326
------- -------
66,271 34,493
Current portion (4,017) (1,667)
------- -------
$62,254 $32,826
======= =======
</TABLE>
In March 1995, the Company completed construction of its research and office
<PAGE> 21
building in Cambridge, Massachusetts and entered into a $25 million floating
rate loan with a bank (the Term loan). The Term loan provides for annual
principal payments of $1.7 million in each of the years 1996 through 1999 with
the balance due May 8, 2005. The Company has fixed its interest rate on the Term
loan at 7.5% under the terms of a swap agreement under which the Company agrees
to exchange with the bank semi-annually the difference between 7.5% and a
floating rate computed on a notional amount beginning at $25 million and
amortizing according to the same terms of the loan agreement.
In the second quarter of 1995, the Company began construction of its biologics
manufacturing facility in Research Triangle Park, North Carolina. The estimated
cost of construction, including land, is $59 million. In August 1995, the
Company entered into a floating rate loan agreement with a bank for financing of
this project (the "Construction Loan"). Under the terms of the Construction
Loan, the Company may be advanced funds during the construction period up to $50
million. Beginning upon the earlier of 90 days after completion of the project
or August 1997, the outstanding principal balance will be payable in 39
consecutive quarterly installments of $800,000, assuming the full $50 million is
advanced, with the balance due in 2007. The Company also entered into two
interest rate swap agreements fixing its interest rate at 6.39% during the
construction period and 7.75% during the remaining term of the loan, payable
quarterly.
The Term loan and Construction Loan agreements include various covenants,
including financial covenants which require the Company to maintain minimum net
worth, cash flow and various financial ratios. The loans are secured by certain
assets of the Company.
<TABLE>
4. CONSOLIDATED BALANCE SHEET DETAILS
<CAPTION>
(in thousands) 1996 1995
-------- --------
<S> <C> <C>
Property and equipment:
Land............................................ $ 3,470 $ 3,301
Buildings....................................... 26,417 23,960
Construction in progress........................ 65,079 20,184
Leasehold improvements.......................... 50,739 45,663
Equipment....................................... 72,221 61,906
-------- --------
Total cost...................................... 217,926 155,014
-------- --------
Less accumulated depreciation................... 52,603 39,966
-------- --------
$165,323 $115,048
======== ========
</TABLE>
Depreciation expense was $12.7 million and $8.5 million for 1996 and 1995
respectively. The Company capitalized interest costs of $1.7 million and
$143,000, respectively, in 1996 and 1995 with respect to qualifying construction
projects.
<PAGE> 22
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------- -------
<S> <C> <C>
Accrued expenses and other:
Royalties and licensing fees.................... $22,784 $ 9,431
Clinical trial costs............................ 3,385 2,105
Accrued compensation, benefits and related costs 7,797 5,508
Income taxes.................................... 6,634 5,654
Other........................................... 27,609 16,518
------- -------
$68,209 $39,216
======= =======
</TABLE>
5. PENSIONS
<TABLE>
The Company has a defined benefit pension plan which provides benefits to
substantially all of its employees. The Company also has a supplemental
retirement benefit plan which covers certain employees. The pension plans are
noncontributory with benefit formulas based on employee earnings and credited
years of service. The Company's funding policy for its pension plans is to
contribute amounts deductible for federal income tax purposes. Funds contributed
to the plans are invested primarily in fixed income and equity securities.
Pension cost for each of the three years ended December 31 are summarized below:
<CAPTION>
(in thousands) 1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Service cost........................ $1,381 $ 847 $ 791
Interest cost....................... 659 371 313
Actual return on plan assets........ (532) (622) 9
Net amortization and deferral....... 312 420 (149)
------ ------ -----
Net pension cost.................... $1,820 $1,016 $ 964
====== ====== =====
</TABLE>
<TABLE>
The funded status of the defined benefit plans at December 31, is as follows:
<CAPTION>
(in thousands) 1996 1995
------ -------
<S> <C> <C>
Actuarial present value of:
Vested benefits obligation ....... $5,497 $ 4,513
Non-vested benefits .............. 1,348 501
------ -------
Accumulated benefit obligation ... 6,845 5,014
====== =======
Projected benefit obligation ....... 9,466 7,267
Plan assets at fair value .......... 5,579 3,385
------ -------
Projected benefit obligation in
excess of plan assets ............. 3,887 3,882
</TABLE>
<TABLE>
<S> <C> <C>
Unrecognized net asset ............. 42 63
Unrecognized net loss .............. (985) (1,407)
Unrecognized prior service cost .... (444) (165)
------ -------
Accrued pension cost ............... $2,500 $ 2,373
====== =======
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 7.5% for 1996 and 7.25% for 1995. The assumed long-term compensation increase
rate was 5% and the assumed long-term rate of return on plan assets was 8% for
1996 and 1995, respectively.
6. INCOME TAXES
<TABLE>
The components of income (loss) before income taxes and of income tax expense
(benefit)for each of the three years ended December 31, is as follows:
<CAPTION>
(in thousands) 1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic ....................... $ 65,250 $ 28,845 $(1,533)
Foreign ........................ (24,421) (21,400) (374)
-------- -------- -------
$ 40,829 7,445 (1,907)
======== ======== =======
Income tax expense (benefit):
Current
Federal ........................ $ 4,636 $ 1,264 $ 2,540
State .......................... 789 211 415
Foreign ........................ 415 310 35
-------- -------- -------
$ 5,840 1,785 2,990
======== ======== =======
Deferred
Federal ........................ $ (4,082) -- --
State .......................... (1,459) -- --
Foreign ........................ -- -- --
-------- -------- -------
$ (5,541) -- --
======== ======== =======
Total income tax expense ........ $ 299 $ 1,785 $ 2,990
======== ======== =======
</TABLE>
The Company's foreign subsidiaries generated operating losses in 1996 reflecting
the costs of building a commercial infrastructure in Europe and the foreign
subsidiaries' investment in the Company's consolidated research and development
efforts.
<PAGE> 23
<TABLE>
Deferred tax assets (liabilities) are comprised of the following at December 31:
<CAPTION>
(in thousands) 1996 1995
------- --------
<S> <C> <C>
Tax credits................................................. $26,079 $ 20,648
Loss carryforwards.......................................... 17,006 30,625
Discontinuance of HIRULOG[registered trademark] program..... - 5,984
Inventory and other reserves................................ 5,304 2,401
Other....................................................... 4,510 2,178
Deferred tax assets valuation allowance..................... - (57,091)
------- --------
Deferred tax assets, net................................... 52,899 4,745
------- --------
Depreciation and amortization............................... (7,496) (4,745)
------- --------
Deferred tax liabilities................................... (7,496) (4,745)
------- --------
$45,403 $ --
======= ========
</TABLE>
Due to the sustained growth during the third quarter of 1996 in sales and
profitability of the Company's first commercial product, AVONEX[trademark], the
Company made the determination that it is more likely than not that it will
realize the benefits of the net deferred tax assets and it has therefore
released all of the related valuation allowance. The Company's reversal of the
valuation allowance resulted in a realization of income tax benefits of
approximately $23 million representing the balance of tax-loss carryforwards and
tax credits that had not been recognized at the beginning of the third quarter
as well as tax credits generated during the quarter. The reversal of the
valuation allowance also resulted in an increase in additional paid-in capital
of $38.6 million relating to deductions for non-qualified stock options.
<TABLE>
A reconciliation between the amounts of reported income tax expense and the
amounts computed using the U.S. federal statutory rate of 35% are as follows:
<CAPTION>
(in thousands) 1996 1995 1994
-------- ------- ------
<S> <C> <C> <C>
Income tax expense (benefit) at
statutory rates.................... $ 14,350 $ 2,606 $ (667)
State taxes, net of federal income
tax benefit........................ 509 138 270
Foreign losses without tax benefit
and foreign rate differential...... 8,887 7,812 391
Effects of losses not currently
utilizable......................... -- -- 2,962
Change in valuation allowance and
current utilization of net
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C> <C>
operating loss carryforwards and
deferred tax assets................ (23,000) (9,485) --
Other, net........................... (447) 714 34
-------- ------- ------
Reported income tax expense......... $ 299 $ 1,785 $2,990
======== ======= ======
</TABLE>
At December 31, 1996, the Company had net operating loss carry forwards
available in the United States for federal income tax return purposes of $47
million and tax credits of $15 million, most of which expire at various dates
through 2010. The Company also has approximately $1.0 million of foreign loss
carry forwards at December 31, 1996 which do not expire.
7. RESEARCH COLLABORATIONS
In December, 1996, the Company signed a research collaboration and license
agreement with Creative BioMolecules, Inc. ("CBM") under which Biogen obtained
rights to develop and market CBM's morphogenic protein, OP-1, for the treatment
of renal disorders. Under the terms of the agreement the Company purchased
approximately 1.5 million shares of CBM common stock for $18 million and paid a
one-time license fee of $10 million. The payment for the common stock included a
$1.2 million premium which was charged to research and development expense. The
Company also agreed to fund approximately $10.5 million in research activities
over the next three years, of which $2 million was included in research and
development expense in 1996.
Effective July 1, 1996, the Company signed a collaborative research and
commercialization agreement with Ontogeny, Inc. ("Ontogeny"), a private
biotechnology company, for the development and commercialization of three
specific Hedgehog cell differentiation proteins. The Company acquired a minority
equity interest in Ontogeny as well as certain exclusive, worldwide rights
related to products based on the Hedgehog proteins for most disease areas. The
Company has agreed to fund approximately $6 million in research and development
costs of Ontogeny over two years and to make license fees and milestone payments
to Ontogeny of up to $27 million per Hedgehog protein, depending on the
achievement of certain clinical, regulatory and commercial milestones over the
remaining life of the agreement.
In August 1995, the Company signed a collaborative research agreement for the
development of human gene therapy treatments with Genovo, Inc. ("Genovo"), a
gene therapy research company. The Company acquired a minority equity interest
in Genovo as well as certain licensing rights. The Company accounts for the
investment in Genovo on the equity method of accounting. The Company has agreed
to fund research and development costs to Genovo up to approximately $37 million
over the remaining life of the agreement, depending on achievement of scientific
milestones, which will be recorded as research and development expense as
incurred.
<PAGE> 25
8. COMMITMENTS AND CONTINGENCIES
<TABLE>
The Company rents laboratory and office space and certain equipment under
noncancellable operating leases. The rental expense under these leases, which
terminate at various dates through 2004, amounted to $6.6 million in 1996, $5.1
million in 1995 and $4.7 million in 1994. The lease agreements contain various
clauses for renewal at the option of the Company and, in certain cases,
escalation clauses linked generally to rates of inflation. At December 31, 1996,
minimum annual rental commitments under noncancellable leases were as follows:
<CAPTION>
(in thousands)
Year
- ----
<C> <C>
1997.................................................. $ 6,540
1998.................................................. 5,050
1999.................................................. 4,302
2000.................................................. 3,231
2001.................................................. 829
Thereafter............................................ 2,196
-------
Total minimum lease payments.......................... $22,148
=======
</TABLE>
During the fourth quarter of 1994, a total of six class action lawsuits were
initiated against the Company and several of its directors and officers. On
March 3, 1995, these cases were consolidated into a single proceeding in the
United States District Court for the District of Massachusetts. On January 23,
1996, in response to motions to dismiss the entire case filed by Biogen and the
named officer and director defendants, the District Court issued a memorandum
and Order (dated January 22, 1996) dismissing most of the claims asserted in the
plaintiffs' Second Amended Complaint, including all claims against the Company's
outside directors. The only two claims remaining in the case pertain to
statements concerning the results of the HIRULOG[registered trademark] TIMI-7
clinical trials in unstable angina. The Court did not reach a decision on the
merits of these claims. On October 11, 1996, the Company filed a motion for
summary judgment in the case. The plaintiffs have opposed the motion. The
Company will continue to defend vigorously the claims that remain in the case.
On October 7, 1996, a judge dismissed the lawsuit filed by Berlex Laboratories,
Inc. against the FDA in the U.S. District Court for the District of Columbia in
which Berlex claimed that the FDA's approval of Biogen's AVONEX[trademark] was
improper. Biogen was an intervenor-defendant in the litigation. In dismissing
the suit, the judge held that the FDA acted lawfully in approving
AVONEX[trademark]. Berlex chose not to appeal this decision.
On July 3, 1996, Berlex filed suit against Biogen in the United States District
Court for the District of New Jersey alleging infringement by Biogen of Berlex's
"McCormick" patent in the United States in the production of
<PAGE> 26
AVONEX[trademark]. Berlex seeks a judgment granting it unspecified damages, a
trebling of any damages awarded and a permanent injunction restraining Biogen
from alleged infringement. An unfavorable ruling in the Berlex suit could have a
material adverse effect on the Company's results of operations and financial
position. The Company believes that it has meritorious defenses to the Berlex
claim. Prior to the date of the suit filed by Berlex on the McCormick patents,
Biogen had filed a suit against Schering AG ("Schering"), Berlex and the Board
of Trustees of the Leland Stanford Jr. University ("Stanford") in the United
States District Court for the District of Massachusetts for a declaratory
judgment of non-infringement and invalidity of the McCormick patent contending
that AVONEX[trademark], its manufacturing process and intermediates used in that
process do not infringe the McCormick patent and that such patent is not valid.
In November 1996, the U.S. District Court in Massachusetts ruled that it had
jurisdiction and Berlex's New Jersey action was transferred to Massachusetts.
Biogen and Stanford subsequently entered into an agreement voluntarily
dismissing Stanford from the suit. A trial is not expected before the latter
part of 1998.
In June 1996, ASTA Medica Aktiengesselschaft filed for arbitration against
Biogen with the International Chamber of Commerce (ICC)in Paris, France. In its
complaint, ASTA alleges that Biogen's 1993 termination of a 1989 agreement
licensing ASTA to market recombinant interferon beta in certain European
territories was ineffective. The agreement at issue also included as a party
Bioferon, a Biogen joint venture that declared bankruptcy in 1993. The ASTA
complaint asks that an ICC panel declare that the 1989 licence is still in
force, and, in the alternative, seeks approximately $5 million in damages. The
territories in the 1989 license included most of Western Europe except Germany.
The arbitration will take place in Zurich under Swiss law.
The Company's management believes that it has meritorious defenses to the
preceding claims and given these defenses, believes the ultimate outcome of
these legal proceedings will not have a material adverse effect on the results
of operations or financial position of the Company.
9. SHAREHOLDERS' EQUITY
On October 22, 1996, the Board of Directors declared a two-for-one stock split
to be effected in the form of a stock dividend of one share of Common Stock for
each share outstanding. The stock dividend was payable on November 15, 1996 to
shareholders of record at the close of business on November 4, 1996. All
references to the number of shares and per share amounts in the financial
statements have been restated to reflect the effect of the stock split.
Convertible Exchangeable Preferred Stock
The Company has authority to issue 20,000,000 shares of $.01 par value preferred
stock.
Shareholder Rights Plan
<PAGE> 27
In 1989, the Company's Board of Directors declared a dividend of one preferred
share purchase right (a "right") for each share of common stock outstanding.
Each right entitles the holder to purchase from the Company one two-hundredth of
a share of $0.01 par value Series A junior participating preferred stock at a
price of $34.00 per two-hundredth of a share (post split basis), subject to
certain adjustments. The rights are exercisable only if a person or group
acquires 20% or more of the outstanding common stock of the Company or commences
a tender offer which would result in the ownership of 20% or more of the
outstanding common stock of the Company; or if 10% of the Company's common stock
is acquired and the acquirer is determined by the Board of Directors to be an
adverse person (as defined in the rights plan). Once a right becomes
exercisable, the plan allows the Company's shareholders to purchase common stock
at a substantial discount. Unless earlier redeemed, the rights expire on May 8,
1999 (adjusted to reflect stock split). The Company is entitled to redeem the
rights at $.005 per right, subject to adjustment for any future stock split,
stock dividend or similar transaction.
As of December 31, 1996, the Company has authorized the issuance of 400,000
shares of Series A junior participating preferred stock for use in connection
with the shareholder rights plan.
Share Option and Purchase Plans
<TABLE>
The Company has several plans and arrangements under which it may grant options
to employees, Directors, Scientific Board members and consultants to purchase
common stock. Options are granted for periods of up to 10 years and become
exercisable in installments over periods of up to 7 years or upon the
achievement of scientific or other goals. Activity under these plans follows
(shares are in thousands):
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, Jan. 1..... 11,772 $17.59 10,764 $14.71 9,511 $12.65
Granted................ 1,935 34.46 2,465 25.81 2,423 20.18
Exercised.............. (1,478) 12.89 (1,117) 7.13 (537) 7.86
Canceled............... (481) 20.92 (340) 21.38 (633) 10.58
------ ------ ------ ------ ------ ------
Outstanding, Dec. 31.... 11,748 20.77 11,772 17.59 10,764 14.71
====== ====== ====== ====== ====== ======
Options exercisable .... 5,692 5,925 5,188
Available for grant .... 2,310 3,764 1,889
Weighted average fair
value of options
granted during year ... $16.59 $12.63
</TABLE>
<PAGE> 28
Options were exercised during the three years ended December 31, 1996 at prices
ranging from $2.13 to $29.38 per share. The exercise price of options
outstanding at December 31, 1995, 1994, 1993 ranged from $2.13 to $41.31 per
share.
The Company also has two employee stock purchase plans covering substantially
all of its employees. The plans allow employees to purchase common stock at 85%
of the lower of the fair market value at either the date of the beginning of the
plan period or the purchase date. Purchases under the plans are subject to
certain limitations and may not exceed an aggregate of 560,000 shares during the
term of the plans; no shares may be issued after December 31, 2004. Through
December 31, 1996, 253,230 shares have been issued under the plans.
<TABLE>
Had compensation cost for the Company's 1996 and 1995 grants for stock-based
compensation plans been determined consistent with SFAS 123, the Company's pro
forma net income, and pro forma earning per share for the years ending December
31, would be as follows (in thousands except per share data):
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Pro forma net income $36,679 $3,711
Pro forma earnings per share $ 0.50 $ 0.05
</TABLE>
<TABLE>
The fair value of the option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Expected dividend yield 0% 0%
Expected stock price volatility 36% 40%
Risk-free interest rate 5.5%-5.9% 5.6%-7.7%
Expected option term 2.5 YEARS 2.5 Years
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. SFAS 123 does not apply to awards prior to 1995, and
additional awards in future years are anticipated.
Common Stock Warrants
During 1995, the Company received $30.6 million from the exercise of 3.6 million
common stock warrants issued in 1989 in connection with a research agreement
with an insurance company. During 1994, the Company received $10.9 million from
the exercise of 1.1 million common stock warrants issued in connection with the
original sale of limited partnership interests in Biogen Medical Products
Limited Partnership. As of December 31, 1996, no common stock warrants were
outstanding.
<PAGE> 29
10. GEOGRAPHIC DATA
<TABLE>
Revenues, excluding interest, were derived in the following geographic areas for
the years ended December 31:
<CAPTION>
(in thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
United States............... $131,756 44,764 $ 44,083
Japan....................... 50,342 16,082 27,216
Europe...................... 62,459 60,523 56,881
Other....................... 15,147 13,284 12,253
-------- -------- --------
$259,704 $134,653 $140,433
======== ======== ========
</TABLE>
The Company received revenue from three unrelated parties in 1996 accounting for
a total of 27%, 17% and 13% of total product and royalty revenues; two unrelated
parties in 1995 accounting for 40% and 39% of total royalty revenues; and three
unrelated parties in 1994 accounting for 40%, 34% and 11% of total royalty
revenues.
11. OTHER EXPENSES
During the third quarter of 1994, the Company incurred a pre-tax charge to other
expenses of $25 million as a result of its decision to discontinue its major
activities associated with HIRULOG[registered trademark] development. The charge
related entirely to third-party expenses associated with the manufacture of drug
supplies and wind-down of clinical trial activities.
<TABLE>
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share amounts)
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
1996
- ----
Total revenues ........ $38,843 $45,401 $100,859 $91,987 $277,090
Product revenue ....... -- 6,125 27,517 44,560 78,202
Royalties revenue ..... 34,378 35,032 69,236 42,856 181,502
Total expenses and
taxes ................ 42,501 54,494 55,807 83,758 236,560
Net income(loss) ...... (3,658) (9,093) 45,052 8,229 40,530
Earnings (loss) per
share of common stock (0.05) (0.13) 0.60 0.11 0.55
1995
- ----
Total revenues ........ $35,970 $36,896 $ 38,177 $40,648 $151,691
Royalties revenue ..... 31,953 32,717 33,884 36,099 134,653
Total expenses and
taxes ................ 33,136 36,182 37,049 39,664 146,031
Net income ............ 2,834 714 1,128 984 5,660
Earnings per share of
common stock ......... 0.04 0.01 0.02 0.01 0.08
</TABLE>
<PAGE> 30
EXHIBIT 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Biogen, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of shareholders' equity
present fairly, in all material respects, the financial position of Biogen, Inc.
and its subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
January 14, 1997
<PAGE> 31
SHAREHOLDER INFORMATION
BIOGEN, INC. AND SUBSIDIARIES
CORPORATE HEADQUARTERS:
Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142
Telephone: (617) 679-2000
Fax: (617) 679-2617
ANNUAL MEETING:
Friday, June 6, 1997 at 10:00 a.m.
at the Company's offices at 12 Cambridge Center
All shareholders are welcome.
MARKET FOR SECURITIES:
Biogen's securities are quoted on the
NASDAQ National Market System.
Common stock symbol: BGEN
As of February 14, 1997, there were approximately 2,759 holders of record of the
Company's Common Stock. The Company has not paid any cash dividends on its
Common Stock since its inception, and does not intend to pay any dividends in
the foreseeable future. On November 15, 1996, the Company effected a two-for-one
stock split of its Common Stock. The quarterly high and low closing sales price
(adjusted for all periods to reflect the stock split) of the Common Stock on the
NASDAQ National Market System for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
HIGH LOW
FISCAL 1996
<S> <C> <C>
First Quarter 38 1/4 28 3/4
Second Quarter 33 7/8 25 13/16
Third Quarter 38 1/16 26 3/8
Fourth Quarter 43 36 3/16
FISCAL 1995
First Quarter 21 3/16 16 1/8
Second Quarter 23 3/8 18 11/16
Third Quarter 30 1/2 20 3/4
Fourth Quarter 32 1/8 25
</TABLE>
SEC FORM 10-K:
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K is available without charge upon written request to the Corporate
Communications Department, Biogen, Inc., 14 Cambridge Center, Cambridge, MA
02142
TRANSFER AGENT:
For shareholder questions regarding lost certificates, address changes and
changes of ownership or name in which the shares are held, direct inquiries to:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Telephone: (800)426-5523
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
U.S. LEGAL COUNSEL:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
ANNUAL REPORT ANNOUNCEMENT
As a service to our shareholders and prospective investors, copies of Biogen
news releases issued in the last 12 months are now available almost immediately
24 hours a day, seven days a week on the Internet's World Wide Web at
http://www.prnewswire.com and via automated fax by calling "Company News On
Call" at 1 800 758-5804, ext. 101550. Biogen news releases are usually posted on
both systems within one hour of being issued and are available at no cost.
THE BIOGEN LOGO IS A REGISTERED TRADEMARK OF BIOGEN, INC. AVONEX[TRADEMARK] IS A
TRADEMARK OF BIOGEN, INC. HIRULOG[REGISTERED TRADEMARK] IS A REGISTERED
TRADEMARK OF BIOGEN, INC. INTRON[REGISTERED TRADEMARK] A IS A REGISTERED
TRADEMARK OF SCHERING-PLOUGH CORPORATION.
<PAGE> 1
Exhibit 21
----------
<TABLE>
List of Subsidiaries
--------------------
<CAPTION>
Name State or other
---- --------------
jurisdiction of
---------------
organization
------------
<S> <C>
Biogen Securities Corp. Massachusetts
Biogen Realty Corp. Massachusetts
Biogen GmbH Germany
Biogen Limited United Kingdom
Biogen France, S.A. France
Biotech Manufacturing Ltd. Channel Islands
Biogen B.V. The Netherlands
Biogen Technologies, Inc. Delaware
Biogen Canada, Inc. Delaware
Biogen Marketing GmbH Switzerland
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3, as amended (Nos.
33-14741, 33-14743, 33-20183 and 33-51639) and in the Registration Statements on
Form S-8, as amended (Nos. 2-87550, 2-96157, 33-9827, 33-14742, 33-37312,
33-22378, 33-41077, 33-69174, 33-63013 and 33-63015) of Biogen, Inc. and its
subsidiaries of our report dated January 14, 1997 appearing in the 1996 Annual
Report to Shareholders which is incorporated in this Annual Report on Form 10-K.
Price Waterhouse LLP
Boston, Massachusetts
February 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1,000
<CASH> 62,032
<SECURITIES> 275,352
<RECEIVABLES> 44,432
<ALLOWANCES> 1,480
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0
0
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</TABLE>
