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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 18, 1998 (excludes shares held by directors)
$3,132,883,164: 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 18, 1998: 73,822,242 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1998
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Report, and portions of the Registrant's 1997 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 health care. The Company currently derives revenues from sales
of AVONEX(R) (Interferon beta-1a) for the treatment of relapsing forms of
multiple sclerosis and from sales by Biogen's licensees of a number of products,
including alpha interferon and hepatitis B vaccines and diagnostic products.
Biogen began marketing AVONEX(R) in the United States in 1996 and in the fifteen
member countries of the European Union in 1997. Biogen's revenues from sales of
AVONEX(R) in 1997 were approximately $240 million. During 1997, Biogen also
received approximately $172 million in royalty revenue and license fees from its
licensees, including a one-time license fee of $15 million from Merck & Co.,
Inc. under a collaborative agreement for the development of VLA-4 inhibitor
compounds.
Biogen continues to devote significant resources to its ongoing research
and development efforts. The Company focuses its efforts on areas where it has
particular scientific strengths: multiple sclerosis, kidney diseases,
inflammatory diseases, respiratory diseases, cardiovascular diseases,
developmental biology and gene therapy. In 1997, Biogen completed early-stage
clinical trials of several of its product candidates, including a Phase 2a
clinical trial of LFA3TIP in patients with moderate to severe psoriasis, two
Phase 2a studies of CVT-124, a diuretic being developed as a potential treatment
for edema associated with congestive heart failure, a Phase 2 study of gelsolin,
a mucolytic agent studied as a potential treatment for cystic fibrosis, and a
Phase 1 safety study of humanized 5c8 anti-CD40 ligand monoclonal antibody in
patients with ideopathic thrombocytopenic purpura. Additional clinical trials of
LFA3TIP, humanized 5c8 and CVT-124 are underway or planned. In addition, Biogen
has early-stage research programs directed toward finding therapies for kidney
diseases, exploring ways to treat central nervous system disorders, developing
products for human gene therapy and investigating new ways to modify immune
responses more specifically in order to treat diseases of the immune system.
Biogen is also exploring the use of functional genomics technology to find novel
therapeutics.
AVONEX(R) INTERFERON BETA-1a
Biogen currently markets and sells AVONEX(R) (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(R) is a recombinant form of a protein
produced by fibroblast cells in response to viral infection. AVONEX(R) has been
shown in a pivotal clinical trial both to slow the accumulation of disability
and to reduce the frequency of exacerbations in patients with relapsing forms of
multiple sclerosis.
Biogen began selling AVONEX(R) in the United States in May 1996. In March
1997, Biogen received regulatory approval to market and sell AVONEX(R) in the 15
member countries of the European
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Union (EU). Shortly after approval in the EU, Biogen began selling AVONEX(R) in
the United Kingdom, Germany, Austria, Sweden, Finland, Denmark and Switzerland.
The Company introduced AVONEX(R) in the other countries of the EU, including
Italy, Spain, the Netherlands, France and Ireland, in the latter half of 1997.
AVONEX(R) is also on the market in Norway, Israel and Cyprus. In addition,
Biogen has received regulatory approval and is awaiting final reimbursement and
pricing clearance to market AVONEX(R) in New Zealand. The Company expects to
receive regulatory approval to market and sell AVONEX(R) in Canada in the first
half of 1998.
In the United States and in most of the major countries of the EU, Biogen
uses its own sales force to market AVONEX(R). In those countries, Biogen
distributes AVONEX(R) principally through wholesale distributors of
pharmaceutical products or mail order or specialty distributors or using
shipping service providers. The Company also expects to market AVONEX(R)
directly in Canada. In other countries, including Spain, Sweden, Finland,
Norway, Denmark, Italy, Greece, Portugal, Israel and New Zealand, Biogen sells
AVONEX(R) to distribution partners who are then responsible for most marketing
and distribution activities. The Company has also entered into distribution
agreements covering Australia, Latin America, the Caribbean, and South Africa,
and anticipates entering into agreements covering Eastern Europe, Turkey and the
Middle East in 1998. Under most of these agreements the distribution partners
are responsible for obtaining regulatory approval for AVONEX(R) as well as
marketing and distribution.
Biogen is currently conducting several additional clinical studies of
AVONEX(R). These include a clinical study of AVONEX(R) in patients who have had
only one confirmed exacerbation and a dose comparison study comparing the
approved dosage of AVONEX(R) with a higher dose, both of which were initiated in
1996, and a four-year open-label follow-up study initiated in 1995 to obtain
long-term safety and antigenicity data. In addition, in 1997, Biogen began
enrollment in a clinical study of AVONEX(R) in patients with secondary
progressive multiple sclerosis, and commenced a Phase 2 clinical study of
AVONEX(R) in the treatment of glioma, a type of brain cancer.
Revenues from sales of AVONEX(R) in 1997 were $240 million or
approximately 55% of total revenues. Revenues from sales of AVONEX(R) in 1996
were $76.5 million or approximately 28% of total revenues. Approximately 92% of
AVONEX(R) sales in 1997 and approximately 99% of AVONEX(R) sales in 1996 were
generated in the United States. Sales to three major wholesale distributors in
the United States accounted for 11.3%, 10.8% and 10.5%, respectively, of total
revenues (excluding interest) in 1997.
MAJOR RESEARCH AND DEVELOPMENT 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.
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LFA3TIP
Inflammation is the result of the body's immune system response to
infection and injury. In many autoimmune diseases, the inflammation process is
directed inappropriately against the body's own tissues, causing temporary or
permanent damage. Biogen has focused the efforts of its inflammation programs on
developing drugs to inhibit specific cellular interactions critical to the
inflammation process. Central to inflammation is the activation of T-cells,
specialized white blood cells which initiate and control the immune response.
One of the cellular pathways which activates T-cells is the LFA-3/CD2 pathway.
LFA3TIP, a recombinant protein, is designed to modulate immune responses by
binding to the CD2 receptor. Biogen is developing LFA3TIP as a treatment for
certain autoimmune diseases. In 1997, the Company completed a Phase 2a clinical
study of the safety profile of LFA3TIP in patients with moderate to severe
psoriasis. A second Phase 2a study was extended to test additional routes of
administration. Psoriasis is a chronic autoimmune disease that is characterized
by inflammation and thickening of the skin. An estimated 500,000 psoriasis
patients in the United States and Europe combined have a severe enough form of
the disease to need systemic therapies. The completed Phase 2a study involved 51
patients in the United States and Europe. A larger Phase 2b study designed to
provide initial evidence of the efficacy of LFA3TIP compared to a placebo is
scheduled to commence in the first half of 1998.
HUMANIZED 5c8
The human immune system generates two types of responses: humoral (also
known as antibody) responses and cell-mediated responses. When CD40 ligand
("CD40L") on the surface of an activated T-cell binds to CD40 on the surface of
a B-cell, an antibody response occurs, and the production of antibodies is
triggered. When CD40L on the surface of an activated T-cell binds to CD40 on the
surface of a variety of other cells, such as macrophages and dendritic cells, a
cell-mediated response occurs, and the cells then become activated, triggering
an inflammatory response. The inhibition of the CD40-CD40L pathway offers a
unique target for modulating both types of immune responses.
Biogen is developing hu5c8, a humanized monoclonal antibody which binds
to CD40L, as a treatment for a variety of autoimmune diseases and as a therapy
for preventing organ and cellular transplant rejection. In 1997, the Company
completed a Phase 1 safety study of hu5c8 in patients with ideopathic
thrombocytopenic purpura ("ITP"). The Company expects to commence Phase 2
studies of hu5c8 in 1998 in ITP, systemic lupus erythematosus, and hemophilia A
patients with inhibitors to Factor VIII.
CVT-124
In March 1997, Biogen entered into a research collaboration and license
agreement with CV Therapeutics, Inc. ("CVT") under which the Company obtained
rights to develop and market CVT-124. CVT-124 is a highly selective antagonist
of the adenosine A1 receptor which is expressed principally in the heart, brain
and kidney, and which in the kidney mediates vasoconstriction and reabsorption
of fluids. Biogen is developing CVT-124 as a treatment for edema associated with
congestive heart failure. Congestive heart failure is a chronic progressive
disease that affects approximately four to five million people in the United
States. Patients with the disease experience both a chronic course as well as
acute episodes that, in many cases, require hospitalization. Edema, or fluid
retention, in lungs and extremities
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is a significant symptom of chronic heart failure, leading to increased
morbidity and need for hospitalization. In 1997, Biogen completed two Phase 2a
clinical studies of CVT-124. The Company expects to commence a Phase 2b study
comparing CVT-124 to a currently available therapy in 1998.
VLA-4 INHIBITORS
VLA-4 (Very Late Antigen-4) is a receptor which appears on the surface of
most white blood cells except neutrophils and binds to VCAM-1, a protein found
on the surface of vascular endothelial cells. The VLA-4/VCAM-1 pathway
facilitates migration of white blood cells into tissue as part of the body's
normal response during inflammation. This inflammatory response can be severely
damaging or even life threatening when it is directed against the body's own
tissue in chronic inflammatory diseases such as asthma. Biogen scientists have
developed VLA-4-specific small molecule inhibitors designed to interrupt the
cell adhesion activity of VLA-4 as a means of blocking the inflammation process
in a highly specific manner.
In December 1997, Biogen entered into a collaborative research,
development and license agreement with Merck & Co., Inc. ("Merck") under which
Biogen and Merck will collaborate on developing oral and aerosolized small
molecule inhibitors of VLA-4. Biogen expects that Merck will commence a Phase 1
clinical trial of an aerosolized VLA-4 inhibitor in 1998. Under the agreement
with Merck, Biogen has rights to develop, market and sell small molecule
inhibitors of VLA-4 for the treatment of multiple sclerosis, kidney diseases and
disorders, inflammatory bowel disease and most diseases with small patient
populations. Merck has rights to develop, market and sell small molecule
inhibitors of VLA-4 in all other indications, including asthma. As part of the
agreement, Merck paid to Biogen an upfront fee of $15 million. The agreement
also provides for payments to be made by each party upon the attainment of
certain development milestones by the other party. In addition, if a product is
successfully developed by a party, the other party will receive royalties on
sales of the product. In connection with Merck's agreement with Biogen, Merck's
Japanese affiliate, Banyu Pharmaceutical Co., Ltd., will manage clinical
development and the regulatory approval process in Japan with respect to one of
Biogen's proprietary compounds to be selected by Biogen. The marketing rights to
the compound worldwide, including Japan, will be retained by Biogen.
GELSOLIN
Biogen has been studying a recombinant form of the actin-severing agent,
gelsolin, as a potential therapy for 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. In 1997, Biogen completed a Phase 2 clinical study of
gelsolin. The results of the trial were inconclusive. The Company does not
intend to pursue further clinical development of gelsolin itself, and instead is
currently looking for opportunities to license its rights to a third party.
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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 is currently studying OP-1 as a treatment for acute and
chronic renal failure.
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 obtained access to
exclusive worldwide rights to develop therapeutics directly based on Ontogeny's
proprietary family of sonic, indian and desert hedgehogs for most disease
indications. The Company's current focus is the study of the hedgehog proteins
for the treatment of central nervous system disorders.
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 received certain rights
related to diseases of the liver and lung.
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. In
addition, through its collaboration with CuraGen Corporation, Biogen is
exploring the use of functional genomics technology to find novel therapeutics.
RESEARCH AND DEVELOPMENT COSTS
During 1997, 1996 and 1995, Biogen's research and development costs were
approximately $145.5 million, $132.4 million and $87.4 million, respectively.
RISKS ASSOCIATED WITH DRUG DEVELOPMENT AND COMMERCIALIZATION
Certain of the statements set forth above regarding the Company's
research and development programs and AVONEX(R) commercialization, such as the
statement regarding the anticipated receipt and timing of regulatory approval
for the marketing of AVONEX(R) in Canada and the anticipated commencement of
clinical trials of drugs in development, are forward-looking, and are based upon
the Company's current belief as to the outcome and timing of such future events.
These events are subject to a number of factors and uncertainties which could
cause actual results to differ materially from those described in the
forward-looking statements. For example, to receive final marketing approval
from
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Canada for AVONEX(R) in the first half of 1998, the Company must await final
action by the Canadian regulatory authorities, the outcome and timing of which
is still within the regulatory authorities' sole control. Many important factors
affect the Company's ability to successfully develop and commercialize drugs,
including the ability to demonstrate the safety and efficacy of drug candidates
at each stage of the clinical trial process, to meet applicable regulatory
standards and to receive required regulatory approvals, to be capable of
producing drug candidates in commercial quantities at reasonable costs, to
obtain and maintain all necessary patents or licenses, to compete successfully
against other products, and to market products successfully. There can be no
assurance that any of the products described in this section or resulting from
Biogen's research and development 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, be successfully marketed or successfully meet challenges from
competitive products.
For a detailed discussion of the outlook of the Company, see the
"Outlook" section of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference under Item 7.
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 covering the production of
alpha interferons through recombinant DNA techniques. See "Patents and Other
Proprietary Rights." Biogen's worldwide licensee for recombinant alpha
interferon, Schering-Plough 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
worldwide 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. In 1997, Schering-Plough also received marketing
clearance from the FDA for use of Intron(R) A for injection in conjunction with
anthracycline-containing combination chemotherapy for the initial treatment of
patients with clinically aggressive non-Hodgkin's lymphoma, and filed a New Drug
Application for the combination use of Intron(R) A and REBETOL(R) (ribavirin,
USP capsules) for the treatment of chronic hepatitis C. 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 19%, 27% and 40% of Biogen's revenues (excluding interest) in
1997, 1996 and 1995, respectively.
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.
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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 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. Biogen has also
licensed rights under its hepatitis B patents to Merck and The Green Cross
Corporation on a non-exclusive basis in Japan. Royalties from SmithKline and
Merck together accounted for approximately 14%, 23% and 48% of Biogen's revenues
(excluding interest) in 1997, 1996 and 1995, respectively.
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 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. See "Patents and Other Proprietary
Rights".
In 1996, Biogen 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, Biogen receives ongoing royalties on sales of
Pharmacia & Upjohn's recombinant human growth hormone product, Genotropin(R), in
the United States, Canada and Japan.
In March 1997, Biogen granted to The Medicines Company ("TMC") exclusive
worldwide rights to develop and market Hirulog(R) (bivalirudin) direct thrombin
inhibitor. Biogen will receive milestone and royalty payments from TMC if TMC is
successful in its efforts to develop and commercialize the drug.
Financial information about foreign operations and export sales is
included in Note 10 of the Notes to Consolidated Financial Statements
incorporated by reference under Item 8.
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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 been issued on a number of these applications. The
Company has also obtained rights to various patents and patent applications
under licenses with third parties which provide for the payment of royalties by
the Company. Issues remain as to the ultimate degree of protection that will be
afforded to Biogen by its patents. There is no certainty that Biogen's existing
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 pending
patent applications or patent applications licensed from third parties will
ultimately be granted as patents or whether those patents that have been issued
or are issued in the future 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.
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 has granted an exclusive
worldwide license to Schering Plough under Biogen's alpha interferon patents,
and receives royalties from Schering Plough on sales of its Intron(R) A brand of
alpha interferon. See "Principal Products Being Marketed or Developed by
Biogen's Licensees - Intron(R) A Alpha Interferon".
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 United States
Patent and Trademark Office to the applicants of a patent application owned by
Genentech, Inc. ("Genentech") 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 1999. In the meantime, the companies are
discussing possible alternative resolutions of the dispute. The primary 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 of the U.S.
Patent and Trademark Office in the interference has not affected Schering
Plough's ability to market its Intron(R) A brand of alpha interferon.
In the event Biogen does not prevail in its action against Genentech and
Roche or does not resolve the matter in another manner satisfactory to Biogen,
Schering Plough's royalty obligation to Biogen on sales of Intron(R) A in the
United States will terminate upon expiration of Biogen's existing U.S. alpha
interferon patent in 2002. In any event Schering Plough's royalty obligation to
Biogen on sales of Intron(R) A in Europe will terminate upon expiration of
Biogen's European alpha interferon patent in 2001.
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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(R). Yamanouchi Pharmaceutical Co. Ltd., Amgen's
licensee, has filed a declaratory judgment action against Biogen in France,
Italy and Germany seeking a judgment that its consensus interferon product does
not infringe Biogen's alpha interferon patent.
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 has licensed its recombinant
hepatitis B antigen patent rights to manufacturers and marketers of hepatitis B
vaccines and diagnostic test kits, and receives royalties on sales of the
vaccines and test kits by its licensees. See "Principal Products Being Marketed
or Developed by Biogen's Licensees - Hepatitis B Vaccines and Diagnostics." The
obligation of SmithKline and Merck to pay royalties on sales of hepatitis B
vaccines and the obligation of Biogen's other licensees under its hepatitis B
patents to pay royalties on sales of diagnostic products will terminate upon
expiration of Biogen's existing hepatitis B patents. Biogen's existing United
States hepatitis B patents will expire in 2004. Biogen's European hepatitis B
patents will expire at the end of 1999, except in those countries in which
Biogen has or is able to obtain supplemental protection certificates. To date
Biogen has received supplemental protection certificates in France, Italy,
Luxembourg, The Netherlands and Sweden, and has a number of additional
applications pending. The additional coverage afforded by the supplemental
protection certificates ranges from two to six years.
RECOMBINANT BETA INTERFERON
In 1997, the Technical Board of Appeal of the European Patent Office
revoked Biogen's European patent covering the production of recombinant beta
interferon. Although no formal appeal procedure exists, Biogen has asked the
European Patent Office to overturn the revocation. A patent application in the
United States with similar claims is still pending. The Company also has a
patent with similar claims in Israel. In Germany, a patent with similar claims
was the subject of a nullity proceeding instituted by Schering AG in the German
Federal Patent Court. In March 1998, the German Federal Patent Court indicated
that it would uphold the German patent but with substantially narrower claims.
The Company will decide whether to appeal the decision after it receives the
written opinion. In July 1997, Biogen sued InterPharm Laboratories Ltd.
("Interpharm"), an affiliate of Ares Serono, S.A. ("Serono"), and related
defendants, claiming that the manufacture by InterPharm of Serono's Rebif(R)
(Interferon Beta-1a) infringes Biogen's patent in Israel. Other parties have
pending patent applications or issued patents in the United States, Europe and
other countries with claims to key intermediates in the production of beta
interferon (the "Taniguchi patents") and to beta interferon itself (the "Roche
patents"). Biogen has obtained non-exclusive rights in various countries of the
world, including the United States, Japan and most European countries, to
manufacture, use and sell AVONEX(R) under the Taniguchi patents and has obtained
worldwide, non-exclusive rights under the Roche patents.
In 1994, a European patent was issued to Dr. Rentschler Biotechnologie
GmbH ("Rentschler") with claims relating to a specific cell line, production
method and form of recombinant beta interferon. Biogen filed an opposition to
the Rentschler patent in the European Patent Office seeking a revocation of the
entire patent on grounds of lack of inventive step and lack of novelty. In April
1997, the Opposition Division of the European Patent Office revoked the
Rentschler patent. Recently the European Patent
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Office indicated that it will grant a second patent to Rentschler based on
another patent application with claims to a specific structure of beta
interferon. At such time as this patent is granted, Biogen will determine
whether or not to oppose it.
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(R). 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 patent, Biogen filed a suit against
Schering AG, 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(R), 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. 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 AG without prejudice 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 the early part of 1999.
OTHER PATENTS
Biogen has granted 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'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. In March 1997, the Opposition Division
decided to revoke Biogen's patent. Biogen has appealed the decision.
In March 1995, Biogen filed suit in the U.S. District Court for the
District of Massachusetts seeking to enjoin Amgen from manufacturing and selling
its Neupogen(R) human granulocyte colony stimulating factor in the United States
and asking for damages for infringing activities. Biogen believes that to make
Neupogen(R) Amgen uses technology claimed in certain of Biogen's gene expression
patents. Biogen does not expect a trial in the case prior to the early part of
1999.
In July 1997, Biogen filed suit in the U.S. District Court for the
District of Massachusetts to enjoin Amgen from manufacturing and selling its
Infergen(R) consensus interferon in the United States and asking for damages for
infringing activities. Biogen believes that to make Infergen(R) Amgen uses
technology claimed in certain of Biogen's gene expression patents. Biogen's
request to have the case consolidated with the Neupogen(R) suit was denied by
the court. Biogen does not expect a trial in the case prior to the early part of
2000.
THIRD PARTY PATENTS
Biogen is aware that others, including various universities and companies
working in the biotechnology field, have also filed patent applications and have
been granted patents in the United
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<PAGE> 12
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. For example, 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 a leadership position depends largely
upon Biogen's continued ability to attract and retain skilled and experienced
personnel, its ability to identify and exploit commercially the products
resulting from biotechnology research 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
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<PAGE> 13
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. The
European Union and other jurisdictions have or are considering similar laws.
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(R) (INTERFERON BETA - 1a)
As a treatment for multiple sclerosis, AVONEX(R) 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, and is sold
in Europe under the brand name Betaferon(R) by Schering AG. AVONEX(R) also faces
competition from Copaxone(R) glatiramer acetate (also known as copolymer-1). In
the United States, Copaxone(R) is marketed by a partnership between Teva
Pharmaceuticals ("Teva") and Hoechst Marion Roussel, Inc. AVONEX(R) also
competes in Italy and Spain with FRONE(R), an extracted form of beta interferon
sold by Ares Serono S.A. ("Serono") and in Germany with Imurek(R) azathioprine
sold by Glaxo Wellcome GmbH. Serono has 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. Serono is also seeking approval to market
Rebif(R) in the United States, but to be approved as a treatment for relapsing
forms of multiple sclerosis would have to overcome the orphan drug status
afforded to AVONEX(R) and Betaseron(R) for that indication by the FDA. A number
of other companies are working to develop products to treat multiple sclerosis
which may in the future compete with AVONEX(R). 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. On occasion, regulatory
authorities may require larger or additional studies, leading to unanticipated
delay or expense.
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<PAGE> 14
In connection with the commercialization of products resulting from
Biogen's research and development 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 regulatory requirements and
approval processes for new products in the European Union operate under similar
principles as those applied in the United States. The process of seeking and
obtaining approval of the FDA or regulatory authorities in the European Union or
other regulatory authorities worldwide for a new product and licensing of the
facilities in which the product is produced are 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, the countries
of the European Union and other countries around the world 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 worldwide 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
applicable 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. 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, 1997, Biogen employed 797 full-time employees in the
United States. Of the 797 employees, approximately 143 were engaged in, or
directly supported, research and development, approximately 423 were involved
in, or directly supported, manufacturing, quality assurance/quality control,
regulatory, medical operations and preclinical and clinical development and
approximately 107 were involved in sales and marketing. In addition, Biogen
maintains consulting arrangements with a
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<PAGE> 15
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 300,992 square feet of additional office,
manufacturing and research and development space in all or part of four other
buildings in Cambridge, consisting of a 67,362 square foot building housing
manufacturing facilities, laboratories and office space, a building with 65,792
square feet of space containing laboratories, purification and aseptic bottling
facilities and office space, a multi-tenant building where the Company leases
approximately 150,838 square feet of office space, of which the Company
currently occupies 94,702 square feet, and a 17,000 square foot building housing
office space and distribution facilities. The Company also has development
options for additional property in Cambridge. The lease expiration dates for the
leased sites range from 2000 to 2012.
In 1997, the Company completed construction of a 100,000 square foot
biologics manufacturing facility in Research Triangle Park, North Carolina. The
Company recently received approval from the FDA to use the Research Triangle
Park facility as an additional site for the manufacture of AVONEX(R).
Biogen financed construction of the buildings which it owns in Cambridge,
Massachusetts and Research Triangle Park, North Carolina with term loans. The
loans are secured by the buildings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference under
Item 7.
The Company's European headquarters consists of 1,400 square meters of
office space in a multi-tenant building in Nanterre, France. The lease for this
space terminates in 2003 with Biogen having the right to terminate the lease
earlier under specified circumstances. The Company also leases small offices in
England, Germany, The Netherlands, Switzerland, Austria and Canada.
The Company believes that its production plants in Cambridge, Massachusetts
and Research Triangle Park, North Carolina and existing outside sources will
allow it to meet, in the near term, its production needs for clinical trials and
its production needs for AVONEX(R). Biogen believes that its existing facilities
are in compliance with applicable 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)
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<PAGE> 16
dismissing most of the claims asserted in the plaintiffs' Second Amended
Complaint, including all claims against the Company's outside directors. The
only claims remaining in the case pertain to a statement 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. On September 4, 1997, the Court
denied the motion but narrowed the plaintiff class. A trial is scheduled for
April 1998.
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(R). 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 patent, 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(R), 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. In
February 1997, the U.S. District Court in Massachusetts dismissed Biogen's
declaratory judgment action as to Schering without prejudice 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 the early part of 1999.
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 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. Arbitration proceedings
were held in late 1997 in Zurich under Swiss law. The parties expect a decision
in the first half of 1998.
For a description of legal proceedings relating to certain patent rights,
see Item 1, "Business-Patents and Other Proprietary Rights."
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
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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.
Name Age Positions
- ---- --- ---------
James L. Vincent ........ 58 Chairman of the Board of Directors
James R. Tobin .......... 53 President and Chief Executive Officer
Burt A. Adelman ......... 45 Vice President - Development Operations
Michael J. Astrue ....... 41 Vice President - General Counsel, Secretary
and Clerk
Frank A. Burke, Jr. ..... 54 Vice President - Human Resources
Lawrence S. Daniels ..... 55 Vice President - Strategic Planning
Joseph M. Davie ......... 58 Vice President - Research
David C. Dlesk .......... 39 Vice President - Operations
Irving H. Fox ........... 54 Vice President - Medical Affairs
Timothy M. Kish ......... 46 Vice President - Finance and Chief Financial
Officer
Mark W. Leuchtenberger .. 41 Vice President - Sales, Marketing and Business
Development
James C. Mullen ......... 39 Vice President - International
David D. Pendergast ..... 49 Vice President - Product Development and
Quality Assurance
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
also 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. Mr. Vincent is a director of CuraGen Corporation.
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<PAGE> 18
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.
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 fourteen year career at the
University of Michigan, where he held
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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.
Timothy M. Kish was appointed Vice President - Finance 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 - Sales, Marketing
and Business Development in January 1998 after serving as Vice President -
Marketing and Sales since October 1996. Mr. Leuchtenberger served as Director of
Distributor Operations, Europe from September 1996 until October 1996 and
Director of Marketing and Program Executive for AVONEX(R) from 1993 until
September 1996. From 1992 to 1993, Mr. Leuchtenberger served as a Product
Manager of the Company, and 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. 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 - Product
Development and Quality Assurance in January 1998 after serving as Vice
President - Quality Assurance and Quality Control of the Company since 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 1997 Annual
Report to Shareholders is hereby incorporated by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The section entitled "Selected Financial Data" in the Company's 1997
Annual Report to Shareholders is hereby incorporated by reference.
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<PAGE> 20
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 1997 Annual Report to
Shareholders is hereby incorporated by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Outlook" in the Company's 1997 Annual
Report to Shareholders is hereby incorporated by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The sections entitled "Consolidated Statements of Income," "Consolidated
Balance Sheets," "Consolidated Statements of Cash Flows," "Consolidated
Statements of Shareholders' Equity," "Notes to Consolidated Financial
Statements" and "Report of Independent Accountants" in the Company's 1997 Annual
Report to Shareholders are hereby incorporated by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's definitive proxy
statement for its 1998 Annual Meeting of Stockholders, which the Company intends
to file with the Commission no later than April 30, 1998, are hereby
incorporated by reference.
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" and "Executive
Compensation", in the Company's definitive proxy statement for its 1998 Annual
Meeting of Stockholders, which the Company intends to file with the Commission
no later than April 30, 1998, 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 1998 Annual Meeting of Stockholders, which the Company intends
to file with the Commission no later than April 30, 1998, is hereby incorporated
by reference.
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ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Executive Compensation-Employment Arrangements with
the Company and Certain Transactions" in the Company's definitive proxy
statement for its 1998 Annual Meeting of Stockholders, which the Company intends
to file with the Commission no later than April 30, 1998, 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:
(1) Financial Statements, as required by Item 8 of this Form,
incorporated by reference herein from the 1997 Annual Report to
Shareholders attached hereto as Exhibit 13:
Item Location
- ---- --------
Consolidated Statements of Income Annual Report under the caption
"Biogen, Inc. and Subsidiaries
Consolidated Statements of Income."
Consolidated Balance Sheets Annual Report under the caption
"Biogen, Inc. and Subsidiaries
Consolidated Balance Sheets."
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."
With the exception of the portions of the 1997 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
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(3) Exhibits
Exhibit No. Description
- ----------- -----------
(3.1) Articles of Organization, as amended (p)
(3.2) By-Laws, as amended (g)
(4.1) Form of Common Stock Share Certificate (i)
(4.2) Certificate of Designation of Series A Junior Participating
Preferred Stock (d)
(4.3) Rights Agreement dated as of May 8, 1989 between Registrant and
The First National Bank of Boston, as Rights Agent (d)
(10.1) Independent Consulting and Project Agreement dated as of June 29,
1979 between Registrant and Kenneth Murray (a)**
(10.2) Letter Agreement dated September 23, 1995 with Kenneth Murray
relating to renewal of Independent Consulting Agreement (o)**
(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 A. Sharp
relating to chairmanship of Scientific Board and renewal of
Independent Consulting Agreement (o)**
(10.6) Project Agreement dated as of December 15 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 (f)**
(10.9) Letter Agreement dated April 14, 1995 with Alexander G. Bearn
relating to renewal of Independent Consulting Agreement (o)**
(10.10) Form of Amendment dated July 1, 1988 to Independent Consulting
Agreement between Registrant and Scientific Board Members (c)**
22
<PAGE> 23
(10.11) Letter regarding employment of James L. Vincent dated September
23, 1985 (b)**
(10.12) Letter agreement amending employment arrangement between the
Registrant and James L. Vincent dated as of November 21, 1996
(q)**
(10.13) Form of Stock Option Agreement with James L. Vincent under 1985
Non-Qualified Stock Option Plan (g)**
(10.14) Form of Stock Option Agreement with James L. Vincent under 1985
Non-Qualified Stock Option Plan (1995) (o)**
(10.15) Form of Stock Option Agreement with James L. Vincent under 1985
Non-Qualified Stock Option Plan (1997) (*)**
(10.16) Letter dated December 13, 1989 regarding employment of Dr. Irving
H. Fox (e)**
(10.17) Letter dated April 7, 1993 regarding employment of Dr. Joseph M.
Davie (h)**
(10.18) Letter dated January 12, 1994 regarding employment of James R.
Tobin (j)**
(10.19) Form of Indemnification Agreement between Registrant and each
Director and Executive Officer (c)**
(10.20) 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)
(10.21) First Amendment to Lease dated January 19, 1989 amending Cambridge
Center Lease dated October 4, 1982 (g)
(10.22) Second Amendment to Lease dated March 8, 1990 amending Cambridge
Center Lease dated October 4, 1982 (g)
(10.23) Third Amendment to Lease dated September 25, 1991 amending
Cambridge Center Lease dated October 4, 1982 (g)
(10.24) Fourth Amendment to Lease dated October 6, 1993, amending
Cambridge Center Lease dated October 4, 1982 (*)
(10.25) Fifth Amendment to Lease dated October 9, 1997, amending Cambridge
Center Lease dated October 4, 1982 (*).
(10.26) Lease dated October 6, 1993 between North Parcel Limited
Partnership and Biogen Realty Limited Partnership (j)
(10.27) 1983 Employee Stock Purchase Plan, as amended and restated through
September 12, 1997 (*)**
23
<PAGE> 24
(10.28) 1982 Incentive Stock Option Plan, as amended through April 25,
1995 and restated with form of Option Agreement (n)**
(10.29) 1985 Non-Qualified Stock Option Plan, as amended through
December 6, 1996 and restated with form of Option Agreement (r) **
(10.30) 1987 Scientific Board Stock Option Plan, as amended through
September 12, 1997 (*)**
(10.31) Voluntary Executive Supplemental Savings Plan (m)**
(10.32) Amendment No.1 dated April 25, 1997, to Voluntary Executive
Supplemental Savings Plan (*)**
(10.33) Amended and Restated Supplemental Executive Retirement Plan (*)**
(10.34) Voluntary Board of Directors Savings Plan (m)**
(10.35) Amendment No. 1 dated April 25, 1997, to Voluntary Board of
Directors Savings Plan (*)**
(10.36) Exclusive License and Development Agreement dated December 8, 1979
between Registrant and Schering Corporation (a)
(10.37) Amendatory Agreement dated May 14, 1985 to Exclusive License and
Development Agreement dated December 8, 1979 (b)
(10.38) Amendment and Settlement Agreement dated September 29, 1988 to
Exclusive License and Development Agreement dated December 8,
1979 (g)
(10.39) Amendment dated March 20, 1989 to Exclusive License and
Development Agreement dated December 8, 1979 (g)
(10.40) 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.) (g)
(10.41) 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.) (g)
(10.42) 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. (g)
(10.43) Supplemental Amendment and Agreement dated as of March 1, 1994
between the Registrant and Schering Corporation (l)
24
<PAGE> 25
(13) Incorporated portions from Biogen, Inc. 1997 Annual Report to
Shareholders *
(21) Subsidiaries of the Registrant *
(24.1) Consent of Price Waterhouse LLP *
(27) Financial Data Schedule
(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, 1988,
File No. 0-12042 and incorporated herein by reference.
(d) 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.
(e) 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.
(f) 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.
(g) 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, 1992, File No. 0-12042, and incorporated herein by
reference.
(h) 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.
(i) Previously filed with the Commission as an exhibit to Registration
Statement on Form S-3, File No. 33-51639 filed December 21, 1993,
and incorporated herein by reference.
(j) Previously filed with the Commission as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993,
File No. 0-12042, and incorporated herein by reference.
25
<PAGE> 26
(k) 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.
(l) 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.
(m) 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.
(n) 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.
(o) 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 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, 1996, File No. 0-12042, and incorporated herein by
reference.
(q) Previously filed with the Commission as an exhibit to an amendment
to the Registrant's Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996, File No. 0-12042, and incorporated
herein by reference.
(r) Previously filed with the Commission as an exhibit to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
File No. 0-12042, and incorporated herein by reference.
* Filed herewith
** Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
During the fourth quarter of 1997, the Company filed a report on Form 8-K
announcing the authorization by the Company's Board of Directors of a stock
repurchase program covering the repurchase of up to 2,500,000 shares of the
Company's Common Stock during a two-year period.
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 March 6, 1998
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 March 6, 1998
- ------------------------- Office and a Director
James R. Tobin (principal executive officer)
/s/ James L. Vincent Chairman of the Board March 6, 1998
- -------------------------
James L. Vincent
/s/ Timothy M. Kish Vice President - Finance and March 6, 1998
- ------------------------- Chief Financial Officer
Timothy M. Kish (principal financial and
accounting officer)
/s/ Alexander G. Bearn Director March 6, 1998
- -------------------------
Alexander G. Bearn
/s/ Harold W. Buirkle Director March 6, 1998
- -------------------------
Harold W. Buirkle
/s/ Alan Belzer Director March 6, 1998
- -------------------------
Alan Belzer
/s/ Mary L. Good Director March 6, 1998
- -------------------------
Mary L. Good
/s/ Thomas F. Keller Director March 6, 1998
- -------------------------
Thomas F. Keller
/s/ Roger H. Morley Director March 6, 1998
- -------------------------
Roger H. Morley
<PAGE> 28
/s/ Kenneth Murray Director March 6, 1998
- -------------------------
Kenneth Murray
/s/ Phillip A. Sharp Director March 6, 1998
- -------------------------
Phillip A. Sharp
/s/ James W. Stevens Director March 6, 1998
- -------------------------
James W. Stevens
<PAGE> 29
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.15 Form of Stock Option Agreement with James L. Vincent under 1985
Non-Qualified Stock Option Plan (1997)
10.24 Fourth Amendment to Lease dated October 6, 1993, amending
Cambridge Center Lease dated October 4, 1982.
10.25 Fifth Amendment to Lease dated October 9, 1997, amending Cambridge
Center Lease dated October 4, 1982.
10.27 1983 Employee Stock Purchase Plan, as amended and restated through
September 12, 1997.
10.30 1987 Scientific Board Stock Option Plan, as amended through
September 12, 1997
10.32 Amendment No. 1 dated April 25, 1997, to Voluntary Executive
Supplemental Savings Plan
10.33 Amended and Restated Supplemental Executive Retirement Plan
10.35 Amendment No. 1 dated April 25, 1997, to Voluntary Board of
Directors Saving Plan
(13) Incorporated portions from Biogen, Inc. 1997 Annual Report to
Shareholders
(21) Subsidiaries of the Registrant
(24.1) Consent of Price Waterhouse LLP
(27) Financial Data Schedule
29
<PAGE> 1
Exhibit 10.15
-------------
STOCK OPTION AGREEMENT
This Agreement is dated as of this 12th day of December, 1997 between
Biogen, Inc., a Massachusetts corporation (the "Company"), having its principal
office in Cambridge, Massachusetts, and James L. Vincent, an employee and member
of the Board of Directors of the Company (the "Employee"). Any capitalized term
not defined in this Agreement shall have the meaning set forth in the Company's
1985 Non-Qualified Stock Option Plan, as amended (the "Plan").
WHEREAS, the Company desires to grant to Employee an option (the
"Option") to purchase Seventy-five Thousand (75,000) shares of the Company's
Common Stock, par value U.S. $0.01 per share, under the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties agree as
follows:
1. GRANT OF OPTION.
The Company hereby grants to Employee the right and option to
purchase all or any part of an aggregate of Seventy-five Thousand (75,000)
shares of its Common Stock, U.S. $0.01 par value, on the terms and conditions
and subject to all of the limitations set forth in this Agreement and in the
Plan. The Option granted hereby shall not be treated as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXERCISE PRICE.
The exercise price shall be $35.75 per share.
3. EXERCISE OF OPTION.
3.1 Subject to Section 3.2, the Option granted hereby shall be
immediately exercisable for all or any part of the Shares.
3.2 Notwithstanding the provisions of Section 3.1, if the Company
terminates Employee's employment or Employee resigns as an employee, and
Employee also no longer serves on the Board of Directors, or if Employee resigns
or is removed (whether by election of a successor or otherwise) from the Board
of Directors and Employee is also no longer an employee of the Company, in
either case under circumstances which do not constitute a permanent or total
disability as defined in Section 4 hereof, then (i) if such termination,
resignation or removal occurs before December 12, 1998 and Employee has
exercised the Option for any Shares, the Company may purchase those Shares from
Employee at the price paid by Employee upon such exercise, (ii) if such
termination, resignation or removal occurs on or after December 12, 1998, but
before December 12, 1999, and Employee has exercised the Option for more than
20% of the Shares
<PAGE> 2
originally issuable hereunder, the Company may purchase the number of Shares for
which the Option has been exercised in excess of 20% of the Shares originally
issuable hereunder at the price paid by Employee upon exercise, (iii) if such
termination, resignation or removal occurs on or after December 12, 1999, but
before December 12, 2000, and Employee has exercised the Option for more than
40% of the Shares originally issuable hereunder, the Company may purchase the
number of Shares for which the Option has been exercised in excess of 40% of the
Shares originally issuable hereunder at the price paid by Employee upon
exercise, (iv) if such termination, resignation or removal occurs on or after
December 12, 2000, but before December 12, 2001, and Employee has exercised the
Option for more than 60% of the Shares originally issuable hereunder, the
Company may purchase the number of Shares for which the Option has been
exercised in excess of 60% of the Shares originally issuable hereunder at the
price paid by Employee upon exercise, or (v) if such termination or resignation
occurs on or after December 12, 2001, but before December 12, 2002, and Employee
has exercised the Option for more than 80% of the Shares originally issuable
hereunder, the Company may purchase the number of Shares for which the Option
has been exercised in excess of 80% of the Shares originally issuable hereunder
at the price paid by the Employee upon exercise. The Option shall cease to be
exercisable as to any Shares which, together with Shares previously purchased by
the Employee upon exercise of the Option, will exceed the percentages set forth
above for the relevant time period. The right of the Company to purchase Shares
pursuant to this Section 3.2 is hereinafter referred to as the "Purchase
Option". Notwithstanding anything to the contrary contained in this Agreement, a
resignation or termination of employment or service as a member of the Board of
Directors by reason of total and permanent disability, as determined by the
Stock and Option Plan Administration Committee of the Board of Directors (the
"Committee"), in its discretion, shall not be deemed a resignation or
termination for purposes of the Purchase Option.
4. TERM OF OPTION.
(a) The Option shall terminate on December 12, 2007, but shall be
subject to earlier termination as provided in this Section 4.
(b) If the Company terminates Employee's employment other than for
cause (as defined in paragraph 8(e) of the Employment Agreement between Employee
and the Company dated September 23, 1985 (the "Employment Agreement")), or
Employee resigns, and Employee also no longer serves as a member of the Board of
Directors, or if Employee resigns or is removed (whether by election of a
successor or otherwise) from the Board of Directors and Employee is also no
longer an employee of the Company, in either case under circumstances which do
not constitute a permanent or total disability as defined in paragraph (c) of
this Section 4, the Option, to the extent not previously exercised, may be
exercised within the time period originally prescribed in paragraph (a) of this
Section 4, but only as to the number of shares as to which the Option continues
to be exercisable under Section 3.2.
(c) If Employee's employment is terminated due to the total and
permanent disability of Employee (as determined by the Committee, and as to the
fact and date of which Employee is
2
<PAGE> 3
notified by the Committee in writing), and if Employee also no longer serves as
a member of the Board of Directors, or if Employee's service as a member of the
Board of Directors ceases due to the total and permanent disability of Employee
(as determined by the Committee, and as to the fact and date of which Employee
is notified by the Committee in writing), and Employee is also no longer an
employee of the Company, the Option, to the extent not previously exercised,
shall be exercisable by Employee or his legal representative within the time
period originally prescribed in paragraph (a) of this Section 4. In the event of
the death of Employee, the Option, to the extent not exercised as of the date of
death, may be exercised by the executors, administrators or other legal
representatives of the estate of Employee or by any person or persons who
acquired Employee's rights to the Option by will or by the laws of descent and
distribution as provided in the Plan within time originally prescribed in
paragraph (a) of this Section 4.
(d) In the event the Company terminates Employee's employment for
cause (as defined in paragraph 8 (e) of the Employment Agreement), upon such
termination, Employee's right to exercise any unexercised portion of the Option
shall immediately terminate.
5. EXERCISE OF OPTION AND ISSUE OF STOCK.
The Option may be exercised in whole or in part (to the extent
that it is exercisable in accordance with its terms) by giving written notice to
the Company, at the address set forth in Section 8 below, and accompanied by the
Option exercise price. Such written notice shall be signed by the person
exercising the Option, shall state the number of shares with respect to which
the Option is being exercised, and shall otherwise comply with the terms and
conditions of this Agreement. Payment of the Option price shall be made to the
Company as follows:
(a) In cash; or
(b) By transfer to the Company of shares of Common Stock
which have been held by Employee for at least six (6) months prior to being used
for payment of the Option price, the transfer value of such shares being their
fair market value on the day preceding the date of notice of exercise
(determined in accordance with paragraph 8 of the Employment Agreement); or
(c) A combination of (a) and (b) above.
The Company shall pay all original issue taxes with respect to
the issue of shares pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection therewith. The payment of any withholding
or other similar taxes shall be made by the Option holder in compliance with
Section VI (M) of the Plan. The holder of this Option shall have the rights of a
shareholder only with respect to those shares covered by the Option which have
been registered in the holder's name in the share register of the Company upon
due exercise of the Option.
3
<PAGE> 4
6. RESTRICTIONS ON TRANSFER OF SHARES; DETAILS OF THE PURCHASE
OPTION
6.1 Any Shares which are subject to the Option shall not be
transferred by Employee except as permitted in this Section 6. Until the
termination of this Agreement, the Shares which are subject to the Purchase
Option may not be transferred by Employee unless and until the transferee
agrees, in a form satisfactory to the Company, to be bound by this Agreement and
to sell any transferred Shares to the Company should the Company choose to
exercise the Purchase Option.
6.2 In the event the Company shall be entitled to and shall
elect to exercise the Purchase Option, it shall give to Employee a written
notice specifying the number of Shares which it elects to purchase (the
"Purchase Stock") and specifying a date for closing of the purchase (the
"Closing") which date shall not be more than thirty (30) calendar days after the
giving of such notice. The Closing shall take place at the Company's principal
offices in Massachusetts or such other location as the Company may reasonably
designate in such notice.
6.3 At the Closing, Employee shall deliver the Purchase
Stock being purchased by the Company against the simultaneous delivery to
Employee of the purchase price (by certified or bank cashier's check), for the
number of shares of Purchase Stock then being purchased. In the event that
Employee fails to deliver the number of shares of the Purchase Stock to be
purchased, the Company may elect (a) to establish a segregated account in the
amount of the purchase price, such account to be turned over to Employee upon
delivery of such shares of Purchase Stock, and (b) immediately to take such
action as is appropriate to transfer record title in such Purchase Stock from
Employee to the Company and to treat Employee and such shares of Purchase Stock
in all respects as if delivery of such shares of Purchase Stock had been made as
required by this Agreement. Employee hereby irrevocably grants the Company a
power of attorney for the purposes of effectuating the preceding sentence.
6.4 If the Company shall pay a stock dividend or declare a
stock split on or with respect to any of the Company's Common Stock, or
otherwise distribute securities of the Company to the holders of its Common
Stock, whether before or after the exercise of the Option, the number of Shares
of stock or other securities of the Company issued with respect to the Purchase
Stock then subject to the Purchase Option shall be added to the Purchase Stock
then subject to the Purchase Option without any change in the aggregate purchase
price. If the Company shall distribute to its stockholders shares of stock of
another corporation, the shares of stock of such other corporation distributed
with respect to the Purchase Stock then subject to the Purchase Option shall be
added to the Purchase Stock covered by the Purchase Option without any change in
the aggregate purchase price. Without limiting the generality of the foregoing,
Employee shall be entitled to retain any and all cash dividends paid by the
Company on the Shares of Purchase Stock prior to the Closing.
4
<PAGE> 5
6.5 If the outstanding shares of Common Stock of the Company
shall be subdivided into a greater number of shares or combined into a smaller
number of shares, or in the event of a reclassification of the outstanding
shares of Common Stock of the Company, or if the Company shall be a party to any
capital reorganization, whether before or after the exercise of the Option,
there shall be substituted for the Purchase Stock then covered by the Purchase
Option such amount and kind of securities as are issued in such subdivision,
combination, reclassification, or capital reorganization in respect of the
Purchase Stock subject to the Purchase Option immediately prior thereto, without
any change in the aggregate purchase price, although the purchase price will be
based on the adjusted exercise price of the Option, if any.
6.6 If the Company shall be completely liquidated, then the
Purchase Option shall cease and terminate as of the date of such liquidation and
Employee shall hold the Shares free of the Purchase Option.
6.7 The Company shall not be required to transfer any Shares
on its books which shall have been sold, assigned or otherwise transferred in
violation of this Agreement, or to treat as owner of such Shares, or to accord
the right to vote as such owner or to pay dividends to, any person or
organization to which any such Shares shall have been sold, assigned or
otherwise transferred, from and after any sale, assignment or transfer of any
Shares made in violation of this Agreement.
6.8 All certificates representing any Shares to be issued to
Employee pursuant to the exercise of the Option which are subject to the
Purchase Option shall have endorsed thereon a legend substantially as follows:
"The shares represented by this certificate are subject to a Stock Option
Agreement dated December 12, 1997 between Biogen, Inc. and James L. Vincent, a
copy of which Agreement is available for inspection at the principal offices of
the Company or will be made available upon request."
6.9 This Agreement shall not restrict the transfer by
Employee of shares, if any, which are not acquired pursuant to the exercise of
the Option or which are not, or cease to be, subject to the Purchase Option in
accordance with the terms hereof.
7. NON-ASSIGNMENT.
This Option shall not be transferable by Employee other than (i)
by will or by the laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order as defined by the Code or Title 1 of the Employee
Retirement Income Security Act or the rules thereunder, or (iii) as otherwise
permitted by the Committee. Except as provided in the preceding sentence, the
Option shall be exercisable during Employee's lifetime only by Employee.
8. NOTICES.
5
<PAGE> 6
Any notice required or permitted by the terms of this Agreement shall be
given by registered or certified mail, return receipt requested, addressed as
follows:
To the Company: Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142
Attention: Vice President - General Counsel
To Employee: James L. Vincent
Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
9. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
10. BENEFIT OF AGREEMENT.
This Agreement shall be for the benefit of and shall be binding
upon heirs, executors, administrators and successors of the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized representative and Employee has hereunto
set his hand as of the day and year first above written.
BIOGEN, INC. EMPLOYEE:
By:
------------------------------- --------------------------------
Roger H. Morley James L. Vincent
Member of the Stock and Option
Plan Administration Committee
By:
------------------------------
Harold W. Buirkle
6
<PAGE> 7
Member of the Stock and Option
Plan Administration Committee
7
<PAGE> 8
STOCK OPTION AGREEMENT
This Agreement is dated as of this 12th day of December, 1997 between
Biogen, Inc., a Massachusetts corporation (the "Company"), having its principal
office in Cambridge, Massachusetts, and James L. Vincent, an employee and member
of the Board of Directors of the Company (the "Employee"). Any capitalized term
not defined in this Agreement shall have the meaning set forth in the Company's
1985 Non-Qualified Stock Option Plan, as amended (the "Plan").
WHEREAS, the Company desires to grant to Employee an option (the
"Option") to purchase Seventy-five Thousand (75,000) shares of the Company's
Common Stock, par value U.S. $0.01 per share, under the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties agree as
follows:
1. GRANT OF OPTION.
The Company hereby grants to Employee the right and option to
purchase all or any part of an aggregate of Seventy-five Thousand (75,000)
shares of its Common Stock, U.S. $0.01 par value, on the terms and conditions
and subject to all of the limitations set forth in this Agreement and in the
Plan. The Option granted hereby shall not be treated as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXERCISE PRICE.
The exercise price shall be $35.75 per share.
3. EXERCISE OF OPTION.
3.1 Subject to Section 3.2, the Option granted hereby shall be
immediately exercisable for all or any part of the Shares.
3.2 Notwithstanding the provisions of Section 3.1, if the Company
terminates Employee's employment or Employee resigns as an employee, and
Employee also no longer serves on the Board of Directors, or if Employee resigns
or is removed (whether by election of a successor or otherwise) from the Board
of Directors and Employee is also no longer an employee of the Company, in
either case under circumstances which do not constitute a permanent or total
disability as defined in Section 4 hereof, then (i) if such termination,
resignation or removal occurs before December 12, 1998 and Employee has
exercised the Option for any Shares, the Company may
8
<PAGE> 9
purchase those Shares from Employee at the price paid by Employee upon such
exercise, (ii) if such termination, resignation or removal occurs on or after
December 12, 1998, but before December 12, 1999, and Employee has exercised the
Option for more than 33 1/3% of the Shares originally issuable hereunder, the
Company may purchase the number of Shares for which the Option has been
exercised in excess of 33 1/3% of the Shares originally issuable hereunder at
the price paid by Employee upon exercise, or (iii) if such termination,
resignation or removal occurs on or after December 12, 1999, but before December
12, 2000, and Employee has exercised the Option for more than 66 2/3% of the
Shares originally issuable hereunder, the Company may purchase the number of
Shares for which the Option has been exercised in excess of 66 2/3% of the
Shares originally issuable hereunder at the price paid by Employee upon
exercise. The Option shall cease to be exercisable as to any Shares which,
together with Shares previously purchased by the Employee upon exercise of the
Option, will exceed the percentages set forth above for the relevant time
period. The right of the Company to purchase Shares pursuant to this Section 3.2
is hereinafter referred to as the "Purchase Option". Notwithstanding anything to
the contrary contained in this Agreement, a resignation or termination of
employment or service as a member of the Board of Directors by reason of total
and permanent disability, as determined by the Stock and Option Plan
Administration Committee of the Board of Directors (the "Committee"), in its
discretion, shall not be deemed a resignation or termination for purposes of the
Purchase Option.
4. TERM OF OPTION.
(a) The Option shall terminate on December 12, 2007, but shall be
subject to earlier termination as provided in this Section 4.
(b) If the Company terminates Employee's employment other than for
cause (as defined in paragraph 8(e) of the Employment Agreement between Employee
and the Company dated September 23, 1985 (the "Employment Agreement")), or
Employee resigns, and Employee also no longer serves as a member of the Board of
Directors, or if Employee resigns or is removed (whether by election of a
successor or otherwise) from the Board of Directors and Employee is also no
longer an employee of the Company, in either case under circumstances which do
not constitute a permanent or total disability as defined in paragraph (c) of
this Section 4, the Option, to the extent not previously exercised, may be
exercised within the time period originally prescribed in paragraph (a) of this
Section 4, but only as to the number of shares as to which the Option continues
to be exercisable under Section 3.2.
(c) If Employee's employment is terminated due to the total and
permanent disability of Employee (as determined by the Committee, and as to the
fact and date of which Employee is notified by the Committee in writing), and if
Employee also no longer serves as a member of the Board of Directors, or if
Employee's service as a member of the Board of Directors ceases due to the total
and permanent disability of Employee (as determined by the Committee, and as to
the fact and date of which Employee is notified by the Committee in writing),
and Employee is also no longer an employee of the Company, the Option, to the
extent not previously exercised, shall be
9
<PAGE> 10
exercisable by Employee or his legal representative within the time period
originally prescribed in paragraph (a) of this Section 4. In the event of the
death of Employee, the Option, to the extent not exercised as of the date of
death, may be exercised by the executors, administrators or other legal
representatives of the estate of Employee or by any person or persons who
acquired Employee's rights to the Option by will or by the laws of descent and
distribution as provided in the Plan within time originally prescribed in
paragraph (a) of this Section 4.
(d) In the event the Company terminates Employee's employment for
cause (as defined in paragraph 8 (e) of the Employment Agreement), upon such
termination, Employee's right to exercise any unexercised portion of the Option
shall immediately terminate.
5. EXERCISE OF OPTION AND ISSUE OF STOCK.
The Option may be exercised in whole or in part (to the extent
that it is exercisable in accordance with its terms) by giving written notice to
the Company, at the address set forth in Section 8 below, and accompanied by the
Option exercise price. Such written notice shall be signed by the person
exercising the Option, shall state the number of shares with respect to which
the Option is being exercised, and shall otherwise comply with the terms and
conditions of this Agreement. Payment of the Option price shall be made to the
Company as follows:
(a) In cash; or
(b) By transfer to the Company of shares of Common Stock
which have been held by Employee for at least six (6) months prior to being used
for payment of the Option price, the transfer value of such shares being their
fair market value on the day preceding the date of notice of exercise
(determined in accordance with paragraph 8 of the Employment Agreement); or
(c) A combination of (a) and (b) above.
The Company shall pay all original issue taxes with respect to
the issue of shares pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection therewith. The payment of any withholding
or other similar taxes shall be made by the Option holder in compliance with
Section VI (M) of the Plan. The holder of this Option shall have the rights of a
shareholder only with respect to those shares covered by the Option which have
been registered in the holder's name in the share register of the Company upon
due exercise of the Option.
6. RESTRICTIONS ON TRANSFER OF SHARES; DETAILS OF THE PURCHASE
OPTION
6.1 Any Shares which are subject to the Option shall not be
transferred by Employee except as permitted in this Section 6. Until the
termination of this Agreement, the Shares which are subject to the Purchase
Option may not be transferred by Employee unless and
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<PAGE> 11
until the transferee agrees, in a form satisfactory to the Company, to be bound
by this Agreement and to sell any transferred Shares to the Company should the
Company choose to exercise the Purchase Option.
6.2 In the event the Company shall be entitled to and shall
elect to exercise the Purchase Option, it shall give to Employee a written
notice specifying the number of Shares which it elects to purchase (the
"Purchase Stock") and specifying a date for closing of the purchase (the
"Closing") which date shall not be more than thirty (30) calendar days after the
giving of such notice. The Closing shall take place at the Company's principal
offices in Massachusetts or such other location as the Company may reasonably
designate in such notice.
6.3 At the Closing, Employee shall deliver the Purchase
Stock being purchased by the Company against the simultaneous delivery to
Employee of the purchase price (by certified or bank cashier's check), for the
number of shares of Purchase Stock then being purchased. In the event that
Employee fails to deliver the number of shares of the Purchase Stock to be
purchased, the Company may elect (a) to establish a segregated account in the
amount of the purchase price, such account to be turned over to Employee upon
delivery of such shares of Purchase Stock, and (b) immediately to take such
action as is appropriate to transfer record title in such Purchase Stock from
Employee to the Company and to treat Employee and such shares of Purchase Stock
in all respects as if delivery of such shares of Purchase Stock had been made as
required by this Agreement. Employee hereby irrevocably grants the Company a
power of attorney for the purposes of effectuating the preceding sentence.
6.4 If the Company shall pay a stock dividend or declare a
stock split on or with respect to any of the Company's Common Stock, or
otherwise distribute securities of the Company to the holders of its Common
Stock, whether before or after the exercise of the Option, the number of Shares
of stock or other securities of the Company issued with respect to the Purchase
Stock then subject to the Purchase Option shall be added to the Purchase Stock
then subject to the Purchase Option without any change in the aggregate purchase
price. If the Company shall distribute to its stockholders shares of stock of
another corporation, the shares of stock of such other corporation distributed
with respect to the Purchase Stock then subject to the Purchase Option shall be
added to the Purchase Stock covered by the Purchase Option without any change in
the aggregate purchase price. Without limiting the generality of the foregoing,
Employee shall be entitled to retain any and all cash dividends paid by the
Company on the Shares of Purchase Stock prior to the Closing.
6.5 If the outstanding shares of Common Stock of the Company
shall be subdivided into a greater number of shares or combined into a smaller
number of shares, or in the event of a reclassification of the outstanding
shares of Common Stock of the Company, or if the Company shall be a party to any
capital reorganization, whether before or after the exercise of the Option,
there shall be substituted for the Purchase Stock then covered by the Purchase
Option such amount and kind of securities as are issued in such subdivision,
combination, reclassification, or capital reorganization in respect of the
Purchase Stock subject to the Purchase Option immediately prior
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<PAGE> 12
thereto, without any change in the aggregate purchase price, although the
purchase price will be based on the adjusted exercise price of the Option, if
any.
6.6 If the Company shall be completely liquidated, then the
Purchase Option shall cease and terminate as of the date of such liquidation and
Employee shall hold the Shares free of the Purchase Option.
6.7 The Company shall not be required to transfer any Shares
on its books which shall have been sold, assigned or otherwise transferred in
violation of this Agreement, or to treat as owner of such Shares, or to accord
the right to vote as such owner or to pay dividends to, any person or
organization to which any such Shares shall have been sold, assigned or
otherwise transferred, from and after any sale, assignment or transfer of any
Shares made in violation of this Agreement.
6.8 All certificates representing any Shares to be issued to
Employee pursuant to the exercise of the Option which are subject to the
Purchase Option shall have endorsed thereon a legend substantially as follows:
"The shares represented by this certificate are subject to a Stock Option
Agreement dated December 12, 1997 between Biogen, Inc. and James L. Vincent, a
copy of which Agreement is available for inspection at the principal offices of
the Company or will be made available upon request."
6.9 This Agreement shall not restrict the transfer by
Employee of shares, if any, which are not acquired pursuant to the exercise of
the Option or which are not, or cease to be, subject to the Purchase Option in
accordance with the terms hereof.
7. NON-ASSIGNMENT.
This Option shall not be transferable by Employee other than (i)
by will or by the laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order as defined by the Code or Title 1 of the Employee
Retirement Income Security Act or the rules thereunder, or (iii) as otherwise
permitted by the Committee. Except as provided in the preceding sentence, the
Option shall be exercisable during Employee's lifetime only by Employee.
8. NOTICES.
Any notice required or permitted by the terms of this Agreement
shall be given by registered or certified mail, return receipt requested,
addressed as follows:
To the Company: Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142
Attention: Vice President - General Counsel
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<PAGE> 13
To Employee: James L. Vincent
Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
9. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
10. BENEFIT OF AGREEMENT.
This Agreement shall be for the benefit of and shall be binding
upon heirs, executors, administrators and successors of the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized representative and Employee has hereunto
set his hand as of the day and year first above written.
BIOGEN, INC. EMPLOYEE:
By:
------------------------------- --------------------------------
Roger H. Morley James L. Vincent
Member of the Stock and Option
Plan Administration Committee
By:
------------------------------
Harold W. Buirkle
Member of the Stock and Option
Plan Administration Committee
13
<PAGE> 1
Exhibit 10.24
-------------
FOURTH AMENDMENT TO LEASE
FOURTH AMENDMENT TO LEASE dated as of the 6th day of October, 1993 by and
between Mortimer B. Zuckerman, Edward H. Linde and David Barrett, Trustees of
Fourteen Cambridge Center Trust under Declaration of Trust dated February 4,
1982 and recorded with the Middlesex South District Registry of Deeds in Book
14707, Page 96 and not individually (hereinafter called the "Landlord") and
Biogen, Inc. (successor to Biogen Research Corp., successor to B. Leasing,
Inc.). Biogen, Inc., is the Tenant under the Lease and is (hereinafter called
"Tenant").
R E C I T A L S
By lease dated October 4, 1982, as amended by First Amendment To Lease
dated January 19, 1989, by Second Amendment To Lease dated March 8, 1990 and by
Third Amendment To Lease dated September 25, 1991 (said Lease as so amended
being hereinafter called the "Lease"), Landlord did lease to Tenant and Tenant
did hire and lease from Landlord the "Site" and "Building" known as and numbered
Fourteen Cambridge Center, Cambridge, Massachusetts. The Site and the Building
are defined in Section 1.2 of the Lease and are collectively therein and herein
interchangeably called the "Demised Premises" or the "Premises".
The Lease provides for an original Lease Term which Landlord and Tenant
acknowledge and agree is to expire on February 28, 1998 (herein sometimes called
the "Original Term").
Pursuant to Section 3.2 of the Lease, Tenant has the right to extend the
Lease Term for three (3) successive periods of five (5) years each on the terms
and conditions set forth in said Section 3.2.
Landlord and Tenant have now reached agreement on the present exercise of
Tenant's first, five (5) year extension option and on other modifications to the
Lease and desire to set forth the same.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration paid by each of the parties hereto to the other, the
receipt and sufficiency of which is hereby acknowledged, and in further
consideration of the provisions herein, Landlord and Tenant hereby agree as
follows:
<PAGE> 2
1. The Lease Term (also in the Lease sometimes called the "Term"), which
but for this Amendment is scheduled to expire on February 28, 1998, is
hereby presently extended for one (1) period of five (5) years from
March 1, 1998 to February 28, 2003 (herein called the "First Extended
Term") unless extended or sooner terminated in accordance with the
provisions of the Lease (as herein amended). The present extension of
the Lease Term for the First Extended Term shall be deemed to be the
exercise of the first, five (5) year extension option provided for in
Section 3.2 of the Lease, leaving only the second extension option
(the "Second Extension Option") and third extension option (the "Third
Extension Option") pursuant to said Section 3.2. The present extension
of the Lease Term for the First Extended Term shall be on all of the
same terms and conditions set forth in the Lease except as otherwise
provided in this Amendment. All references in the Lease (as herein
amended) to the "Term" or "Lease Term" shall mean and be references to
the Original Term as presently extended by the First Extended Term.
2. (A) For the Original Term, Tenant shall continue to pay Annual Fixed
Rent as provided in the Lease.
(B) During the First Extended Term (being the period from March 1,
1998 to February 28, 2003), Annual Fixed Rent shall be at the annual
rate equal to the product of (i) $19.71 and (ii) the 67,362 square
feet of Gross Building Area of the Building.
(C) During the second and third extension option periods (if
exercised), Annual Fixed Rent shall be payable by Tenant as provided
in Section 3.2 of the Lease.
3. (A) Landlord and Tenant acknowledge and agree that Landlord has
completed the North Garage and that Tenant's parking privileges
pursuant to Section 16.5 of the Lease and Section 3 of the Second
Amendment to Lease are being and shall be provided in the North
Garage. The term "North Garage" as used in this Amendment and the
Lease shall include both (i) the parking garage and other improvements
(collectively, the "North Garage Improvements") located on the parcel
of land known as Tract IV of the Parcel 2 Development
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<PAGE> 3
Area (the "North Garage Site") and (ii) the North Garage Site.
Landlord and Tenant acknowledge that affiliates of Landlord and Tenant
are concurrently herewith entering into a transaction that has as its
objective the construction of a new building, on a site including part
or all of the Expansion Parcel as defined in Section 16.27 of the
Lease, to be known as Twelve Cambridge Center, to be owned by an
affiliate of Tenant (the 12CC Owner") and occupied by Tenant, and that
such transaction would include the execution of a parking lease
between the 12CC Owner, as tenant, and Cambridge Center North Trust,
an affiliate of Landlord that is the owner of the North Garage, as
landlord, to provide parking rights for the 12CC Owner in the North
Garage (the "12CC Parking Lease"). For the portion of the Lease Term
prior to the Commencement Date of the 12CC Parking Lease, the monthly
rates per vehicle for Tenant's parking privileges under this Lease
shall be the rates provided in Section 3(b) of the Second Amendment to
Lease. For the portion of the Lease Term on and after the Commencement
Date of the 12CC Parking Lease, Section 3(b) of the Second Amendment
is hereby amended so that the monthly rates per vehicle for Tenant's
parking charges shall be as follows:
(i) Period Monthly Rate Per Car
From the Commencement Date $105.00, subject to escalation
of the 12CC Parking Lease as provided in Sections 3(B)
through December 31, 1999 and 3(C) below and subject to
the limitation as provided in
Section 3(D) below.
From January 1, 2000 through $140.00, subject to escalation
February 28, 2003 as provided in Sections 3(B)
and 3(C) below and subject to
the limitation as provided in
Section 3(D) below.
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<PAGE> 4
(ii) Further, if Tenant shall exercise its Second Extension Option
pursuant to Section 3.2 of the Lease, then the monthly rates per
vehicle for Tenant's parking charges shall be as follows:
-4-
<PAGE> 5
Period Monthly Rate Per Car
------ --------------------
From March 1, 2003 through $140.00, subject to escalation
December 31, 2004 as provided in Sections 3(B)
and 3(C) below.
From January 1, 2005 through $180.00, subject to escalation
February 28, 2008 as provided in Sections 3(B)
and 3(C) below.
(iii) In addition, if Tenant shall exercise its Third Extension Option
pursuant to Section 3.2 of the Lease, then the monthly rates per
vehicle for Tenant's parking charges shall be as follows:
Period Monthly Rate Per Car
------ --------------------
From March 1, 2008 through $180.00, subject to escalation
December 31, 2009 as provided in Sections 3(B)
and 3(C) below.
From January 1, 2010 through $215.00, subject to escalation
February 28, 2013 as provided in Sections 3(B)
and 3(C) below.
(B) With reference to the real estate taxes for the North Garage
referred to in this Section 3(B), it is agreed that terms used herein
are defined as follows:
(a) "Tax Year" means the 12-month period beginning July 1 each
year during the Lease Term or if the appropriate
Governmental tax fiscal period shall begin on any date other
than July 1, such other date.
(b) "Tax Expenses for the North Garage" with respect to any Tax
Year means the aggregate "North Garage Real Estate Taxes"
(as hereinafter defined) with respect to that Tax
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<PAGE> 6
Year, reduced by any net abatement receipts with respect to
that Tax Year.
(c) "Tax Expenses Allocable to Each Parking Space" means the
quotient of (i) Tax Expenses for the North Garage divided by
(ii) the total number of parking spaces in the North Garage,
being 1,170.
(d) "Monthly Tax Expenses Allocable to Each Parking Space" means
the quotient of (i) Tax Expenses Allocable to Each Parking
Space, divided by (ii) twelve (12).
(e) "North Garage Real Estate Taxes" means all taxes and special
assessments of every kind and nature assessed by any
Governmental authority on the North Garage Site or the North
Garage Improvements or both the North Garage Site and the
North Garage Improvements which the owner of the North
Garage shall be obligated to pay because of or in connection
with the ownership, leasing and operation of the North
Garage Site and the North Garage Improvements and reasonable
expenses of any proceedings for abatement of taxes. The
amount of special taxes or special assessments to be
included shall be limited to the amount of the installment
(plus any interest other than penalty interest payable
thereon) of such special tax or special assessment required
to be paid during the year in respect of which such taxes
are being determined. There shall be excluded from such
taxes all income, estate, succession, inheritance and
transfer taxes; provided, however, that if at any time
during the Lease Term the present system of ad valorem
taxation of real property shall be changed so that in lieu
of, or in addition to, the whole or any part of the ad
valorem tax on real property, there shall be assessed on the
owner of the North Garage a capital levy or other tax on the
gross income and/or parking receipts received with respect
to the North Garage Site or the North Garage Improvements,
or a Federal, State, County, Municipal, or
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<PAGE> 7
other local income, franchise, excise or similar tax,
assessment, levy or charge (distinct from any now in effect
in the jurisdiction in which the North Garage is located)
measured by or based, in whole or in part, upon any such
gross income and/or parking receipts, then any and all of
such taxes, assessments, levies or charges, to the extent so
measured or based, shall be deemed to be included within the
term "North Garage Real Estate Taxes" but only to the extent
that the same would be payable if the North Garage Site or
the North Garage Improvements were the only property of the
owner of the North Garage.
(f) "Base Taxes for the North Garage" means Tax Expenses for the
North Garage (hereinbefore defined) for fiscal tax year 1993
(that is the period beginning July 1, 1992 and ending June
30, 1993), being $269,147.00.
(g) "Base Taxes Allocable to Each Parking Space" means the
quotient of (i) Base Taxes for the North Garage divided by
(ii) the total number of parking spaces in the North Garage,
being 1,170, which quotient is $230.04 per parking space.
(h) "Monthly Base Taxes Allocable to Each Parking Space" means
the quotient of (i) "Base Taxes Allocable to Each Parking
Space", divided by (ii) twelve (12), which quotient is
$19.17 per parking space.
If with respect to any full calendar month or fraction thereof falling
within the Term after the Commencement Date of the 12CC Parking Lease,
Monthly Tax Expenses Allocable to Each Parking Space for a full month
exceed Monthly Base Taxes Allocable to Each Parking Space or for any
such fraction of a calendar month exceed the corresponding fraction of
Monthly Base Taxes Allocable to Each Parking Space (such amount being
hereinafter referred to as the "North Garage Tax Excess"), then Tenant
shall pay to Landlord, as Additional Rent, the product of (i) such
North Garage Tax Excess and (ii) the total number automobiles for
which Tenant has
-7-
<PAGE> 8
parking privileges in the North Garage under the terms of the Lease
during such calendar month (the "North Garage Tax Excess Payment").
Payments by Tenant on account of the North Garage Tax Excess Payment
shall be made monthly at the time and in the fashion herein provided
for the payment of Annual Fixed Rent. The amount so to be paid to
Landlord shall be an amount from time to time reasonably estimated by
Landlord to be sufficient to provide Landlord, in the aggregate, a sum
equal to the North Garage Tax Excess Payment for each Tax Year during
the Lease Term, ten (10) days at least before the day on which tax
payments by the owner of the North Garage would become delinquent.
Promptly after Tax Expenses Allocable to Each Parking Space are
determinable for the first such Tax Year or fraction thereof and for
each succeeding Tax Year or fraction thereof during the Lease Term,
Landlord shall render to Tenant a statement in reasonable detail
certified by a representative of Landlord showing North Garage Real
Estate Taxes for such Tax Year or fraction thereof, abatements and
refunds, if any, of any such taxes and assessments, expenditures
incurred in obtaining such abatement or refund, the amount of the
North Garage Tax Excess and the North Garage Tax Excess Payment for
each calendar month during such Tax Year or fraction thereof, the
amount thereof already paid by Tenant and the amount thereof overpaid
by, or remaining due from Tenant for the period covered by such
statement. Within thirty (30) days after the receipt of such
statement, Tenant shall pay any sum remaining due. Any balance shown
as due to Tenant shall be credited against Annual Fixed Rent next due,
or refunded to Tenant if the Lease Term has then expired and Tenant
has no further obligation to Landlord. Expenditures for reasonable
legal fees, reasonable costs charged by affiliates of Landlord and
other expenses incurred in obtaining an abatement or refund may be
charged against the abatement or refund before the adjustments are
made for the Tax Year.
To the extent that real estate taxes shall be payable to the taxing
authority in installments with respect to periods less than a Tax
Year, the statement to be furnished by Landlord shall be rendered and
payments made on account of such installments.
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<PAGE> 9
(C) With reference to the operating expenses for the North Garage
referred to in this Section 3(C), it is agreed that terms used herein
are defined as follows:
(a) "Operating Expenses Allocable to Each Parking Space" means
the quotient of (i) "Operating Expenses for the North
Garage" (as hereinafter defined) divided by (ii) the total
number of parking spaces in the North Garage, being 1,170.
(b) "Monthly Operating Expenses Allocable to Each Parking Space"
means the quotient of (i) Operating Expenses Allocable to
Each Parking Space, divided by (ii) twelve (12).
(c) "Base Operating Expenses for the North Garage" (as defined
below) means Operating Expenses for the North Garage for
calendar year 1993 (that is the period beginning January 1,
1993 and ending December 31, 1993).
(d) "Base Operating Expenses Allocable to Each Parking Space"
means the quotient of (i) Base Operating Expenses for the
North Garage divided by (ii) the total number of parking
spaces in the North Garage, being, 1,170.
(e) "Monthly Base Operating Expenses Allocable to Each Parking
Space" means the quotient of (i) Base Operating Expenses
Allocable to Each Parking Space, divided by (ii) twelve
(12).
(f) "Operating Expenses for the North Garage" means the cost of
operation of the North Garage incurred by the owner of the
North Garage. Such costs charged by affiliates of Landlord
shall be limited to reasonable costs and such costs shall
exclude payments of debt service and any other mortgage
charges, brokerage commissions, salaries of executives and
owners not directly employed in the management or operation
of the North Garage and the general overhead and
administrative expenses of the home office of the owner of
-9-
<PAGE> 10
the North Garage or such owner's managing agent, but shall
include, without limitation:
(i) compensation, wages and all fringe benefits,
workmen's compensation insurance premiums and
payroll taxes paid to, for or with respect to
all persons for their services in the
operating, maintaining or cleaning of the
North Garage Improvements or the North Garage
Site;
(ii) payments under service contracts with
independent contractors for operating,
maintaining or cleaning of the North Garage
Improvements or the North Garage Site;
(iii) steam, water, sewer, gas, oil, electricity
and telephone charges and costs of
maintaining letters of credit or other
security as may be required by utility
companies as a condition of providing such
services;
(iv) cost of maintenance, cleaning and repairs
(other than repairs not properly chargeable
against income or reimbursed from contractors
under guarantees);
(v) cost of snow removal and care of landscaping;
(vi) cost of building and cleaning supplies and
equipment;
(vii) premiums for insurance carried with respect
to the North Garage (including, without
limitation, liability insurance, insurance
against loss in case of fire or casualty and
business interruption insurance and, if there
be any first mortgage on the North Garage,
-10-
<PAGE> 11
including such insurance as may be required
by the holder of such first mortgage);
(viii) management fees at reasonable rates
consistent with the services rendered;
(ix) the North Garage's share of operating
expenses related to the common areas and
facilities within the Parcel 2 Development
Area for use of tenants of the Building in
common with tenants of other buildings in the
Parcel 2 Development Area;
(x) depreciation for capital expenditures made by
the owner of the Garage (x) to reduce
Operating Expenses for the North Garage if
the owner of the North Garage reasonably
shall have determined that the annual
reduction in Operating Expenses for the North
Garage shall exceed depreciation therefor or
(y) to comply with applicable laws, rules,
regulations, requirements, statutes,
ordinances, by-laws and court decisions of
all public authorities which are now or
hereafter in force (herein collectively
called "Legal Requirements"), (plus, in the
case of both (x) and (y), an interest factor,
reasonably determined by the owner of the
North Garage, as being the interest rate then
charged for long term mortgages by
institutional lenders on like properties
within the general locality in which the
North Garage is located), and in the case of
both (x) and (y) depreciation shall be
determined by dividing the original cost of
such capital
-11-
<PAGE> 12
expenditure by the number of years of useful
life of the capital item acquired, which
useful life shall be determined reasonably by
the owner of the North Garage in accordance
with generally accepted accounting principles
and practices in effect at the time of
acquisition of the capital item; and
(xi) all other reasonable and necessary expenses
paid in connection with the operating,
cleaning and maintenance of the North Garage
Improvement, the North Garage Site and said
common areas and facilities and properly
chargeable against income.
If with respect to any full calendar month or fraction thereof
falling within the Term after the Commencement Date of the 12CC
Parking Lease, Monthly Operating Expenses Allocable to Each Parking
Space for a full calendar month exceed Monthly Base Operating
Expenses Allocable to Each Parking Space or for any such fraction of
a calendar month exceed the corresponding fraction of Monthly Base
Operating Expenses Allocable to Each Parking Space (such amount
being hereinafter referred to as the "North Garage Operating Cost
Excess"), then Tenant shall pay to Landlord, as Additional Rent, the
product of (i) such North Garage Operating Cost Excess and (ii) the
total number of automobiles for which Tenant has parking privileges
in the North Garage under the terms of the Lease during such
calendar month (the "North Garage Operating Cost Excess Payment").
Payments by Tenant on account of the North Garage Operating Cost
Excess Payment shall be made monthly at the time and in the fashion
herein provided for the payment of Annual Fixed Rent. The amount so
to be paid to Landlord shall be an amount from time to time
reasonably estimated by Landlord to be sufficient to cover, in the
aggregate, a sum equal to the North Garage Operating Cost Excess
Payment for each calendar year during the Lease Term.
-12-
<PAGE> 13
No later than sixty (60) days after the end of each calendar year
during the Lease Term or fraction thereof at the end of the Lease
Term, Landlord shall render Tenant a statement in reasonable detail
and according to usual accounting practices certified by a
representative of Landlord, showing for the preceding calendar year
or fraction thereof, as the case may be, the Operating Expenses for
the North Garage for such calendar year or fraction thereof and the
Operating Expenses Allocable to Each Parking Space for each calendar
month during such calendar year or fraction thereof. Said statement
to be rendered to Tenant also shall show for the preceding year or
fraction thereof, as the case may be, the amounts already paid by
Tenant on account of the North Garage Operating Cost Excess Payment
and the amount of the North Garage Operating Cost Excess Payment
remaining due from, or overpaid by, Tenant for the year or other
period covered by the statement.
If such statement shows a balance remaining due to Landlord, Tenant
shall pay same to Landlord on or before the thirtieth (30th) day
following receipt by Tenant of said statement. Any balance shown as
due to Tenant shall be credited against Annual Fixed Rent next due,
or refunded to Tenant if the Lease Term has then expired and Tenant
has no further obligation to Landlord. Within sixty (60) days after
receipt of such statement, time being of the essence, Tenant may
notify ("Tenant's Operating Cost Notice") Landlord that Tenant
reasonably believes that any of the costs included in such statement
described in subparagraphs (i), (ii), (iv), (v), (vi) or (viii) of
the definition of "Operating Expenses for the North Garage" are
unreasonable when compared to the actual costs for the same items
for other comparable garages in the City of Cambridge and Tenant
shall, if available, include with Tenant's Operating Cost Notice
reasonable evidence of such actual costs incurred by such other
garage (the "Other Garage Costs"). If upon Landlord's receipt of
Tenant's Operating Cost Notice and the Other Garage Costs (i) Tenant
is not in default under the terms of this Lease, and (ii) Tenant
shall have paid Landlord the full amount due under such statement,
Landlord shall review the Other Garage Costs with Tenant. If upon
such review, Landlord and Tenant agree that costs
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<PAGE> 14
reflected in such statement are unreasonable, Landlord shall take
such reasonable actions as may be appropriate to reduce the costs so
identified.
(D) Notwithstanding the foregoing provisions of Sections 3 (A), 3
(B) and 3 (C), in no event shall the monthly parking charge per
vehicle set forth in Section 3 (A) (as escalated pursuant to
Sections 3 (B) and 3 (C) for any month during the period from the
Commencement Date of the 12CC Parking Lease to February 28, 2003
exceed the monthly amount charged per space during such month by the
operator of the North Garage (whether or not such operator is an
affiliate of Landlord) to any single tenant leasing parking rights
for fifty (50) or more vehicles in the North Garage.
4. There is added to the Lease a new Section 16.31 as follows:
"16.31 TENANT'S OPTION TO PURCHASE DEMISED PREMISES.
(A) Upon and subject to the terms and conditions
contained in this Section and provided that (i) the
Lease (as herein amended) shall be in full force and
effect, (ii) there shall be no "Event of Default"
(defined in Section 15.1 of the Lease) either at the
time of the giving of the "Tenant's Option Exercise
Notice" (defined below) or on the Closing Date (as it
may be extended hereunder) and (iii) Tenant has neither
assigned the Lease nor sublet the Demised Premises
(except only as provided in Subsection (L) below)
Landlord hereby grants to Tenant the right and option to
purchase the Demised Premises. Landlord and Tenant
hereby agree that, subject to compliance with the terms
and conditions contained in this Section (including, but
not limited to Items (i), (ii) and (iii) set forth
immediately above), the within granted option to
purchase the Demised Premises shall remain superior to
the rights of any other person to purchase or otherwise
acquire the Demised Premises until February 28, 1998, it
being covenanted and agreed (a) that the within granted
option to purchase the Demised Premises shall not
prevent any sale, conveyance or other transfer of the
Demised Premises or any interest therein but any such
sale, conveyance or other
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<PAGE> 15
transfer shall be subject to the within granted option
to purchase the Demised Premises upon and subject to the
terms and conditions hereof and (b) that the within
granted option to purchase the Demised Premises shall
not prevent any foreclosure, deed in lieu of foreclosure
or the exercise of any other rights under any mortgage
now or hereafter encumbering the Demised Premises but
that any person acquiring title to the Demised Premises
as a result of foreclosure, deed in lieu of foreclosure
or by the exercise of any such other rights shall be
subject to the within granted option to purchase the
Demised Premises upon and subject to the terms and
conditions hereof.
(B) (i) In order to exercise the within granted option
to purchase the Demised Premises, Tenant shall give
written notice to Landlord ("Tenant's Option Exercise
Notice") at any time on or before February 28, 1998
(time being of the essence). In order for Tenant's
Option Exercise Notice to be effective, it shall be
accompanied by, and Tenant shall pay together therewith,
a deposit in the amount of $1,347,240.00 in good funds
payable to Landlord (the "Deposit"); provided, however,
that the Deposit shall be promptly endorsed or otherwise
paid over to the "Escrow Agent" (defined in subsection
(B)(ii) hereof and shall be held and applied by the
Escrow Agent in accordance with the provisions of said
subsection (B)(ii) hereof. It is hereby covenanted and
agreed that if Tenant shall not give to Landlord
Tenant's Option Exercise Notice (together with the
Deposit) on or before February 28, 1998 (time being of
the essence), the within granted option to purchase the
Demised Premises shall automatically cease, expire and
be null and void without any action of the parties and
without any liability or obligation to or against any of
the parties. If Tenant shall
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<PAGE> 16
timely give to Landlord Tenant's Option Exercise Notice
(together with the Deposit), the Closing Date shall be
as set forth in subsection (D) hereof.
(B) (ii) The "Escrow Agent" shall be the General
Counsel of Boston Properties, Inc., or such law firm,
title insurance company or other institutional escrow
agent as Landlord shall select. Landlord shall promptly
pay over the Deposit to the Escrow Agent so selected and
shall cause the Escrow Agent holding the Deposit to
acknowledge to Tenant receipt of the Deposit within a
reasonable period of time after the Escrow Agent
receives the Deposit. The Deposit shall be held in such
interest bearing account in such banking institution in
the City of Boston and upon such terms and conditions
relating to the deposit of funds and maintenance of
accounts as the Escrow Agent shall determine. The type
of account, the rate of interest, the terms and
conditions relating to the deposit of funds and
maintenance of accounts and the banking institution
shall be as solely selected by the Escrow Agent and the
Escrow Agent shall have no liability to Landlord or
Tenant respecting the selection of the type of account,
the rate of interest, the terms and conditions relating
to the deposit of funds and maintenance of accounts
and/or the banking institution. Further, the Deposit
shall be held by the Escrow Agent subject to the terms
of this Section 16.31 and shall be duly accounted for on
the "Closing Date" (hereinafter defined) as it may be
extended pursuant to this Section 16.31 or on the
earlier termination of this Section 16.31. All interest
earned on the Deposit shall be paid to Landlord with no
credit against the purchase price for such interest
being given to Tenant; provided, however, that if
pursuant to the terms of this Section 16.31 the Deposit
shall be returned to Tenant, the interest earned on the
Deposit at the time of such return of the Deposit shall
be paid over to Tenant.
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<PAGE> 17
If for any reason the closing does not occur and
either party makes a written demand upon the Escrow
Agent for delivery of the Deposit and the interest
earned thereon, the Escrow Agent shall give written
notice to the other party of such demand. If the Escrow
Agent does not receive a written objection from the
other party to the proposed payment within ten (10) days
after the giving of such notice, the Escrow Agent is
hereby authorized to make such delivery or payment. If
the Escrow Agent does receive such written objection
within such ten (10) business day period or if for any
other reason the Escrow Agent in good faith shall elect
not to make such payment, the Escrow Agent shall
continue to hold the Deposit until otherwise directed by
written instructions from both Landlord and Tenant or a
final judgment of a court. However, the Escrow Agent
shall have the right at any time to deposit the Deposit
with the clerk of such court of competent jurisdiction
in the Commonwealth of Massachusetts that the Escrow
Agent shall select. The Escrow Agent shall give written
notice of such deposit to Landlord and Tenant. Upon such
deposit the Escrow Agent shall be relieved and
discharged of all further obligations and
responsibilities hereunder.
The Landlord and Tenant acknowledge that the
Escrow Agent shall act solely as a stakeholder at
Landlord's and Tenant's request and for their
convenience, that the Escrow Agent shall not be deemed
to be the agent of either of the parties, and the Escrow
Agent shall not be liable to either of the parties for
any act or omission on its part unless taken or suffered
in bad faith, in willful disregard of this Section 16.31
or involving gross negligence. Landlord and Tenant shall
jointly and severally indemnify and hold the Escrow
Agent harmless from and against all costs,claims and
expenses, including reasonable attorneys' fees,
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<PAGE> 18
incurred in connection with the performance of the
Escrow Agent's duties hereunder, except with respect to
actions or omissions taken or suffered by the Escrow
Agent in bad faith, in willful disregard of this Section
16.31 or involving gross negligence on the part of the
Escrow Agent. The parties agree that notwithstanding the
obligations of the Escrow Agent under this Agreement,
the Escrow Agent (if an attorney or law firm) shall be
permitted to represent Landlord or Tenant (as the case
may be) in connection with the transaction evidenced by
this Section 16.31 or in connection with any matters
arising from or related to this Section 16.31, the
consummation of this Section 16.31 or any claimed breach
of this Section 16.31 by any party.
(C) (i) The purchase price payable for the Demised
Premises (the "Purchase Price") shall be THIRTEEN
MILLION FOUR HUNDRED SEVENTY TWO THOUSAND FOUR HUNDRED
DOLLARS ($13,472,400.00) payable on the closing by
Federal Funds immediately available to the Landlord at
The First National Bank of Boston, Boston, Massachusetts
or such other bank as may be stipulated by Landlord by
written notice to Tenant. Upon closing, credit shall be
given by Landlord to Tenant for and in the amount of the
Deposit (but not for the interest earned thereon). The
parties acknowledge and agree that "Impositions" (as
defined in Article VI of the Lease) are and shall
continue to be paid entirely by Tenant. Accordingly, no
credit or adjustment shall be given to Tenant at closing
(or otherwise) respecting Impositions.
(C) (ii) Fixed Rent and all Additional Rent (except
respecting Impositions, provision for which is made in
Section 16.31 (C)(i) above) shall be paid through the
"Closing Date" (referred to in Section 16.31 (D) as it
may be extended pursuant to the provisions of this
Section 16.31 and in the event that
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<PAGE> 19
Tenant has prepaid amounts of the foregoing (excluding
Impositions) for periods extending beyond said Closing
Date (as it may be so extended), appropriate credit
shall be given to Tenant for amounts thereof (excluding
Impositions) prepaid for periods extending beyond said
Closing Date (as it may be so extended).
(D) The closing (the "Closing") shall be held at the
Middlesex South District Registry of Deeds, 208
Cambridge Street, Cambridge, Massachusetts 02141 (or at
such other location in which said Registry of Deeds may
be located), or at such other place in the City of
Boston as the parties may agree, at 10:30 A.M. on that
date (the "Closing Date") which is thirty (30) days
after Landlord's receipt of Tenant's Option Exercise
Notice (accompanied by the Deposit); provided, however,
if said thirtieth (30th) day shall be a Saturday, Sunday
or Legal Holiday, the Closing Date shall be the next
following business day on which the Middlesex South
District Registry of Deeds shall be open for the
transaction of business. In addition to the provisions
of Section 16.31 (A) above, Landlord covenants that, so
long as this Section 16.31 shall be in full force and
effect and Tenant has not assigned this Lease nor sublet
the Premises (except only as provided in Subsection (L)
below) and Tenant shall not have wrongfully failed to
close on its purchase of the Demised Premises and there
shall be no "Event of Default" (defined in Section 15.1
(a) of the Lease (as herein amended), Landlord shall not
encumber the Demised Premises from time to time with any
mortgages (and other financing documents) in the
aggregate principal amount greater than the purchase
price. It is agreed that time is of the essence with
respect to the provisions and agreements in this Section
16.31.
(E) The Demised Premises shall be sold and conveyed
in as-is condition and subject to
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<PAGE> 20
the following (collectively, the "Permitted
Encumbrances"):
(i) the provisions of all laws, statutes,
ordinances, rules and regulations
(including, but not limited to, the
Kendall Square Urban Renewal Plan (as
amended and as it may hereafter be
amended), building codes, zoning
ordinances and regulations, and
environmental laws and regulations) and
the orders, rules, regulations and
requirements of all Federal, state and
municipal governments, and the
appropriate agencies, officers,
departments, boards and commissions
thereof, whether now or hereafter in
force, which may be applicable to the
Demised Premises or the use or manner of
use of the Demised Premises (herein
collectively called "Legal
Requirements");
(ii) all leases, subleases and other
occupancy agreements and arrangements
for space in the Building of which
Tenant has knowledge or which were
entered into or arranged by Tenant (but
nothing herein shall be construed as a
waiver or modification of the provisions
of Article XI of this Lease);
(iii) any state of facts an accurate survey
and/or inspection and/or review of any
and all public records would disclose
(including, without limitation, the
condition of the Demised Premises and/or
the presence , removal, containment,
investigation, monitoring or permit
conditions of or respecting hazardous
materials in, on, under or with respect
to the Demised Premises);
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<PAGE> 21
(iv) real estate taxes and assessments, water
and sewer charges, other municipal
charges and assessments and all other
Impositions for the fiscal tax year in
which the closing shall occur and for
all prior and subsequent fiscal tax
years;
(v) orders, agreements, decrees, license or
permit conditions relating to, and
notices of violation of, any Legal
Requirements issued by any Federal,
State or municipal or other governmental
authorities, agencies, boards,
departments or other instrumentalities
having jurisdiction, against or
affecting the Site, the Building or the
use of the Site or Building including,
without limitation, any of the foregoing
arising out of or in any way related to
the presence, removal, containment,
investigation, monitoring or permit
conditions of or respecting hazardous
materials in, on, under or relating to
the Demised Premises (herein
collectively called "Governmental
Directives");
(vi) any lien or encumbrance placed on the
Demised Premises (i) with the written
consent of the Tenant (which consent
shall not be unreasonably withheld or
delayed), (ii) arising out of the use,
occupancy or maintaining of the Site
and/or the Building or any breach or
default of the Tenant or (iii) resulting
from any cause created by the act or
omission of the Tenant;
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<PAGE> 22
(vii) that certain unrecorded instrument
entitled "Agreement For The Creation Of
Certain Easements" dated September 19,
1983 by and between COM/Energy Steam
Company and Cambridge Center Associates
and all easements, rights, grants and
other agreements from time to time
executed and/or granted pursuant to said
Agreement;
(viii) those matters set forth in Exhibit I
attached hereto and hereby incorporated
herein by reference;
(ix) such other easements, agreements and
restrictions of record insofar as in
force (on the Closing Date as it may be
extended hereunder) and applicable to
the Site and/or Building, provided the
same do not materially interfere with
the use of the Demised Premises for the
"Permitted Uses" (as defined in Section
1.2 of the Lease).
(x) The "Printed Exclusions" and the "Deemed
Approved Matters" (both referred to in
Section 16.31 I (2) hereof).
(F) In the event of (i) a taking of the Demised Premises, or any
part thereof, by the exercise of a right of condemnation or
eminent domain, or (ii) damage to the Building by fire or other
casualty, or (iii) a taking ,by the exercise of a right of
condemnation or eminent domain, of the "Garage" (defined in the
"Parking Garage Lease" hereinafter referred to at the end of
this subsection) which taking pursuant to the provisions of
Section 7 (b) of the Parking Garage Lease results in a
termination of the Parking Garage Lease (a "Parking Garage
Taking Termination"), and if any of the events referred to in
items (i), (ii) and
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<PAGE> 23
(iii) above occur between the date of Landlord's receipt of
Tenant's Option Exercise Notice (given pursuant to and in
compliance with the foregoing provisions hereof) and the
Closing, then Tenant, by written notice to Landlord given within
fifteen (15) days after such taking of the Demised Premises or
any part thereof, a Parking Garage Taking Termination or the
occurrence of such fire or casualty, as the case may be (but in
no case given after the time of closing), shall elect one (1)
but only one (1) of the following: (x) to cancel Tenant's
exercise of the option to purchase the Demised Premises in which
case the Deposit (and all interest then earned thereon) shall be
promptly refunded to Tenant (provided the Deposit has previously
been paid by Tenant) in which case the provisions of this
Section 16.31 shall be void without further recourse or
liability to or against either Landlord or Tenant provided,
however, that the Lease (as amended by this Amendment but
without this Section 16.31) shall remain in full force and
effect in accordance with the terms of the Lease as amended by
this Amendment but without this Section 16.31 or (y) to proceed
to close regardless of the extent of such taking, damage or
destruction (the "Closing Election").If Tenant shall make the
Closing Election, the agreements contained in this Section 16.31
shall remain unaffected thereby (except only as hereinafter
specifically set forth in this Section 16.31 (F)) and the
parties shall close the transaction as herein provided
notwithstanding such occurrence, without any diminution or
abatement of the purchase price; except, however, that unless
Landlord has previously restored the Demised Premises to its
former condition (Landlord having the right but not the
obligation to do so), Landlord shall (i)(a) in the case of fire
or casualty to the Building pay over or assign to Tenant, on
delivery of the Deed, all amounts recovered or recoverable on
account of an insured fire or casualty less any
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<PAGE> 24
amounts reasonably expended by Landlord for any partial
restoration or (i)(b) in the case of a taking of the Demised
Premises (in whole or in part) under the power of eminent domain
pay over or assign to Tenant, on delivery of the Deed, all
amounts recovered on account of such taking and/or Landlord's
claim in any such eminent domain or condemnation proceeding less
any amounts reasonably expended by Landlord for any partial
restoration, or (ii) if the holder of a mortgage on the Demised
Premises shall require that fire or casualty proceeds or eminent
domain (or condemnation) awards be applied on account of the
mortgage indebtedness, give to Tenant a credit against the
Purchase Price, on delivery of the Deed, equal to the insured
fire or casualty proceeds received or recoverable or the eminent
domain (or condemnation) awards respecting the Demised Premises,
as the case may be, and retained by the holder of said mortgage
less any amounts reasonably expended by Landlord for any partial
restoration. In the event that Tenant shall fail to give any
notice or to give timely notice pursuant to this Section 16.31
(F) (time being of the essence), Tenant shall be deemed to have
conclusively elected the Closing Election. The "Parking Garage
Lease" is that certain Lease entitled "Cambridge Center North
Garage Parking Lease" dated March 19, 1990 between David
Barrett, Edward H. Linde and Mortimer B. Zuckerman, Trustees of
Cambridge Center North Trust u/d/t dated August 7, 1988 recorded
with the Middlesex South District Registry of Deeds in Book
19383, Page 203, as landlord, and David Barrett, Edward H. Linde
and Mortimer B. Zuckerman, Trustees of Fourteen Cambridge Center
Trust u/d/t dated February 4, 1982 recorded with said Registry
in Book 14707, Page 96, as tenant, a Notice of which is recorded
with said Registry in Book 20450, Page 211.
(G) The following deliveries shall be made at the Closing:
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(i) Landlord shall execute, acknowledge and deliver
a Massachusetts quitclaim deed to the Demised
Premises in recordable form, so as to convey to
Tenant good and clear record and marketable fee
simple title to the Demised Premises, free and
clear of all liens and encumbrances, except for,
and subject to, the Permitted Encumbrances.
(ii) Each of Landlord and Tenant shall pay one half
(1/2) of all transfer taxes and stamp costs and
all other federal, state, county or municipal
taxes excises, impositions or levies applicable
to or imposed on the transfer of real property,
the conveyance of the Demised Premises or the
delivery or recording of the deed (whether now
or hereafter in effect) and whether assessed to
sellers or buyers of real property (excluding,
however, any income taxes of Landlord which
Landlord shall be obligated to pay and any
franchise, corporation or income taxes of Tenant
which Tenant shall be obligated to pay and
excluding all Impositions, provision for which
is made in Section 16.31 (C)(i) hereof) and
Tenant shall pay all recording costs by reason
of the delivery or recording of the deed.
(iii) Landlord shall execute, acknowledge and deliver
to Tenant an assignment of all insurance
proceeds and condemnation awards or claims or
rights thereto, if any there be, then payable to
the Landlord, but as required by and subject to
the provisions of subsection (F) above, all
without representation or
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<PAGE> 26
warranty by or recourse against Landlord.
(iv) The Tenant shall deliver the Purchase Price
described in subsection (C) above in the manner
specified therein.
(v) The parties shall execute and deliver to each
other such other instruments and documents, and
shall pay or cause to be paid such sums of
money, to which either may be entitled pursuant
to any of the other provisions of this Section
or which may be required reasonably in
connection with the Closing and consistent with
the provisions of this Section. Each such
instrument and document to be delivered at the
Closing shall be consistent with the applicable
provisions of this Section, shall be in the form
or contain the information or provisions
provided for in this Section, and shall
otherwise be reasonably satisfactory in form and
substance to the parties.
(vi) Landlord shall cause its counsel to deliver an
opinion in form and substance reasonably
satisfactory to Tenant relating to the power and
authority of Landlord to execute and deliver the
Deed and other instruments at the Closing.
(vii) Tenant shall cause its counsel to deliver an
opinion in form and substance reasonably
satisfactory to Landlord relating to the power
and authority of Tenant to purchase the Demised
Premises and to execute and deliver any
instruments as are executed by the Tenant or its
nominee at the Closing.
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<PAGE> 27
(viii) To the extent same are in Landlord's possession
or subject to Landlord's custody and control,
Landlord shall deliver to Tenant all licenses,
permits, authorizations and approvals of any
Governmental authorities relating to the Demised
Premises.
(H) Tenant represents and warrants to the Landlord that: (i) it
has examined, inspected and investigated, to its full
satisfaction,the physical nature and condition of the Demised
Premises; (ii) neither Landlord nor any agent, officer,
director, employee, trustee, beneficiary, partner,
representative or affiliate of Landlord (including, without
limitation, Boston Properties, Inc., and its officers, directors
and employees) has made any representation whatsoever regarding
the Demised Premises or any part thereof, or anything relating
to the subject matter of the agreements contained in this
Section 16.31 including, without limiting the generality of the
foregoing, representations as to the present or future physical
nature or condition of the Demised Premises (including the
presence, removal, containment, investigation, monitoring or
permit conditions of or respecting hazardous materials),
operation, size or zoning of the Demised Premises, operating
expenses, carrying charges or real estate taxes and assessments,
water and sewer charges, other municipal charges and assessments
and all other Impositions affecting the Demised Premises; and
(iii) it will take ownership of the Demised Premises in its "as
is" condition on the Closing Date. The acceptance of a deed to
the Demised Premises by Tenant shall be deemed to be a
reaffirmation of the provisions of this Section 16.31 (H).
(I) (1) (a) As of the Closing Date, Landlord shall be the owner
of good and clear record and marketable fee simple title to the
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<PAGE> 28
Demised Premises, subject only to those matters defined as
Permitted Encumbrances in subsection (E) hereof. However, if on
the Closing Date (i) the title to the Demised Premises is not as
aforesaid or becomes additionally encumbered, in either case by
an act or omission not attributable to Tenant, Tenant's
affiliates or Tenant's subtenants, occupants, licensees, agents,
contractors, subcontractors, tradesmen or materialmen or (ii)
the Demised Premises do not comply in all material respects with
applicable Legal Requirements or Governmental Directives or
(iii) there is any material state of facts disclosed by an on
the ground instrument survey of the Site performed and prepared
for Tenant by the "Surveying Firm" (hereinafter defined) which
renders title to the Site unmarketable (herein called "Survey
Defects"), but in any of such cases not attributable to
"Tenant's Operation Of The Demised Premises" (hereinafter
defined), then Tenant, by written notice to Landlord given on or
before the Closing Date (but in no event after the Closing Date)
shall elect one (1) but only one (1) of the following: (x) to
cancel Tenant's exercise of the option to purchase the Demised
Premises in which case the Deposit (and all interest then earned
thereon) shall be promptly refunded to Tenant (provided the
Deposit has previously been paid by Tenant) and the provisions
of this Section 16.31 shall be void and shall wholly cease and
terminate and neither party shall have any claim against or
liability to the other provided, however, that the Lease (as
amended by this Amendment but excluding this Section 16.31)
shall remain in full force and effect in accordance with the
terms of the Lease as amended by this Amendment but without this
Section 16.31 or (y) to extend the Closing Date for a period of
ninety (90) days (the "Extension Election") in which case
Landlord shall use reasonable efforts, but at Tenant's sole
cost, expense and liability (collectively "Tenant's Cost And
Liability") to attempt to bring the Demised Premises into
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<PAGE> 29
material compliance with applicable Legal Requirements or
Governmental Directives or to cure the Survey Defects, as the
case may be, but in any of such cases Landlord shall have no
obligation if any such non-compliance and/or Survey Defects is
(are) the result of Tenant's Operation Of The Demised Premises.
If Tenant shall make the Extension Election, the same shall only
be effective if Tenant, in its notice to Landlord, shall agree
to the provisions of item (y) hereof which shall survive the
delivery of the deed and shall survive as elsewhere provided in
this Section 16.31. For purposes hereof, "Tenant's Operation Of
The Demised Premises" shall mean the manner and operation or use
of the Demised Premises (or any portion or component thereof or
equipment or process therein) by Tenant and/or those claiming
by, through or under Tenant. For purposes hereof, the term
"Surveying Firm" shall mean a duly licensed and qualified
registered professional land surveying firm in the Commonwealth
of Massachusetts first approved by Landlord, which approval
shall not be unreasonably withheld or delayed. For purposes
hereof, Landlord hereby approves the firm of Allen & Major
presently located in Woburn, Massachusetts.
(I) (1) (b) In addition to the foregoing provisions of Section
16.31 (I)(1)(a), if on the Closing Date a hazardous materials
analysis and study of the Site and its component materials
performed by a geotechnical or other engineering first approved
by Landlord (which approval shall not be unreasonably withheld
or delayed) discloses the presence of hazardous materials in
such quantities or amounts as to constitute a material violation
or material non-compliance with the standards therefor set forth
in applicable environmental laws, then Tenant, by written notice
to Landlord given on or before the Closing Date (but in no event
after the Closing Date) shall elect one (1) but only one (1) of
the following:
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<PAGE> 30
(x) to cancel Tenant's exercise of the option to purchase the
Demised Premises (the "Termination Election") in which case the
Deposit (and all interest then earned thereon) shall be promptly
refunded to Tenant (provided the Deposit has previously been
paid by Tenant) and the provisions of this Section 16.31 shall
be void and shall wholly cease and terminate and neither party
shall have any claim against or liability to the other provided,
however, that the Lease (as amended by this Amendment but
excluding this Section 16.31) shall remain in full force and
effect in accordance with the terms of the Lease as amended by
this Amendment but without this Section 16.31 or (y) to close
the purchase of the Demised Premises on the Closing Date without
any deduction, offset or other reduction in the purchase price.
In the case of an election to close under item (y), such
election shall be conditioned upon Tenant executing a written
instrument in favor of Landlord pursuant to which Tenant and its
successors and assigns releases Landlord from liability
respecting the presence, release, threat of release, removal and
remediation of hazardous materials (herein called "Tenant's
Release").
(I) (1) (c) Subject to the provisions of Section 16.31 (I)
(1)(a) above, to enable Landlord to make conveyance of the
Demised Premises as herein provided, Landlord may, on the
Closing Date (as it may be extended as above provided) use the
purchase price or any portion thereof to clear the title to the
Premises of any or all interests not permitted by this Section
16.31 provided that all instruments so procured which affect
title to the Demised Premises are recorded on the Closing Date
(as it may be so extended) except, however, that Landlord shall
have the right in lieu of payment and discharge to have
deposited with Tenant's title insurer out of the purchase price
such funds or assurances as will provide for the full payoff of
all of such interests and the deletion of any exceptions for
items other
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than the Permitted Exceptions, those matters deemed approved
pursuant to Section 16.31 (I) (2) and the Printed Exclusions in
the owner's policy of title insurance issued (or to be issued)
to Tenant upon the acquisition of the Demised Premises by
Tenant, in which case such interests shall not be considered
objections to title to the Demised Premises.
(I) (2) The Tenant agrees that it will obtain, not earlier than
twenty (20) days prior to the date of Tenant's Option Exercise
Notice nor later than ten (10) days prior to the Closing, a
preliminary commitment from a recognized title insurance company
reasonably selected by Tenant (the "Title Insurer"), covering
the Demised Premises, pursuant to which the Title Insurer shall
commit to issue to Tenant an Owner's Fee Title Insurance Policy
insuring Tenant's title to the Demised Premises in the amount of
the Purchase Price, subject only to the Permitted Encumbrances
and the printed exclusions from coverage and other matters set
forth in said preliminary commitment and the Owner's Policy of
issue (the "Printed Exclusions"). A copy of title commitment
shall be furnished to Landlord within seven (7) days after its
receipt by the Tenant, accompanied by a written statement as to
any objections to title set forth therein which are not
Permitted Encumbrances or Printed Exclusions. Any objections to
title then existing but not then raised in such written
statement shall be deemed waived, accepted and approved by
Tenant (the "Deemed Approved Matters").
If Tenant shall have elected to extend the Closing Date as
provided in and on the terms set forth in Section 16.31
(I)(1)(a) and if, at the extended Closing Date, title to the
Demised Premises shall not be as provided in this Section 16.31
or if the Demised Premises are not in material compliance with
the applicable Legal Requirements and Governmental Directives or
if there shall be any Survey Defects, Tenant shall elect one
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(1) but only one (1) of the following: (a) to cancel its
agreement to purchase the Demised Premises contained in this
Section 16.31, in which event the Deposit (and all interest then
earned thereon) shall be promptly refunded to Tenant (provided
the Deposit shall have previously been paid by Tenant) and the
provisions of this Section 16.31 shall be void and shall wholly
cease and terminate, and neither party shall have any claim
against or liability to the other provided, however, that the
Lease as amended by this Amendment (but excluding the provisions
of this Section 16.31) shall remain in full force and effect in
accordance with the terms of this Lease as amended by this
Amendment but without this Section 16.31; provided, however,
that notwithstanding the foregoing Tenant's Cost And Liability
shall survive, or (b) to consummate the Closing without any
reduction of the purchase price or allowance against the same
and without any liability on the part of the Landlord on account
of the agreements or matters contained in this Section 16.31
including, without limitation, any non-compliance with
applicable Legal Requirements, any non-compliance with
Governmental Directives, the existence of any Survey Defects,
the existence of any Deemed Approved Matters and/or the
existence or presence of any matters for which Tenant's Release
is given.
(J) If, on the Closing Date (as it may be extended pursuant to
subsection (I) (1)(a) hereof), the Tenant shall fail to perform
its obligation to purchase the Demised Premises, as herein
provided, (i) the Landlord shall as its sole remedy therefor
retain the Deposit (and all interest earned thereon) and (ii)
the terms, conditions and provisions of both this Section 16.31
and Section 16.32 shall wholly cease and terminate and neither
party shall have any further claim against or liability to the
other by reason of the provisions of this Section 16.31 and
Section 16.32 (it being acknowledged that Landlord shall retain
the Deposit and said interest); provided, however, that the
Lease as amended by this Amendment (but excluding the provisions
of this Section 16.31 and Section
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<PAGE> 33
16.32) shall remain in full force and effect in accordance with
the terms of the Lease as amended by this Amendment but without
this Section 16.31 and Section 16.32; provided, however, that
notwithstanding the foregoing Tenant's Cost And Liability shall
survive.
(K) All notices, demands, requests, consents, approvals or other
communications (for the purposes of this subsection collectively
called "Notices") required or permitted to be given under this
Section shall be in writing and shall be sent by registered or
certified mail, return receipt requested, postage prepaid,
addressed to the party to be notified at its address first above
set forth or to such other address as such party shall have
specified most recently by like Notice. At the same time any
Notice is given to Landlord, a copy thereof shall be sent to
Boston Properties, Inc., 8 Arlington Street, Boston,
Massachusetts 02116, Attention: General Counsel. At the same
time any Notice is given to Tenant a copy thereof shall be sent
to Mintz, Levin, Cohn, Ferris, Glovsky And Popeo, P.C., One
Financial Center, Boston, Massachusetts 02111, Attention: Joel
R. Bloom, Esquire. Notices given as provided above shall be
deemed given on the date of delivery except that if delivery is
refused notice shall be deemed given on the date that delivery
is first attempted to be made.
(L) This Section 16.31, and Tenant's rights hereunder, shall not
be assigned, pledged, hypothecated, mortgaged or otherwise
transferred (collectively called "Transfer") and any purported
Transfer shall be null and void and of no force or effect.
However, Tenant shall have the right to assign this Section
16.31 but only as part of an assignment of the entire Lease (as
amended by this Amendment) to an
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assignee permitted under Section 11.1 B of the Lease or
consented to under Section 11.1 D of the Lease.
(M) (1) With respect only to this Section 16.31, Landlord
warrants and represents to Tenant that as of the date of this
Amendment (a) Landlord is a nominee trust under the laws of the
Commonwealth of Massachusetts and that it has the necessary
power and authority under its Declaration of Trust to enter into
this Fourth Amendment, (b) Landlord has no actual knowledge of
any litigation pending against Landlord or the Demised Premises
(excluding Tenant's Operation Of The Demised Premises as to
which no representation or warranty is made) which would have a
materially adverse effect on the obligations of Landlord under
this Section 16.31, (c) the Lease (as amended by this Amendment)
and those leases and subleases set forth in Exhibit I are the
only leases entered into by Landlord respecting the Demised
Premises (no warranty or representation being made as to any
subleases or other occupancy agreements or arrangements made by
Tenant or as to any matters set forth in Section 16.31 (E)(ii)
hereof), (d) Landlord has not entered into any service contracts
respecting the Demised Premises which will continue in effect
beyond the conveyance of the Demised Premises to Tenant (or if
any service contracts entered into by Landlord respecting the
Demised Premises exist, the same shall be terminated on or
before closing hereunder), (e) no consent, authorization or
approval of any governmental body, authority or court is
required in connection with Landlord's agreements set forth in
this Section 16.31 (or if any of the same shall be required,
Landlord has obtained or will obtain same) and (f) Landlord has
not entered into any options to sell, nor granted rights of
first offer or first refusal to sell nor entered into any other
written agreements to sell the
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<PAGE> 35
Demised Premises which would deprive Tenant of its option to
purchase the Demised Premises under this Section 16.31;
provided, however, Tenant acknowledges that Landlord's mortgage
lender must approve and consent to this Amendment and the
existence of any mortgages does not contravene the foregoing. At
the time of closing, the then owner of the Demised Premises
shall reaffirm the foregoing warranties and representations or
state in what respects the same are not then true and correct.
The provisions hereof shall not survive the delivery of the deed
of the Demised Premises.
(M)(M) (2) If any of the warranties and representations set
forth in subsection (M) (1) above shall not be complied with in
material respects as of the Closing Date (as it may be extended
pursuant to the applicable provisions hereof), Tenant shall
elect one (1) but only one (1) of the following: (a) to cancel
its agreement to purchase the Demised Premises contained in this
Section 16.31 in which event the Deposit (and all interest then
earned thereon) shall be promptly refunded to Tenant (provided
the Deposit shall have been paid by Tenant) and the provisions
of this Section 16.31 shall be void and shall wholly cease and
terminate, and neither party shall have any claim against or
liability to the other provided, however, that the Lease as
amended by this Amendment (but excluding the provisions of this
Section 16.31) shall remain in full force and effect in
accordance with the terms of this Lease as amended by this
Amendment but without this Section 16.31, or (b) to consummate
the Closing without any reduction of the purchase price or
allowance against same and without any liability on the part of
Landlord on account of the matters set forth in subsection (M)
(1) above.
(N) It is understood and agreed that all understandings and
agreements heretofore had between the parties hereto with
respect to
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the subject matter of this Section 16.31 are merged herewith,
and this Section 16.31 alone fully and completely expresses
their agreement.
(O) The delivery and acceptance of the Deed conveying fee title
to the Demised Premises shall be deemed to be an
acknowledgement, for all purposes, of the full performance and
discharge of every representation, warranty, agreement and
obligation on the part of each of the parties to be performed
pursuant to the provisions of this Section 16.31, except those
which are herein specifically stated to survive the Closing and
the delivery of the Deed.
(P) If the Lease is terminated on account of an Event of Default
specified in Section 15.1 of the Lease, the provisions contained
in this Section 16.31 shall terminate and shall not survive the
termination of the Lease.
(Q) The Tenant acknowledges that a reference to the Landlord
herein is a reference to the Trustees of Fourteen Cambridge
Center Trust under Declaration of Trust identified on the first
page of this Amendment, and that no trustee, nor any beneficiary
of said trust, nor any officer, director, employee or agent of
said trust or any affiliate of said trust (including, but not
limited to, Boston Properties, Inc., Mortimer B. Zuckerman,
Edward H.Linde and/or any affiliates of said Mortimer B.
Zuckerman and/or Edward H. Linde) nor any successor holder of
Landlord's interest in the Lease (as amended) and/or in the
Demised Premises, shall be held to any personal liability
hereunder, nor shall resort be had to their private property for
the satisfaction of any claim hereunder, and Tenant agrees to
look solely to the Demised Premises in satisfaction of any
liability of the Landlord or any such successor under this
Section 16.31. In no event shall any of the aforesaid persons or
parties (including, without limitation, Landlord and its
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successors) be liable for indirect or consequential damages.
(R) The unenforceability of invalidity of any one or more
provisions hereof shall not affect the validity or
enforceability of any of the other provisions hereof.
(S) This Section shall be governed by, and construed and
enforced in accordance with the law of, The Commonwealth of
Massachusetts, as the same may from time to time exist.
(T) The Lease (as herein amended) shall terminate upon and as of
the date of the acquisition by Tenant of title to the Demised
Premises pursuant to this Section 16.31".
5. There is added to the Lease a new Section 16.32 as set forth in
Exhibit II attached hereto and hereby incorporated herein by
reference.
6. The existing Section 16.32 of the Lease is hereby renumbered as
Section 16.33.
7. For purposes of Section 11.1 D(a) of the Lease, the proposed
assignee shall be deemed to possess "adequate financial capability
to meet the tenant obligations" under the Lease (as herein amended)
if the proposed assignee (a) has a shareholder's or owner's (as
applicable) equity as determined in accordance with "GAAP"
(hereinafter defined) at least equal to One Hundred Twenty Five
Million Dollars ($125,000,000.00) plus the "CPI Amount" (hereinafter
defined), (b) has Net Income (as determined in accordance with
GAAP), but excluding interest and investment income and income from
extraordinary events, of at least (1) Seven Million Dollars
($7,000,000.00) plus the CPI Amount for the fiscal year immediately
prior to such proposed assignment, (2) One Dollar ($1.00) for each
of at least two of the last three fiscal years prior to such
proposed assignment and (3) Twenty Million Dollars ($20,000,000.00)
plus the CPI Amount in the aggregate for the last three fiscal years
prior to such proposed assignment and (c) has Fifty Million Dollars
($50,000,000.00) plus the CPI Amount in cash or marketable
securities at the time of such proposed
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<PAGE> 38
assignment. For purposes hereof, "GAAP" shall mean generally
accepted accounting principles consistently applied throughout
(and/or with respect to) the relevant period. In addition and for
purposes hereof, the "CPI Amount" shall be and mean an amount equal
to the product of the amount in question times the percentage
increase, if any, in the Consumer Price Index (1982-1984 = 100) of
all items for urban wage earners and clerical workers published by
the Bureau of Labor Statistics of the U.S. Department of Labor for
Boston, Massachusetts (the "Index") (or if there ceases to be any
such publication, any other substantially equivalent index generally
recognized to measure changes in the cost of living for Boston,
Massachusetts) between the Index last published prior to the date of
this Amendment and the Index last published prior to the change
contemplated by this Section.
8. Reference is made to the "East Garage Sublease" (referred to in Item
5 of Exhibit I attached hereto). Notwithstanding anything contained
in the Lease as amended by this Amendment, Tenant acknowledges,
covenants and agrees that Landlord shall have the right, in its sole
and absolute discretion, to terminate the East Garage Sublease or to
cause the East Garage Sublease to be terminated at such time
(whether during the Term of the Lease as amended hereby (as it may
be extended) or after any conveyance of the Demised Premises to
Tenant pursuant to Section 16.31 or Section 16.32 or otherwise) as
Landlord, in its sole and absolute discretion, shall determine.
9. Landlord and Tenant each represents and warrants to the other that
it has not dealt with any real estate brokers or other persons or
entities which have been, are or will be entitled to any broker's or
finder's fee or any similar commission or fee in connection with
this Lease Amendment (including, without limitation, the
transactions contemplated by Sections 16.31 and 16.32 of the Lease
and added to the Lease pursuant to this Lease Amendment) except
Fallon, Hines & O'Connor (the "Recognized Broker"). Landlord and
Tenant each agree to indemnify, hold harmless, protect and defend
the other from and against any and all loss, damage, liability and
expense, including costs and reasonable attorneys' fees which such
other party incurs or
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<PAGE> 39
sustains by reason of the breach by the indemnifying party of its
foregoing warranties and representations. Tenant covenants and
agrees that it shall be solely responsible for and shall pay to the
Recognized Broker such fee or commission as shall be due to the
Recognized Broker. Tenant shall defend, hold harmless and indemnify
Landlord (and its affiliates including, without limitation, Boston
Properties, Inc.) from and against any claims by the Recognized
Broker. The provisions hereof shall survive the expiration or any
termination of this Lease (as herein amended), the termination of
this Fourth Amendment To Lease pursuant to the provisions of Section
11 hereof, the expiration or any termination of Section 16.31 and/or
Section 16.32 hereof and/or the delivery of any deed of the Demised
Premises to Tenant pursuant to Section 16.31 hereof, Section 16.32
hereof or otherwise.
10. Concurrently with the execution of this Fourth Amendment to Lease,
Landlord shall deliver to Tenant a Trustees' Certificate respecting
the authority to enter into this Fourth Amendment To Lease and
Tenant shall deliver to Landlord a corporate vote evidencing the
authority of Tenant to enter into this Fourth Amendment to Lease.
11. Reference is made to that certain lease of even date herewith
between North Parcel Limited Partnership, a Massachusetts Limited
Partnership ("NPLP"), as landlord, and Biogen Realty Limited
Partnership, a Massachusetts Limited Partnership ("BRLP") that is an
affiliate of Tenant, as tenant (the "Tract V Lease"), pursuant to
which Tract V Lease NPLP leased to BRLP that certain parcel of
unimproved land therein referred to as Tract V. BRLP is to construct
the "Improvements" (as therein defined) on said Tract V in
accordance with the requirements of the Tract V Lease and the "Land
Disposition Agreement" (hereinafter defined). The Land Disposition
Agreement is that certain Supplemental Land Disposition Agreement
dated October 6, 1993 between the Cambridge Redevelopment Authority
(the "Authority") and NPLP. The parties acknowledge that the
transaction contemplated by the Tract V Lease was and is a material
inducement to the parties to enter into this Fourth Amendment To
Lease, and that their agreement herein is dependent on the
successful completion of said Tract V transaction. Therefore,
notwithstanding anything to
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the contrary set forth in this Fourth Amendment To Lease, (i) this
Fourth Amendment To Lease shall automatically terminate, cease and
expire if construction of the Improvements on Tract V is not
commenced on or before October 1, 1994 or (ii) if construction of
the Improvements on Tract V is so commenced on or before said
October 1, 1994, this Fourth Amendment To Lease shall automatically
terminate, cease and expire if construction of the Improvements is
not completed and a Certificate of Completion is not issued by the
Authority for the Improvements on or before the date set forth for
completion of the Improvements on Tract V pursuant to the Land
Disposition Agreement. In the event of any such termination of this
Fourth Amendment To Lease, the Lease (excepting this Fourth
Amendment To Lease) shall remain unchanged and in full force and
effect in accordance with its terms (excepting this Fourth Amendment
To Lease).
12. All capitalized terms and words used in this Amendment shall have
the same meaning as set forth in the Lease unless a contrary meaning
is expressly set forth herein.
13. Except as expressly amended hereby, the Lease and its terms and
provisions shall remain unchanged and in full force and effect.
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<PAGE> 41
EXECUTED under seal as of the date and year first above written.
WITNESS: LANDLORD:
- -------------------------------- -------------------------------------
EDWARD H. LINDE, TRUSTEE OF
FOURTEEN CAMBRIDGE CENTER TRUST AND
NOT INDIVIDUALLY
TENANT:
BIOGEN, INC.
By:
----------------------------------
Name: James C. Mullen
Title: PRESIDENT
(VICE PRESIDENT)
ATTEST:
By: By:
------------------------------ ------------------------------------
Name: Michael J. Astrue Name: Timothy M. Kish
Title: ASSISTANT CLERK Title: TREASURER
(ASSISTANT TREASURER)
<PAGE> 1
EXHIBIT 10.25
FIFTH AMENDMENT TO LEASE
FIFTH AMENDMENT TO LEASE (the "Fifth Amendment") dated as of the 9th day of
October, 1997 by and between Mortimer B. Zuckerman, Edward H. Linde and David
Barrett, Trustees of Fourteen Cambridge Center Trust under Declaration of Trust
dated February 4, 1982 and recorded with the Middlesex South District Registry
of Deeds in Book 14707, Page 96 and not individually (hereinafter called the
"Landlord") and Biogen, Inc. (successor to Biogen Research Corp., successor to
B. Leasing, Inc.). Biogen, Inc., is the Tenant under the Lease and is
(hereinafter called "Tenant").
R E C I T A L S
By lease dated October 4, 1982, as amended by First Amendment To Lease
dated January 19, 1989 (the "First Amendment"), by Second Amendment To Lease
dated March 8, 1990 (the "Second Amendment"), by Third Amendment To Lease dated
September 25, 1991 (the "Third Amendment") and by Fourth Amendment to Lease
dated October 6, 1993 (the "Fourth Amendment") (said Lease as so amended being
hereinafter called the "Lease"), Landlord did lease to Tenant and Tenant did
hire and lease from Landlord the "Site" and "Building" known as and numbered
Fourteen Cambridge Center, Cambridge, Massachusetts. The Site and the Building
are defined in Section 1.2 of the Lease and are collectively therein and herein
interchangeably called the "Demised Premises" or the "Premises".
The Lease provided for an Original Lease Term which was scheduled to expire
on February 28, 1998. Pursuant to Section 1 of the Fourth Amendment, the Term
was extended for one (1) period of five (5) years (the "First Extended Term")
expiring on February 28, 2003.
Landlord and Tenant have agreed to extend the Term of the Lease, to
restructure certain obligations of Landlord and Tenant under the Lease and to
make certain other modifications to the Lease and are entering into this
instrument to set forth the same.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration paid by each of the parties hereto to the other, the
receipt and sufficiency of which is hereby acknowledged, and in further
consideration of the provisions herein, Landlord and Tenant hereby agree as
follows:
1. The Lease Term (also in the Lease sometimes called the "Term"), which
but for this Fifth Amendment is scheduled to expire on February 28,
2003, is hereby presently extended for a period commencing on March 1,
2003 and expiring on the date which is fifteen (15) years subsequent
to the date (such date being hereinafter referred to as the "Fifth
Amendment Effective Date") that this Fifth
<PAGE> 2
Amendment has been executed on behalf of both Landlord and Tenant
(plus the partial month, if any, at the end of such fifteen (15) year
period) (herein called the "Second Extended Term") unless extended or
sooner terminated in accordance with the provisions of the Lease (as
herein amended). The present extension of the Lease Term for the
Second Extended Term shall be on all of the same terms and conditions
set forth in the Lease except as otherwise provided in this Fifth
Amendment. All references in the Lease (as herein amended) to the
"Term" or "Lease Term" shall mean and be references to the Original
Term as extended by the First Extended Term and as herein presently
extended by the Second Extended Term.
2. Section 3.2 of the Lease is hereby deleted in its entirety and
Landlord and Tenant acknowledge and agree that Tenant's only options
to extend the Term beyond the expiration of the Second Extended Term
shall be as provided in Section 3 of this Fifth Amendment.
3. Provided that at the time of the exercise there exists no "Event of
Default" (defined in Section 15.1 of the Lease) and that the Lease is
still in full force and effect, Tenant shall have the right to extend
the Lease Term upon all of the same terms, conditions and provisions
contained in the Lease (except for the Annual Fixed Rent which shall
be adjusted during option periods as hereinafter set forth) for four
(4) successive periods of five (5) years each as hereinafter set
forth. Each of the four (4) option periods is sometimes herein
referred to as an Extended Term.
If Tenant desires to exercise any one of the aforementioned options to
extend the then current term of the Lease, then Tenant shall give
notice to Landlord, not earlier than eighteen (18) months nor later
than fourteen (14) months prior to the expiration of the then current
term of the Lease of Tenant's request for Landlord's quotation as of
the commencement date of the applicable extension period of the annual
fair market rental rate of the Demised Premises for the applicable
Extended Term, such quotation to be based on the use of the Demised
Premises as a first class office building of comparable age in the
Cambridge Center Development Area (including such inflation indicators
as may from time to time be in effect but determined without regard to
any right to extend but taking into account Tenant's payments of
Impositions and Tenant's obligations to maintain and pay for the
maintenance of the Demised Premises as set forth in the Lease as
herein amended). Within one hundred five (105) days after Landlord's
receipt of Tenant's notice requesting such a quotation, Landlord shall
notify Tenant of Landlord's quotation. In order to exercise its rights
hereunder, Tenant shall, within fifteen (15) days after receipt of
Landlord's quotation, by written notice to Landlord either (i) accept
such quotation and give notice that it exercises its option to extend
the Lease Term (as it may previously have been extended), in which
case the Lease Term (as it may previously have been extended) shall be
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<PAGE> 3
extended for the applicable Extended Term or (ii) make a request to
Landlord for a broker determination of the Annual Fixed Rent for the
applicable Extended Term (based on the criteria set forth in this
Section 3), which determination shall be made as follows:
Tenant's notice requesting a broker determination of the Annual
Fixed Rent shall include the name of a commercial real estate
brokerage firm selected by Tenant with at least ten (10) years
experience dealing in properties of a nature and type generally
similar to the Demised Premises located in the Downtown
Boston-Cambridge area ("Tenant's Extended Term Broker"). Within
ten (10) days after Landlord's receipt of Tenant's notice
requesting a broker determination and stating the name of such a
commercial real estate brokerage firm, Landlord shall give
written notice to Tenant of Landlord's selection of a commercial
real estate brokerage firm having at least the experience
referred to above ("Landlord's Extended Term Broker"). Within ten
(10) days thereafter the two (2) firms so selected shall select a
third such commercial real estate brokerage firm also having at
least the experience referred to above (the "Third Extended Term
Broker"). Within ten (10) days after the selection of the third
commercial real estate brokerage firm, the three (3) firms so
selected, by majority opinion, shall attempt to determine the
Annual Fixed Rent on the basis of the criteria set forth above in
this Section 3. If the brokers are able to agree at least by
majority on a determination of such Annual Fixed Rent the brokers
shall send a notice to Landlord and Tenant by the end of such ten
(10) day period of such determination which shall be hereinafter
called the "Broker Determination." If the brokers are unable to
agree at least by majority on a determination of such Annual
Fixed Rent, the brokers shall send a notice to Landlord and
Tenant by the end of such ten (10) day period of such inability
and within fourteen (14) days after the selection of the Third
Extended Term Broker, both Tenant's Extended Term Broker and
Landlord's Extended Term Broker shall make separate
determinations of the Annual Fixed Rent on the basis of the
criteria set forth above in this Section 3 ("Tenant's Broker's
Rent Determination" and "Landlord's Broker's Rent Determination"
respectively). Within fourteen (14) days after both Tenant's
Broker's Rent Determination and Landlord's Broker's Rent
Determination have been made, the Third Extended Term Broker
shall select either Landlord's Broker's Rent Determination or
Tenant's Broker's Rent Determination (the "Third Broker's Rental
Selection") and the Third Broker's Rental Selection shall, in its
entirety and without regard to the other Rent Determinations,
constitute the "Broker Determination." In making the selection,
in no event shall the Third Extended Term Broker have any power
to amend, modify, compromise, average or blend either Landlord's
Broker's Rent Determination or Tenant's Broker's Determination,
it being the intent of Landlord and Tenant that the Third
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<PAGE> 4
Extended Term Broker shall simply select one of either Landlord's
Broker's Rent Determination or Tenant's Broker's Rent
Determination which, in the Third Extended Term Broker's
judgement, most accurately and fairly defines the Annual Fixed
Rent for the Premises for the Extended Term based on the
requirements of this Section 3. The Third Extended Term Broker
shall advise Landlord and Tenant in writing by the expiration of
said fourteen (14) day period of the Third Broker's Rental
Selection as so determined. In no event shall the Annual Fixed
Rent as determined in any manner pursuant to this Section be less
than the Annual Fixed Rent for the Lease Year immediately
preceding the commencement of the applicable Extended Term.
Tenant shall have the right to extend the Lease Term for the applicable
Extended Term by written notice to Landlord given within fifteen (15) days
after Tenant's receipt of the Broker Determination.
Upon the giving of notice by Tenant to Landlord either (i) within the
fifteen (15) day period hereinbefore referred to accepting Landlord's
quotation of the Annual Fixed Rent for the then applicable Extended Term
and exercising Tenant's option to extend or (ii) within the fifteen (15)
day period also hereinbefore referred to accepting the Broker Determination
and exercising Tenant's option to extend, then this Lease and the Lease
Term hereof shall be extended, for an additional term of five (5) years,
without the necessity for the execution of any additional documents (except
that Landlord and Tenant agree to enter into an instrument in writing
setting forth the Annual Fixed Rent as determined in the relevant manner
set forth above); and in such event all references herein to the Lease Term
or the term of the Lease shall be construed as referring to the Lease Term,
as so extended, unless the context clearly otherwise requires, and except
that in no event shall the Lease Term be extended for more than twenty (20)
years after the expiration of the Second Extended Term. In no event shall
Tenant have the right to exercise its second five (5) year extension option
unless it has timely exercised its first five (5) year extension option,
nor shall Tenant have the right to exercise its third five (5) year
extension option unless it has timely exercised its first and second five
(5) year extension options, nor shall Tenant have the right to exercise its
fourth five (5) year extension option unless its has timely exercised its
first, second and third extension options, nor shall Tenant have the right
to exercise more than one (1) option at a time.
4. (A) For the period prior to the Fifth Amendment Effective Date, Tenant
shall continue to pay Annual Fixed Rent as provided in the Lease as
previously amended.
(B) During the period commencing on the Fifth Amendment Effective Date and
ending on the last day of the sixtieth (60th) month following the Fifth
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<PAGE> 5
Amendment Effective Date, Annual Fixed Rent shall be payable at the annual
rate equal to the product of (i) $18.95 and (ii) the 67,362 square feet of
Gross Building Area of the Building, being a total of $1,276,509.90 per
year.
(C) During the period commencing on the first day of the sixty-first (61st)
month following the Fifth Amendment Effective Date and ending on the last
day of the one hundred and twentieth (120th) month following the Fifth
Amendment Effective Date, Annual Fixed Rent shall be payable at the annual
rate equal to the product of (i) $21.25 and (ii) the 67,362 square feet of
Gross Building Area of the Building, being a total of $1,431,442.50 per
year.
(D) During the period commencing on the first day of the one hundred and
twenty-first (121st) month following the Fifth Amendment Effective Date and
ending on the last day of the one hundred eightieth (180th) month following
the Fifth Amendment Effective Date, being the expiration of the Second
Extended Term, Annual Fixed Rent shall be payable at the annual rate equal
to the product of (i) $23.50 and (ii) the 67,362 square feet of Gross
Building Area of the Building, being a total of $1,583,007.00 per year.
(E) During the extension option periods (if exercised), Annual Fixed Rent
shall be payable by Tenant as provided in Section 3 hereinabove.
5. For the portion of the Lease Term prior to the Fifth Amendment Effective
Date, Section 3 of the Fourth Amendment shall be unchanged. For the portion
of the Lease Term on and after the Fifth Amendment Effective Date, Sections
3(A) and 3(D) of the Fourth Amendment are hereby deleted in their entirety
(except for the first paragraph of said Section 3(A) which shall remain in
full force and effect) and Section 3(b) of the Second Amendment (as amended
by Section 3(A) of the Fourth Amendment) is hereby amended so that the
monthly rates per vehicle for Tenant's parking charges shall be as follows:
PERIOD MONTHLY RATE PER CAR
From the Fifth Amendment Effective The lesser of (i) $105.00, subject to
Date through December 31, 1999 escalation as provided in Section 3(B)
and 3(C) of the Fourth Amendment or
(ii) the monthly amount (hereinafter
the "Specified Monthly Garage Rate")
charged per space by the operator of
the North Garage (whether or not such
operator is an affiliate of Landlord)
to any single tenant leasing parking
rights
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for fifty (50) or more vehicles in the
North Garage.
From January 1, 2000 through The lesser of (i) $140.00, subject to
December 31, 2004 escalation as provided in Section 3(B)
and 3(C) of the Fourth Amendment or
(ii) the Specified Monthly Garage
Rate.
From January 1, 2005 through The lesser of (i) $180.00, subject to
December 31, 2009 to escalation as provided in Section
3(B) and 3(C) of the Fourth Amendment
or (ii) the Specified Monthly Garage
Rate.
From January 1, 2010 through the The lesser of (i) $215.00, subject to
expiration of the Second Extended escalation as provided in Section
Term 3(B) and 3(C) of the Fourth Amendment
or (ii) the Specified Monthly Garage
Rate.
During the extension option periods, if exercised, the parking charges
shall be the prevailing monthly rates per space charged by the operator of
the North Garage (whether or not such operator is an affiliate of
Landlord).
6. Sections (A) (B), (C) and (D) of Section 16.31 of the Lease added by
Section 4 of the Fourth Amendment are hereby deleted in their entirety and
replaced with the correspondingly lettered Sections as follows:
(A) Upon and subject to the terms and conditions contained in this
Section and provided that (i) the Lease (as herein amended) shall be
in full force and effect, (ii) there shall be no "Event of Default"
(defined in Section 15.1 of the Lease) either at the time of the
giving of the "Tenant's Option Exercise Notice" (defined below) or on
the "Closing Date" (as hereinafter defined and as it may be extended
hereunder) and (iii) Tenant has neither assigned the Lease nor sublet
the Demised Premises (except only as provided in Subsection (L) below)
Landlord hereby grants to Tenant the right and option to purchase the
Demised Premises. Landlord and Tenant hereby agree that, subject to
compliance with the terms and conditions contained in this Section
(including, but not limited to Items (i), (ii) and (iii) set forth
immediately above), the within granted option to purchase the Demised
Premises shall remain superior to the rights of any other person to
purchase or otherwise acquire the Demised Premises through the
expiration of the Second Extended Term whether or not
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<PAGE> 7
Tenant's option has been exercised as of such purchase or acquisition,
it being covenanted and agreed (a) that the within granted option to
purchase the Demised Premises shall not prevent any sale, conveyance
or other transfer of the Demised Premises or any interest therein but
any such sale, conveyance or other transfer shall be subject to the
within granted option to purchase the Demised Premises upon and
subject to the terms and conditions hereof and (b) that the within
granted option to purchase the Demised Premises shall not prevent any
foreclosure, deed in lieu of foreclosure or the exercise of any other
rights under any mortgage now or hereafter encumbering the Demised
Premises but that any person acquiring title to the Demised Premises
as a result of foreclosure, deed in lieu of foreclosure or by the
exercise of any such other rights shall be subject to the within
granted option to purchase the Demised Premises upon and subject to
the terms and conditions hereof.
(B) (i) In order to exercise the within granted option to purchase the
Demised Premises, Tenant shall give written notice to Landlord
("Tenant's Option Exercise Notice") at any time on or before the date
which is eighteen (18) months prior to the expiration of the Second
Extended Term (time being of the essence) of Tenant's exercise of its
purchase option hereunder and its request for Landlord's quotation of
the annual fair market purchase price of the Demised Premises as of
the Closing Date, such quotation to be based on the use of the Demised
Premises as a first class office building of comparable age in the
Cambridge Center Development Area. Within forty-five (45) days after
Landlord's receipt of Tenant's notice requesting such a quotation,
Landlord shall notify Tenant of Landlord's quotation. If Tenant
desires to exercise its option to purchase the Demised Premises,
Tenant shall, within fifteen (15) days after receipt of Landlord's
quotation, by written notice to Landlord ("Tenant's Purchase Price
Notice") either (x) accept such quotation, in which case the "Purchase
Price" for the Demised Premises shall be the price as quoted by
Landlord or (y) make a request to Landlord for a broker determination
of the purchase price for the Demised Premises, which determination
shall be made as follows:
Tenant's notice requesting a broker determination of the purchase
price shall include the name of a commercial real estate
brokerage firm selected by Tenant with at least ten (10) years
experience dealing in properties of a nature and type generally
similar to the Demised Premises located in the Downtown
Boston-Cambridge area ("Tenant's Sale Broker"). Within ten (10)
days after Landlord's receipt of Tenant's notice requesting a
broker determination and stating the name of such a commercial
real estate brokerage firm, Landlord shall give written notice to
Tenant
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<PAGE> 8
of Landlord's selection of a commercial real estate brokerage
firm having at least the experience referred to above
("Landlord's Sale Broker"). Within ten (10) days thereafter the
two (2) firms so selected shall select a third such commercial
real estate brokerage firm also having at least the experience
referred to above (the "Third Sale Broker"). Within ten (10) days
after the selection of the third commercial real estate brokerage
firm, the three (3) firms so selected, by majority opinion, shall
attempt to determine the purchase price for the Demised Premises
on the basis of the criteria set forth hereinabove. If the
brokers are able to agree at least by majority on a determination
of such purchase price the brokers shall send a notice to
Landlord and Tenant by the end of such ten (10) day period of
such determination which shall constitute the "Purchase Price"
hereunder. If the brokers are unable to agree at least by
majority on a determination of such purchase price, the brokers
shall send a notice to Landlord and Tenant by the end of such ten
(10) day period of such inability and within fourteen (14) days
after the selection of the Third Sale Broker, both Tenant's Sale
Broker and Landlord's Sale Broker shall make separate
determinations of the purchase price for the Demised Premises on
the basis of the criteria set forth hereinabove ("Tenant's
Broker's Sale Determination" and "Landlord's Broker's Sale
Determination" respectively). Within fourteen (14) days after
both Tenant's Broker's Sale Determination and Landlord's Broker's
Sale Determination have been made, the Third Sale Broker shall
select either Landlord's Broker's Sale Determination or Tenant's
Broker's Sale Determination (the "Third Broker's Sale Selection")
and the Third Broker's Sale Selection shall, in its entirety and
without regard to the other Sale Determinations, constitute the
"Purchase Price" hereunder. In making the selection, in no event
shall the Third Sale Broker have any power to amend, modify,
compromise, average or blend either Landlord's Broker's Sale
Determination or Tenant's Broker's Sale Determination, it being
the intent of Landlord and Tenant that the Third Sale Broker
shall simply select one of either Landlord's Broker's Sale
Determination or Tenant's Broker's Sale Determination which, in
the Third Sale Broker's judgement, most accurately and fairly
defines the purchase price for the Demand Premises based on the
criteria set forth hereinabove. The Third Sale Broker shall
advise Landlord and Tenant in writing by the expiration of said
fourteen (14) day period of the Third Broker's Sale Selection as
so determined.
Within five (5) days after the date either (i) Tenant notifies
Landlord that it accepts Landlord's quotation of the Purchase
Price pursuant to (x) hereinabove or (ii) the date of Tenant's
receipt of notification from the
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<PAGE> 9
brokers of the Purchase Price as provided in (y) hereinabove,
Tenant shall pay to Landlord a deposit in the amount equal to ten
percent (10%) of the Purchase Price in good funds payable to
Landlord (the "Deposit"); provided, however, that the Deposit
shall be promptly endorsed or otherwise paid over to the "Escrow
Agent" (defined in subsection (B)(ii) hereof) and shall be held
and applied by the Escrow Agent in accordance with the provisions
of said subsection (B)(ii) hereof. It is hereby covenanted and
agreed that if Tenant shall not give to Landlord Tenant's Option
Exercise Notice or Tenant's Purchase Price Notice or pay the
Deposit to Landlord within the time periods referenced above
(time being of the essence), the within granted option to
purchase the Demised Premises shall automatically cease, expire
and be null and void without any action of the parties and
without any liability or obligation to or against any of the
parties, provided, however, that the Lease shall remain in full
force and effect in accordance with its terms for the remainder
of the Term. If Tenant shall timely give to Landlord Tenant's
Option Exercise Notice and Tenant's Purchase Price Notice and pay
the Deposit to Landlord, the Closing Date shall be as set forth
in subsection (D) hereof.
(B) (iii) The "Escrow Agent" shall be the General Counsel of
Boston Properties, Inc., or such law firm, title insurance
company or other institutional escrow agent as Landlord shall
select. Landlord shall promptly pay over the Deposit to the
Escrow Agent so selected and shall cause the Escrow Agent holding
the Deposit to acknowledge to Tenant receipt of the Deposit
within a reasonable period of time after the Escrow Agent
receives the Deposit. The Deposit shall be held in such interest
bearing account in such banking institution in the City of Boston
and upon such terms and conditions relating to the deposit of
funds and maintenance of accounts as the Escrow Agent shall
determine. The type of account, the rate of interest, the terms
and conditions relating to the deposit of funds and maintenance
of accounts and the banking institution shall be as solely
selected by the Escrow Agent and the Escrow Agent shall have no
liability to Landlord or Tenant respecting the selection of the
type of account, the rate of interest, the terms and conditions
relating to the deposit of funds and maintenance of accounts
and/or the banking institution. Further, the Deposit shall be
held by the Escrow Agent subject to the terms of this Section
16.31 and shall be duly accounted for on the "Closing Date"
(hereinafter defined) as it may be extended pursuant to this
Section 16.31 or on the earlier termination of this Section
16.31. All interest earned on the Deposit shall be paid to
Landlord with no credit against the purchase price for such
interest being given to Tenant; provided, however, that if
pursuant to the terms of this Section 16.31 the Deposit shall be
returned to
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<PAGE> 10
Tenant, the interest earned on the Deposit at the time of such
return of the Deposit shall be paid over to Tenant.
If for any reason the closing does not occur and either
party makes a written demand upon the Escrow Agent for delivery
of the Deposit and the interest earned thereon, the Escrow Agent
shall give written notice to the other party of such demand. If
the Escrow Agent does not receive a written objection from the
other party to the proposed payment within ten (10) days after
the giving of such notice, the Escrow Agent is hereby authorized
to make such delivery or payment. If the Escrow Agent does
receive such written objection within such ten (10) business day
period or if for any other reason the Escrow Agent in good faith
shall elect not to make such payment, the Escrow Agent shall
continue to hold the Deposit until otherwise directed by written
instructions from both Landlord and Tenant or a final judgment of
a court. However, the Escrow Agent shall have the right at any
time to deposit the Deposit with the clerk of such court of
competent jurisdiction in the Commonwealth of Massachusetts that
the Escrow Agent shall select. The Escrow Agent shall give
written notice of such deposit to Landlord and Tenant. Upon such
deposit the Escrow Agent shall be relieved and discharged of all
further obligations and responsibilities hereunder.
The Landlord and Tenant acknowledge that the Escrow Agent
shall act solely as a stakeholder at Landlord's and Tenant's
request and for their convenience, that the Escrow Agent shall
not be deemed to be the agent of either of the parties, and the
Escrow Agent shall not be liable to either of the parties for any
act or omission on its part unless taken or suffered in bad
faith, in willful disregard of this Section 16.31 or involving
gross negligence. Landlord and Tenant shall jointly and severally
indemnify and hold the Escrow Agent harmless from and against all
costs, claims and expenses, including reasonable attorneys' fees,
incurred in connection with the performance of the Escrow Agent's
duties hereunder, except with respect to actions or omissions
taken or suffered by the Escrow Agent in bad faith, in willful
disregard of this Section 16.31 or involving gross negligence on
the part of the Escrow Agent. The parties agree that
notwithstanding the obligations of the Escrow Agent under this
Agreement, the Escrow Agent (if an attorney or law firm) shall be
permitted to represent Landlord or Tenant (as the case may be) in
connection with the transaction evidenced by this Section 16.31
or in connection with any matters arising from or related to this
Section 16.31, the consummation of this Section 16.31 or any
claimed breach of this Section 16.31 by any party.
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<PAGE> 11
(C) (i) The Purchase Price payable for the Demised Premises shall
be payable on the closing by Federal Funds immediately available
to the Landlord at BankBoston, Boston, Massachusetts or such
other bank as may be stipulated by Landlord by written notice to
Tenant. Upon closing, credit shall be given by Landlord to Tenant
for and in the amount of the Deposit (but not for the interest
earned thereon). The parties acknowledge and agree that
"Impositions" (as defined in Article VI of the Lease) and the
cost of the maintenance, repair and replacement of the Demised
Premises pursuant to Sections 8.1 and 10.1 of the Lease, as such
Sections are amended by this Fifth Amendment, are and shall
continue to be paid entirely by Tenant. Accordingly, no credit or
adjustment shall be given to Tenant at closing (or otherwise)
respecting Impositions and such maintenance, repair and
replacement obligations.
(C) (ii) Fixed Rent and all Additional Rent (except respecting
Impositions and certain maintenance, repair and replacement
obligations, provision for which is made in Section 16.31 (C)(i)
above) shall be paid through the "Closing Date" (referred to in
Section 16.31 (D)) as it may be extended pursuant to the
provisions of this Section 16.31 and in the event that Tenant has
prepaid amounts of the foregoing (excluding Impositions) for
periods extending beyond said Closing Date (as it may be so
extended), appropriate credit shall be given to Tenant for
amounts thereof (excluding Impositions and such maintenance,
repair and replacement obligations) prepaid for periods extending
beyond said Closing Date (as it may be so extended).
(D) The closing (the "Closing") shall be held at the Middlesex
South District Registry of Deeds, 208 Cambridge Street,
Cambridge, Massachusetts 02141 (or at such other location in
which said Registry of Deeds may be located), or at such other
place in the City of Boston as the parties may agree, at 10:30
A.M. on that date (the "Closing Date") which is the expiration
date of the Second Extended Term; provided, however, if said day
shall be a Saturday, Sunday or Legal Holiday, the Closing Date
shall be the next following business day on which the Middlesex
South District Registry of Deeds shall be open for the
transaction of business. In addition to the provisions of Section
16.31 (A) above, Landlord covenants that, so long as this Section
16.31 shall be in full force and effect and Tenant has not
assigned this Lease nor sublet the Premises (except only as
provided in Subsection (L) below) and Tenant shall not have
wrongfully failed to close on its purchase of the Demised
Premises and there shall be no "Event of Default" (defined in
Section 15.1 (a) of the Lease (as herein amended), Landlord shall
not encumber the Demised Premises from time to time with any
mortgages (and other financing documents) in the aggregate
principal amount greater than the purchase price. It is agreed
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<PAGE> 12
that time is of the essence with respect to the provisions and
agreements in this Section 16.31.
6.1 Section (E) of Section 16.31 of the Lease added by Section 4 of the Fourth
Amendment is hereby amended as follows:
(A) the words "and with the benefit of" are inserted after the
words "subject to" in the second line of the introductory
paragraph;
(B) the following words are added at the end of subsection
(viii):", provided, that Landlord, in Landlord's sole
discretion, may elect at any time to terminate the "East
Garage Sublease;"
6.2 Section (L) of Section 16.31 of the Lease added by Section 4 of the Fourth
Amendment is hereby amended by adding the following at the end thereof:
Notwithstanding the foregoing, if Tenant shall have timely given
Tenant's Option Exercise Notice and Tenant's Purchase Price
Notice as provided in Subsection (B) of this Section 16.31, as
amended by Section 6 of the Fifth Amendment, Tenant may designate
a nominee to take title to the Demised Premises by notice given
to Landlord at least seven (7) days prior to the Closing Date,
provided that all terms and conditions of this Section 16.31, as
amended, and the Lease applicable to such sale of the Demised
Premises shall apply to such nominee in addition to Tenant.
7. Exhibit I attached to the Fourth Amendment to Lease is hereby deleted in
its entirety and replaced with Exhibit I attached hereto.
8. The time period of "March 1, 1998 through February 28, 2002" referenced in
the third (3rd) and fourth (4th) lines of Section (A)(1) of Section 16.32
of the Lease added by Exhibit II of the Fourth Amendment is hereby deleted
and replaced with the "Fifth Amendment Effective Date through the date
which is twelve (12) months prior to the expiration of the Second Extended
Term."
9. (A) It is the purpose and intent of Landlord and Tenant that the Lease as
hereby amended shall constitute, and be construed as, an absolutely net
lease, whereby under all circumstances and conditions (whether or not now
or hereafter existing or within the contemplation of the parties) the
Annual Fixed Rent shall be a completely net return to Landlord throughout
the Term of the Lease and Tenant shall be responsible for all costs of
keeping and maintaining the Demised Premises, the Building and the Site in
first class condition and in compliance with all existing and future laws,
including, without limitation, all costs of capital and operating repairs
and replacements, including the roof, structural, mechanical and other
systems of the Building; and unless and to the extent specifically
otherwise
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<PAGE> 13
provided in the Lease as herein amended Tenant shall indemnify and hold
harmless Landlord from and against any and all expenses, costs,
liabilities, obligations and charges whatsoever, which shall arise or be
incurred or become due, during the Term of the Lease, with respect to or in
connection with, the Demised Premises, the Building and the Site, and the
operation, management, maintenance and repair and replacement thereof.
(B) Unless expressly otherwise provided in the Lease, the Lease shall not
terminate, nor shall Tenant have any right to terminate this Lease, nor
shall Tenant be entitled to any abatement or reduction of Annual Fixed
Rent, Additional Rent or any other sums payable by Tenant under the Lease,
nor shall the obligations of Tenant hereunder be affected by reason of (i)
any damage to or destruction of all or any part of the Demised Premises,
the Building or the Site, from whatever cause (except only and to the
extent specifically otherwise provided in Article XIV of the Lease), (ii)
the taking of the Demised Premises, the Building or the Site, or any
portion thereof, by eminent domain or otherwise for any reason (except only
and to the extent specifically otherwise provided in Article XIV of the
Lease), (iii) the prohibition, limitation or restriction of Tenant's use of
all or any part of the Demised Premises, the Building or the Site, from
whatever cause, or any interference with such use, or (iv) any other cause
whether similar or dissimilar to the foregoing, any present or future law
to the contrary notwithstanding. It is the intention of the parties that
Landlord shall have no obligation or covenant under the Lease with respect
to or in connection with the operation, management, maintenance, repair and
replacement of the Demised Premises, the Building and the Site except for
(i) the obligation to provide the services set forth in Section 7.1 of the
Lease, as amended by Section 2 of the Third Amendment and Section 10 of
this Fifth Amendment, subject to reimbursement by Tenant as provided in
Section 7.1.1 of the Lease, as amended by Section 3 of the Third Amendment
and Section 10 of this Fifth Amendment, (ii) the obligation to provide
Tenant the right to use, in common with others, the common internal
roadways, sidewalks and pedestrian walks in the Parcel 2 Development Area
as provided in Section 7.2 of the Lease, subject to reimbursement by Tenant
as provided in Section 7.1.1 of the Lease, as amended by Section 3 of the
Third Amendment and Section 10 of this Fifth Amendment, (iii) the
obligation to maintain insurance as provided in Section 13.2 of the Lease,
subject to reimbursement from Tenant as provided in Section 7.1.1 of the
Lease, as amended by Section 3 of the Third Amendment and Section 10 of the
Fifth Amendment and (iv) the obligation to provide Tenant's parking rights
in the North Garage as provided in Section 16.5 of the Lease, as amended by
Section 3 of the Second Amendment, Section 3 of the Fourth Amendment and
Section 5 of the Fifth Amendment and (v) Landlord's obligations set forth
in Section 13.1 (B) of this Fifth Amendment respecting certain "Hazardous
Materials" (as defined in said Section 13.1) at the Site. Subsections (i),
(ii) and (v) above are herein collectively referred to as "Landlord's
Repair Obligations". In addition, it is the
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<PAGE> 14
intention of the parties hereto that the obligations of Tenant under the
Lease shall be separate and independent covenants and agreements, that
Annual Fixed Rent, Additional Rent and all other sums payable by Tenant
under the Lease shall continue to be payable in all events and that the
obligations of Tenant under the Lease shall continue unaffected, unless the
requirement to pay or to perform the same shall have been excused pursuant
to an express provision of the Lease.
(C) In order to effectuate the intention of Landlord and Tenant as set
forth in this Section 9, the Lease shall be amended as provided in Sections
10, 11, 12, 13 and 13.1 below.
10. (A) For purposes of calculating Tenant's payments for operating costs
pursuant to Section 7.1.1 of the Lease, as amended by Section 3 of the
Third Amendment, for that portion of the Lease Term prior to the Fifth
Amendment Effective Date, the terms of said Section 7.1.1, as amended by
Section 3 of the Third Amendment, shall be unchanged.
(B) For the purposes of calculating Tenant's payments for the operating
costs for that portion of the Lease Term on and after the Fifth Amendment
Effective Date, said Section 7.1.1, as amended by Section 3 of the Third
Amendment, shall be amended by deleting the definition of "Operating
Expenses" in its entirety and substituting the following therefor:
"Operating Expenses" means the cost of operation of the Demised
Premises reasonably and necessarily incurred by Landlord in performing
Landlord's obligations under the Lease, as amended; including without
limitation, all costs of performing Landlord's obligations under
Section 7.1 of the Lease, as amended by Section 2 of the Third
Amendment; premiums for insurance carried with respect to the Demised
Premises as set forth in Section 13.2 of the Lease; compensation and
all fringe benefits, workmen's compensation insurance premiums and
payroll taxes paid to, for or with respect to all persons engaged in
the operating, maintaining or cleaning of the exterior of the Building
(exclusive of cleaning the windows of the Building) or the Site; the
cost of any letters of credit or deposits necessary to secure any
utility services if required and to the extent not otherwise paid for
by Tenant; cost of building and cleaning supplies and equipment; cost
of maintenance, repairs and replacements (other than reimbursement
from contractors under guarantees); cost of snow removal and care of
landscaping, cost of carrying insurance with respect to and of
providing streetlights and electricity therefor, repairing, and
otherwise maintaining and replacing roadways, sidewalks and pedestrian
ways within or abutting the Site or the Parcel 2 Development Area;
payments under service contracts with independent contractors; and all
other reasonable and necessary amounts paid in connection with
performing
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<PAGE> 15
Landlord's obligations under the Lease, as amended, respecting the
operation, maintenance and cleaning of the exterior of the Building,
the Site and areas outside of the Site but within the Parcel 2
Development Area , including, without limitation, the cost of all
capital expenditures; provided, however, with respect to the insuring,
repairing, removing snow from, landscaping and otherwise maintaining
and replacing roadways, sidewalks and pedestrian walks or ways outside
of the Site but within the Parcel 2 Development Area there only shall
be included within Operating Expenses "Tenant's Proportionate Share"
(hereinafter defined) thereof. "Tenant's Proportionate Share" shall be
a fraction, the numerator of which shall be the Gross Building Area of
the Building and the denominator of which shall be the sum of (i) the
Gross Building Area of the Building plus (ii) the gross building area
of other buildings under construction or completed from time to time
in the Parcel 2 Development Area. Notwithstanding the foregoing, there
shall be excluded from "Operating Expenses" the cost of performing
Landlord's obligations under Section 13.1 (B) of the Fifth Amendment
respecting certain Hazardous Materials at the Site.
11. (A) For the portion of the Lease Term prior to the Fifth Amendment
Effective Date, Tenant shall continue to perform the repairs and
maintenance set forth in Section 8.1 of the Lease as amended by Section 4
of the Third Amendment.
(B) For the portion of the Lease Term on and after the Fifth Amendment
Effective Date, said Section 8.1, as amended by Section 4 of the Third
Amendment, shall be amended and restated as follows:
Tenant shall, throughout the Lease Term, at Tenant's sole cost and
expense, keep and maintain the Demised Premises and every part thereof
including, without limitation, all mechanical, utility and other
systems and appurtenances of the Building and the structural and
nonstructural elements of the roof, interior and exterior walls,
foundation, floor slabs and all other elements of the Building and all
above ground and below ground storage tanks in, on or under the
Building, the Site or the Demised Premises in first class condition
and repair and in compliance with all applicable existing and future
laws, excepting only (i) normal and reasonable wear and use, (ii)
damage caused by fire or other casualty or as a consequence of the
exercise of the power of eminent domain to the extent Tenant is
relieved of its obligations pursuant to Article XIV of the Lease, and
(iii) those repairs (or services) to be made by Landlord as
"Landlord's Repair Obligations" (as defined in Section 9 of the Fifth
Amendment). In addition to the foregoing, Tenant shall, throughout the
Lease Term, at Tenant's sole cost and expense (x) provide to the
Demised Premise steam, water, sewer, electricity, gas, oil, elevator
service, rubbish
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<PAGE> 16
removal, security systems and service, telephone service and pest
control services, (y) provide to the interior of the Building cleaning
service and (z) clean the windows of the Building. Landlord shall have
no responsibility for providing any of (x), (y) and (z) above. Tenant
shall not commit or suffer to be committed any waste upon or about the
Demised Premises, and except for Landlord's Repair Obligations, shall
promptly at its cost and expense make all necessary replacements,
restorations, renewals and repairs to the Demised Premises and
appurtenances thereto, whether interior or exterior, ordinary or
extraordinary, foreseen as well as unforeseen, necessary to keep the
Demised Premises in good and lawful order and condition, and such
repairs, replacements, restorations and renewals shall, to the maximum
extent possible, be at least equivalent in quality to the quality of
the original work or the property replaced, as the case my be. Tenant
shall undertake preventive maintenance as well, and a reasonable
policy of inspection to ascertain the need for repairs and
replacements shall be adhered to by Tenant throughout the entire Lease
Term. Tenant specifically covenants and agrees to replace all glass
damaged with glass of the same kind and quality. Except for Landlord's
Repair Obligations, and except to the extent Tenant is relieved of its
obligations for damage caused by fire or other casualty or by eminent
domain pursuant to Article XIV of the Lease, Tenant's obligations to
maintain the Demised Premises is absolute and without limitation.
Except for Landlord's Repair Obligations, Landlord shall have
absolutely no liability or obligation whatsoever to make any repairs,
replacements, alterations, restorations or renewals of any nature or
description to the Demised Premises (including the improvements
thereon). Landlord, at Landlord's expense, shall cooperate with Tenant
in Tenant's performance of its obligations under this Section 8.1 to
the extent necessary because of Landlord's ownership of the fee
interest in the Demised Premises. Landlord and Tenant represent to the
other that as of the date of this Fifth Amendment that they have not
received written notice from any governmental authority or any insurer
of the Demised Premises that the Demised Premises is currently in
violation of any applicable law or insurance underwriting standard.
Landlord and Tenant shall promptly forward to the other party any
written notice they receive after the date of this Fifth Amendment
from any governmental authority or any insurer of the Demised Premises
that the Demised Premises is in violation of any applicable law. Prior
to Tenant making any submission or filing or sending any notice to any
governmental authority in connection with the performance of its
obligations under this Section 8.1, Tenant shall first submit such
submission, filing or notice to Landlord for Landlord's approval,
which approval shall not be unreasonably withheld or delayed.
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<PAGE> 17
12. (A) For the portion of the Lease Term prior to the Fifth Amendment
Effective Date, Landlord shall continue to perform its obligations set
forth in Section 8.2 of the Lease.
(B) For the portion of the Lease Term on and after the said Fifth Amendment
Effective Date, Section 8.2 of the Lease shall be deleted in its entirety
and Landlord shall have no obligation to perform any of its obligations
formerly set forth therein. At the request of Tenant (i) Landlord shall
make available to Tenant the plans of the Demised Premises in Landlord's
possession which are useful or necessary for Tenant to perform its
maintenance, repair and replacement obligations under the Lease and (ii)
Landlord shall make available to and assign to Tenant, to the extent
assignable, Landlord's interest in any warranties covering portions of the
Demised Premises which Tenant is required to maintain, repair or replace
under the Lease, provided that Landlord shall also retain the benefit of
such warranties.
13. (A) For the portion of the Lease Term prior to the Fifth Amendment
Effective Date, Section 10.1 of the Lease shall be unchanged.
(B) For the portion of the Lease Term on and after the Fifth Amendment
Effective Date, Section 10.1 of the Lease shall be amended and restated as
follows:
Tenant shall, at its sole cost and expense, all during the Lease Term,
promptly comply with all present and future laws, ordinances, rules
and regulations of any duly constituted governmental authority
("Governmental Authority") relating to the use or occupancy of the
Demised Premises. Tenant shall promptly pay all fines, penalties and
damages that may arise out of or be imposed because of its failure to
comply with the provisions of this Section 10.1.
13.1 (A) Tenant covenants during the Lease Term and for such further time as
Tenant occupies any part of the Demised Premises, (i) Tenant shall not, nor
shall Tenant permit its employees, invitees, agents, independent
contractors, contractors, assignees or subtenants to, keep, maintain, store
or dispose of (into the sewage or waste disposal system or otherwise) or
engage in any activity which might produce or generate any substance which
is or may hereafter be classified as a hazardous material, waste or
substance (collectively "Hazardous Materials"), under federal, state or
local laws, rules and regulations, including, without limitation, 42 U.S.C.
Section 6901 et seq., 42 U.S.C. Section 9601 et seq., 42 U.S.C. Section
2601 et seq., 49 U.S.C. Section 1802 et seq. and Massachusetts General
Laws, Chapter 21E and the rules and regulations promulgated under any of
the foregoing, as such laws, rules and regulations may be amended from time
to time (collectively "Hazardous Materials Laws") in violation of Hazardous
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<PAGE> 18
Materials Laws, (ii) Tenant shall immediately notify Landlord of any
incident in, on or about the Premises, the Building or the Site that would
require the filing of a notice under any Hazardous Materials Laws, (iii)
Tenant shall comply and shall cause its employees, invitees, agents,
independent contractors, contractors, assignees and subtenants to comply
with each of the foregoing and (iv) Landlord shall have the right to make
such inspections (including testing) as Landlord shall elect from time to
time to determine that Tenant is complying with the foregoing.
(B) Landlord covenants during the Lease Term, at Landlord's cost and
expense, to comply with the requirements of Hazardous Materials Laws
arising because of Hazardous Materials (a) which are in, on, under or about
the Site as of the Commencement Date, (b) which migrate to the Site after
the Commencement Date from any adjoining property or (c) which are caused
or created by Landlord, its agents, contractor or employees.
Notwithstanding the first sentence of this Subsection 13.1(B), (i) if
Tenant exercises Tenant's option to purchase the Demised Premises pursuant
to Section 16.31 of the Lease, as added to the Lease by Section 4 of the
Fourth Amendment and amended by Section 6 of this Fifth Amendment, as
provided in said Section 16.31 the Demised Premises shall be conveyed in
"as is" condition and Landlord and Tenant's rights and obligations with
respect to the presence of Hazardous Materials in, on, under or about the
Demised Premises in connection with such purchase and after such purchase
shall be as set forth in said Section 16.31, (ii) Tenant, at Tenant's cost
and expense shall be responsible for compliance with Hazardous Materials
Laws required because of Hazardous Materials which migrate to the Demised
Premises from another site where (x) Tenant or an affiliate of Tenant or
their agents, contractors or employees caused or created the contamination
on such other site or (y) Tenant or an affiliate of Tenant own or
previously owned such other site and (iii) Landlord and Tenant do not
intend for the first sentence of this Subsection 13.1(B) to amend or alter
any of the rights or obligations of Landlord or any affiliate of Landlord
or Tenant or any affiliate of Tenant under the "Option Documents" (as
hereinafter defined), and in the event of any conflict between the first
sentence of this Subsection 13.1(B) and the Option Documents, the terms of
the Option Documents shall control. The "Option Documents" shall be deemed
to be the Acquisition, Option and Cooperation Agreement dated as of October
6, 1993 between North Parcel Limited Partnership (an affiliate of Landlord
and Tenant) and Tenant (the "Option Agreement") and the "Transaction
Documents" (as defined in the Option Agreement) defined therein, including,
without limitation, the Indemnity Agreement Regarding Hazardous Materials
dated October 6, 1993 from Biogen, Inc. and Biogen Realty Limited
Partnership (an affiliate of Tenant), the ground Lease dated October 6,
1993 between Biogen Realty Limited Partnership and North Parcel Limited
Partnership respecting Tract V of Parcel 2 of the Kendall Square Urban
Renewal Area, the Exclusive Easement and Option Agreement dated October 6,
1993 between the Cambridge Redevelopment Authority and North Parcel Limited
Partnership respecting Tract
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<PAGE> 19
VI of Parcel 2 of the Kendall Square Urban Renewal Area and the
Unconditional Guaranty and Indemnity of Biogen, Inc. dated October 6, 1993.
14. Tenant acknowledges that the beneficial interest in Landlord has been
transferred to Boston Properties Limited Partnership, a Delaware limited
partnership, the sole general partner of which is Boston Properties, Inc.,
a Delaware corporation which is a publicly traded real estate investment
trust and such transfer is a "REIT Transaction" (as defined in Section
16.32 (A) (2) of the Lease added to the Lease pursuant to Section 5 of the
Fourth Amendment) and is not subject to Tenant's rights under said Section
16.32. To reflect such transfer the following amendments are made to the
Lease:
(A) The words "(including, without limitation, Boston Properties Limited
Partnership, Boston Properties, Inc. and their officers, directors and
employees)" are substituted in the place of the following:
(i) the parenthetical in the ninth (9th) and tenth (10th) lines
of Section 16.31 (H) of the Lease added to the Lease
pursuant to Section 4 of the Fourth Amendment, and
(ii) the parenthetical in the tenth (10th) and eleventh (11th)
lines from the end of Section 9 of the Fourth Amendment.
(B) The words "(including, but not limited to, Boston Properties Limited
Partnership, Boston Properties, Inc., Mortimer B. Zuckerman, Edward H.
Linde and/or affiliates of any of the foregoing)" are substituted in
place of the following:
(i) the parenthetical in the ninth (9th) through twelfth (12th) lines
of Section 16.31 (Q) of the Lease;
(ii) the parenthetical in third (3rd) through sixth (6th) lines of
Section 16.32 (A) (2) of the Lease, and
(iii) the parenthetical in the fifth (5th) through the eighth (8th)
lines from the end of Section 16.32 (A) (3) of the Lease.
(C) The words "(or any affiliates of Landlord, including, but not limited
to, Boston Properties Limited Partnership, Boston Properties, Inc.,
Mortimer B. Zuckerman, Edward H. Linde and other affiliates of any of
the foregoing)" are substituted in place of the following:
(i) the parenthetical in the seventh (7th) through the eleventh
(11th) lines of Section 16.32 (D) (1) of the Lease;
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<PAGE> 20
(ii) the parenthetical on the sixth (6th) line through the tenth
(10th) lines from the end of Section 16.32 (D) (3) (a) of the
Lease; and
(iii) the parenthetical on the fifth (5th) through the ninth (9th)
lines from the end of Section 16.32 (D) (3) (b) of the Lease.
(D) Subsection (iii) of both Sections 16.32 (D) (4) (a) and 16.32 (D) (4)
(b) of the Lease are deleted in their entirety and replaced with the
following:
"(iii) any offer to sell, sale or transfer of the Demised Premises or
any interest in the Demised Premises to any firm, entity, or
business organization in which at the time of the sale or
transfer Boston Properties, Inc. and/or Boston Properties
Limited Partnership directly or indirectly own(s) at least
fifty percent(50%) of or otherwise controls.
15. Landlord and Tenant each represents and warrants to the other that it has
not dealt with any real estate brokers or other persons or entities which
have been, are or will be entitled to any broker's or finder's fee or any
similar commission or fee in connection with this Fifth Amendment
(including, without limitation, the transactions contemplated by Sections
16.31 and 16.32 of the Lease and added to the Lease pursuant to the Fourth
Amendment and as herein amended) except Fallon, Hines & O'Connor (the
"Recognized Broker"). Landlord and Tenant each agree to indemnify, hold
harmless, protect and defend the other from and against any and all loss,
damage, liability and expense, including costs and reasonable attorneys'
fees which such other party incurs or sustains by reason of the breach by
the indemnifying party of its foregoing warranties and representations.
Landlord covenants and agrees that it shall be solely responsible for and
shall pay to the Recognized Brokerage a commission in the amount of One
Hundred Thirty Five Thousand Dollars ($135,000.00) in connection with this
Fifth Amendment which shall be the sole fee or commission due the
Recognized Broker for the transaction evidenced by this Fifth Amendment.
The provisions hereof shall survive the expiration or any termination of
this Lease (as herein amended), the expiration or any termination of
Section 16.31 and/or Section 16.32 of the Lease and/or the delivery of any
deed of the Demised Premises to Tenant pursuant to Section 16.31 of the
Lease, Section 16.32 of the Lease or otherwise.
16. Concurrently with the execution of this Fifth Amendment to Lease, Landlord
shall deliver to Tenant a Trustees' Certificate respecting the authority to
enter into this Fifth Amendment To Lease and Tenant shall deliver to
Landlord a corporate vote evidencing the authority of Tenant to enter into
this Fifth Amendment to Lease.
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<PAGE> 21
17. All capitalized terms and words used in this Amendment shall have the same
meaning as set forth in the Lease unless a contrary meaning is expressly
set forth herein.
18. Except as expressly amended hereby, the Lease and its terms and provisions
shall remain unchanged and in full force and effect.
EXECUTED under seal as of the date and year first above written.
WITNESS: LANDLORD:
- -------------------- ---------------------------
EDWARD H. LINDE, TRUSTEE OF
FOURTEEN CAMBRIDGE CENTER
TRUST AND NOT INDIVIDUALLY
TENANT:
BIOGEN, INC.
By: _______________________
Name: DAVID C. DLESK
Title: (VICE PRESIDENT)
---------------------
ATTEST:
By:______________________________ By:________________________
Name:____________________________ Name:_________________________
Title: CLERK (ASSISTANT CLERK) Title: TREASURER (OR ASSISTANT
--------------------------- ------------------------
TREASURER)
------------------------------
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<PAGE> 1
Exhibit 10.27
-------------
BIOGEN, INC.
1983 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH SEPTEMBER 12, 1997 AND RESTATED)
I. PURPOSE AND DEFINITIONS
A. Purpose of the Plan: The Plan is intended to encourage ownership of
Shares by all employees of the Company and its Affiliates, as hereinafter
defined.
B. Definitions: Unless otherwise specified or unless the context
otherwise requires, the following terms, as used in this Employee Stock Purchase
Plan, have the following meanings:
1. "Affiliate" means a corporation which is a direct or indirect fifty
percent (50%) or more owned parent or subsidiary of the Company.
2. "Board" means the Board of Directors of the Company.
3. "Code" means the United States Internal Revenue Code of 1986, as
amended.
4. "Committee" means the Company's Stock and Option Plan Administration
Committee to which the Board of Directors has delegated power to act
under and pursuant to the provisions of this Plan.
5. "Company" means Biogen, Inc., a Massachusetts Corporation.
6. "Compensation" means salary and wages, including overtime pay,
received by an employee before any salary reduction by the employee
under Code Sections 401(k) or 125, but excluding bonus, incentive and
similar payments and all other forms of non-cash remuneration.
7. "Employee" means any individual who performs services for the Company
or its Affiliates pursuant to an employment relationship other than
those persons whose customary employment is 20 hours or less per week,
excluding employees of non-U.S. Affiliates of the Company, except as is
otherwise determined by the Committee.
8. "Enrollment Dates" are the earliest date participation is permitted
hereunder by the Committee when the Plan is first made operative and
each successive January 1 and July 1 thereafter.
9. "Fair Market Value"
Page 1 of 10
<PAGE> 2
(i) If Shares are purchased by the Plan on a U.S. securities
exchange, the actual purchase price of such Shares shall be such
Shares' Fair Market Value.
(ii) In all other circumstances including if Shares are purchased
by the Plan from the Company, in determining such Shares' Fair
Market Value, if such Shares are then listed on any U.S.
securities exchange, or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") National Market
System, the Fair Market Value shall be the average between the
high and low sale prices, if any, on the largest such exchange or
on the NASDAQ National Market System, as the case may be, on the
applicable date, or, if none, on the most recent trade date
thirty (30) days or less prior to such date. If the Shares are
not then listed on any such exchange or on the NASDAQ National
Market System, the Fair Market Value of such Shares shall be the
average of the closing "Bid" and the closing "Ask" prices, if
any, as reported in NASDAQ for such date, or if none, on the most
recent trade date thirty (30) days or less prior to such date for
which such quotations are reported. If the Fair Market Value
cannot be determined under the preceding two sentences, it shall
be determined in good faith by the Committee.
10. "Option" means a right or option granted under the Plan.
11. "Participant" means an Employee who is enrolled in the Plan,
provided however that no Employee may be granted an Option under this
Plan if, immediately after the Option is granted, such Employee owns
stock possessing five percent (5%) or more of the total combined voting
power, (or in the case of non-voting stock, value) of all classes of
issued and outstanding stock of the Company or Affiliate(s) (other than
wholly owned subsidiaries of the Company.) For purposes of determining
stock ownership the applicable rules of the Code (including attribution)
shall control.
12. "Participant's Survivors" means a deceased Participant's legal
representatives and/or any person or persons who acquired the
Participant's rights to an Option by will or by the laws of descent and
distribution including where appropriate his/her estate.
13. "Plan" means this Employee Stock Purchase Plan.
14. "Shares" means the Common Stock, $.01 par value, of the Company as
to which Options have been or may be granted under the Plan or any
shares of capital stock into which the Shares are changed or for which
they are exchanged within the provisions of Article VI of the Plan.
II. SHARES SUBJECT TO THE PLAN
A. Subject to the terms of Article VI the maximum aggregate number of
Shares which may be optioned and purchased from time to time shall be Five
Hundred Thousand (500,000) Shares.
Page 2 of 10
<PAGE> 3
If an Option ceases to be "outstanding", in whole or in part, the Shares
which were subject to such Option but not purchased shall be available for the
granting of the other Options. An Option shall be treated as "outstanding" until
such Option is exercised in full, or terminates or expires under the provisions
of the Plan.
B. No options shall be granted after December 31, 2007.
III. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee is authorized to interpret the provisions
of the Plan and each Option, and to make any rules and determinations which it
deems necessary or advisable for the administration of the Plan provided,
however, that all such interpretations, rules, determinations, terms and
conditions shall be made and prescribed in the context of preserving the tax
status of the Options under the Plan granted to Employees subject to United
States Federal Income Taxation, and the Plan itself within the Meaning of
Section 423 of the Code. In addition, the Plan is intended to comply in all
respects with Rule 16b-3 or its successors promulgated under the Securities
Exchange Act of 1934, as amended ("1934 Act"), with respect to participants who
are subject to Section 16 of the 1934 Act. The Plan will be interpreted in a
manner which comports with this intention.
IV. ELIGIBILITY FOR PARTICIPATION
A. Subject to the limits in Article II, on the January 1 Enrollment Date
of each year in the case of an Employee who is a Participant on such January 1
Enrollment Date and on the July 1 Enrollment Date of each year in the case of an
Employee who is a Participant on such July 1 Enrollment Date, the Company will
be deemed to have granted to each such Participant an Option to purchase, during
a six-month period commencing on the Enrollment Date on which such Option is
granted and in the manner provided hereunder, such number of Shares as have an
aggregate Employee Share Price (as determined under Article V(A)) equal to
$2,500. If, on any Enrollment Date, an insufficient number of Shares remains
available under the Plan to grant to each Participant an Option to purchase such
number of Shares, then the number of Shares subject to each Option to be granted
on such Enrollment Date shall be reduced equally so that the aggregate number of
Share subject to all Options granted on such Enrollment Date shall not exceed
the number of Shares then available under the Plan.
B. Employee Contributions: Each eligible Employee may, on an Enrollment
Application and Payroll Withholding Form filed with his/her employer's payroll
department no later than thirty (30) days prior to a January or July Enrollment
Date (and with respect to the Plan's first enrollment date specified at Article
1(B)(8), no later than five days prior to such first Enrollment Date), elect to
participate and make contributions by payroll deduction of any whole percentage
form 1% to 10% of such Employee's Compensation payable on each payroll period.
In the event that the amount contributed by a Participant during an
Option exercise period (i.e., the six-month periods commencing on an Enrollment
Date) is in excess of the maximum
Page 3 of 10
<PAGE> 4
amount which may be applied to purchase shares for such Participant, such excess
shall be reimbursed to the Participant. No interest shall accrue or be payable
to any Participant in the Plan with respect to any amount contributed by the
Participant, whether such sums are applied to purchase Shares or are returned to
the Participant.
Payroll deductions may only be increased by a Participant effective as
of an Enrollment Date, but may be decreased effective with respect to any
payroll period, provided written election on a Change Authorization and Payroll
Withholding Form is received by the Participant's employer's payroll department
no later than thirty (30) days prior thereto.
C. Application of Payroll Contributions:
1. The employer will remit to a bank, stock brokerage firm or
other custodian (the "Custodian") selected by the Company, the
accumulated withheld funds of all electing Participants together with
employer contributions pursuant to Article IV(G), if any, as soon as
reasonably possible following the end of the month in which the
deductions were made. Prior to such remittance, Participant
contributions may be commingled with other Company funds. Not less
frequently than monthly, the Custodian shall buy from the Company or, if
the Committee prior thereto approves, give an order to the stock broker
selected by the Company to purchase (or if the Custodian shall be such
stock broker, shall itself purchase) in the open market, the total
number of Shares purchasable with the monies available from such
remittance. The date on which Shares are so acquired shall be referred
to as the "Monthly Share Purchase Date." The Committee shall instruct
the Custodian whether to purchase Shares from the Company or on the open
market, after giving due consideration to any applicable securities laws
and the advice of the chief financial officer of the Company. A
Participant shall be deemed to have exercised his/her Options on the
Monthly Share Purchase Date to the extent of such purchase unless prior
thereto the Participant shall have effectively withdrawn pursuant to the
terms hereof.
The Company may, in its sole and absolute discretion, refuse to
sell Shares to the Custodian under the Plan if to do so would be
violative of any commitment or restriction (whether legally binding or
otherwise) not to issue or sell its own shares, as from time to time
exists, and whether such commitment or restriction existed prior to or
subsequent to the adoption of the Plan or for any other reason the
Company deems appropriate. The refusal of the Company to sell Shares to
the Custodian under the Plan shall not adversely affect the Plan's right
and power to acquire such Shares from any other source the Committee
deems appropriate.
2. The certificates representing the Shares so purchased shall be
issued in the name of and delivered to the Custodian and the account of
electing Participant shall be credited with the number of Shares to
which he/she shall be entitled on the basis of his/her proportion of the
aggregate remittance.
Page 4 of 10
<PAGE> 5
3. Any cash dividends paid on Shares shall automatically be used
to purchase additional shares of the Common Stock of the Company, unless
a Participant in writing instructs the Custodian to the contrary. The
purchases described in the preceding sentence, whether purchased by the
Custodian from the Company or in the open market, shall be in addition
to the number of Shares purchasable pursuant to Article II(A) and
Article IV(A) and shall not be of Shares optioned under the Plan.
Article IV(G) with respect to employer's contribution shall be
inapplicable with respect to shares of the Common Stock of the Company
acquired under this Article IV(C) (3).
4. By enrolling in the Plan, each Participant is deemed to have
authorized the establishment of a brokerage account in his/her name at a
securities brokerage firm selected by or approved of by the Committee.
D. Transfer of Certificates to Electing Participants:
1. Upon request by a Participant and receipt by the Custodian of
written notice to such effect from the Company, all or any portion of
the Shares in the Participant's account shall be transferred by the
Custodian out of its name into the name of the Participant and a
certificate evidencing them shall be issued in the name of and delivered
to such Participant.
2. In order to preserve the intended purposes of the Plan as set
forth in Article 1(A) Employees who become Participants in the Plan
agree not to transfer or otherwise dispose of Shares acquired on their
behalf under the Plan (other than in the case of an Employee's death or
total and permanent disability as determined by the Committee) prior to
one year from the date of acquisition of such Shares on their behalf.
E. Shares Retained by the Custodian: Accumulation of Shares not
transferred to Participants under Article IV(D) shall be held by the Custodian
for the account of the Participant entitled thereto but all rights accruing to
an owner of record on such Shares shall belong to and be vested in the
Participant for whose account it is being held, including the right to receive
any and all dividend payable in respect of such Shares whether in cash, shares
of the Company's Common Stock or otherwise, and the right to receive all notices
of shareholders' meetings (which shall be forwarded to the Participant by the
Custodian without delay) and direct the Custodian how to vote thereat to the
same extent as if such Shares were held in street name by a brokerage firm or
otherwise.
F. Withdrawal:
1. An electing Participant may discontinue his/her election and
withdraw from the Plan as of the payroll period next following 30 days
from the date written notice on a Change Authorization and Payroll
Withholding Form is received by his/her employer's payroll department;
provided, however, that an electing Participant who shall have
discontinued his/her election and withdrawn from the Plan may not
resubscribe to the
Page 5 of 10
<PAGE> 6
Plan prior to the Enrollment Date coincident with or next following
twelve (12) months from the effective date of such discontinuance.
2. A Participant shall be deemed to have discontinued his/her
election and withdrawn from the Plan immediately upon the occurrence of
any of the following:
a. The termination for any reason of the Participant by the
Company or an Affiliate. A Participant's employment shall not be
deemed terminated by reason of a transfer to another employer
which is the Company or an Affiliate. A Participant who has
elected participation under the Plan who is absent from work with
the Company or with an Affiliate because of temporary disability
(any disability other than a permanent or total disability) or
who is on leave of absence for any purpose authorized by his/her
employer and permitted by an authoritative interpretation (e.g.,
regulation, ruling, case law, etc.) of Section 423 of the Code,
shall not, during the period of any such absence, be deemed, by
virtue of such absence alone, to have terminated such
Participant's employment with the Company or with an Affiliate,
except as the Committee may otherwise expressly provide or
determine.
b. Death of the Participant;
c. The filing with or levying upon the Company or the Custodian
of any judgment, attachment, garnishment, or other court order
affecting either the Participant's earnings or his/her account
under the Plan;
d. Termination of the Plan prior to its expiration;
e. Expiration of the Plan.
3. Upon the discontinuance of an election and withdrawal from the
Plan by a Participant, all Shares in the account of the Participant
shall be transferred out of the Custodian's name and into the name of
the Participant and a certificate evidencing such Shares shall be issued
in the name of and delivered to the Participant; and all dividends and
remaining cash if any credited to his/her account shall be paid to the
Participant.
G. Employer Contribution: Each Participant's employer will, as
frequently as is necessary contribute an amount equal to the difference between
the Employee's Share Price as determined at Article V(A) and the cost per share
to the Custodian if the Shares are not acquired from the Company. If the Shares
are acquired from the Company, the Company shall sell such Shares to the
Custodian at a price equal to the Employee's Share Price determined pursuant to
Article V(A).
V. TERMS AND CONDITIONS OF OPTIONS AND ISSUANCE OF SHARES
Page 6 of 10
<PAGE> 7
No Option shall be granted to a Participant, and no purported grant of
any Option shall be effective, until an Enrollment Application and Payroll
Withholding Form shall have been duly executed on behalf of the Company and by
the Participant. Such Enrollment Application and Payroll Withholding Form and
the agreement constituted thereby shall be subject to at least the following
terms and conditions:
A. Employee's Share Price: The "Employee's Share Price" as of a Monthly
Share Purchase Date as determined at Article IV (C)(1) shall be eighty-five
percent (85%) of the lower of the:
1. Fair Market Value of the Shares at the date of grant of the
Option (i.e., the applicable January 1 or July 1 Enrollment Date); or
2. Fair Market Value of the Shares at the Monthly Share Purchase
Date.
B. Effect of Death and Participant's Survivors: In the event that a
Participant to whom an Option has been granted ceases to be an employee of the
Company or of an Affiliate by reason of such Participant's death, such Option to
the extent exercisable but not exercised on the date of death shall be deemed
exercised by the Participant's Survivors to the extent of any monies contributed
by the Participant and his/her employer prior to the Participant's death.
A Participant may determine that a designated person shall become the
Participant's Survivor either by selecting a joint account (with a right of
survivorship running to such designated joint owner), or by so designating in
his/her will or otherwise as controlled under the applicable law with respect to
testamentary dispositions. In the absence of a valid disposition the applicable
laws of descent and distribution shall control. The Custodian may require such
proof and indemnification (documentary or otherwise) as it deems necessary and
appropriate before releasing any Shares and/or funds in a Participant's account
to a person other than the Participant.
C. Assignability and Transferability of Options: By its terms, an Option
granted to a Participant shall not be transferable by the Participant otherwise
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as interpreted under Rule 16b-3 promulgated
under the 1934 Act, and shall be exercisable, during the Participant's lifetime,
only by such Participant. Such Option shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise). Any
attempted transfer, assignment, pledge, hypothecation or other disposition of
any Option or of any rights granted hereunder contrary to the provisions of this
Article V(C) shall be null and void.
D. All Participants to Have Equal Rights and Privileges: All
Participants shall have equal rights and privileges under the Plan. The fact
that the maximum number of Shares which may be acquired by Participants bears a
uniform relationship to compensation or is limited by a maximum purchase
restriction shall not be deemed to be violative of the foregoing sentence.
VI. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Page 7 of 10
<PAGE> 8
In the event that the outstanding shares of the Company's Common Stock
are changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification,
change in par value, stock split-up, combination of shares or dividend payable
in capital stock, or the like, appropriate adjustment shall be made in the
number and kind of Shares for the purchase of which Options may be granted under
the Plan and, in addition, appropriate adjustment to prevent dilution or
enlargement of the rights granted to or available for Participants, shall be
made in the number and kind of Shares and in the Option price per Share subject
to outstanding Options so that each Option holder shall be in a position
equivalent to the position the Option holder would have been in had the Option
holder exercised the Options immediately prior to the applicable event. No such
adjustment shall be made which shall, within the meaning of the applicable
provisions of the Code, constitute such a modification, extension or renewal of
an Option as to cause it to be considered as the grant of a new Option.
VII. EFFECT OF DISSOLUTION OR LIQUIDATION OF THE COMPANY
Upon the dissolution or liquidation of the Company other than in
connection with a transaction to which the preceding Article VI is applicable,
all Options granted hereunder shall terminate and become null and void;
provided, however, that if the rights of a Participant or a Participant's
Survivors hereunder have not otherwise terminated and expired, the Participant
or the Participant's Survivors shall be deemed to have exercised such Options to
the extent of any monies contributed by the Participant or his/her employer as
of the date immediately prior to such dissolution or liquidation.
VIII. TERMINATION OF THE PLAN
No Options shall be granted after December 31, 2007. The Plan may be
terminated at an earlier date by vote of either the stockholders or the Board.
The termination of the Plan shall not affect any Options granted or Shares
acquired prior to the effective date of such termination.
IX. AMENDMENT OF THE PLAN
Except as provided in the following sentence, the Plan may be amended by
the stockholders, by the Board, or by the Committee, including amendment of the
Plan from time to time to designate corporations whose employees may be offered
Options under the Plan from among a group consisting of the Company and any
corporation which is or becomes its parent or subsidiary. Amendments effecting:
(i) any increase in the aggregate number of Shares which may be issued under the
Plan (other than an increase merely reflecting a change in capitalization such
as stock dividend or stock split) or (ii) changing the designation of
corporations whose employees may be offered options under the Plan, except
designations described in the preceding sentence, must be approved by the
stockholders within twelve (12) months after such amendment is adopted by the
Board or by the Committee or such amendment is void ab initio. In addition, if
the scope of any amendment is such as to require stockholder approval in order
to comply with
Page 8 of 10
<PAGE> 9
Rule 16b-3 under the 1934 Act, such amendment shall also require approval by the
stockholders. No amendment shall affect any Options theretofore granted or any
Shares theretofore acquired by a Participant, unless such amendment shall
expressly so provide and unless any Participant to whom an Option has been
granted who would be adversely affected by such amendment consents in writing
thereto.
X. EMPLOYMENT RELATIONSHIP
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment of a Participant, nor to prevent a
Participant from terminating his/her employment with the Company or an
Affiliate.
XI. OPTIONEES NOT STOCKHOLDERS
Neither the granting of an Option nor the deduction from payroll shall
constitute an Employee the owner of Shares covered by an Option until such
Shares have been purchased on his/her behalf pursuant to Article IV.
XII. WITHHOLDING TAXES
Any taxes subject to withholding payable with respect to the amounts to
be paid to the Custodian pursuant to the provisions hereof will be deducted by a
Participant's employer from the balance of the Participant's salary, and not
reduce the amounts so to be paid to the Custodian.
XIII. USE OF FUNDS BY THE COMPANY
The proceeds received by the Company from the sale of Shares pursuant to
Options granted under the Plan will be used for general corporate purposes.
XIV. STATEMENT OF ACCOUNT
Following each purchase of Shares on behalf of a Participant, such
Participant will receive from the Custodian a statement of his/her account
showing (i) the respective total amounts of payments (by the Participant and if
applicable the employer) made to the Custodian on behalf of such Participant
under Article IV (C)(1) hereof, (ii) the Participant's share of any cash
dividends and other cash distributions and of the amount and proceeds of sale of
any other distributions or rights received by the Custodian, (iii) the total
cost of all Shares purchased by the Custodian for the account of such
Participant, (iv) such Participant's share of any stock dividends on the Shares,
and (v) the number of shares delivered, or to be delivered, to such Participant
with respect to the period since the last statement.
XI. BROKERAGE COMMISSIONS AND OTHER COSTS
Page 9 of 10
<PAGE> 10
Brokerage commissions, if any, payable in connection with the purchase
of Shares hereunder (and shares acquired through dividend reinvestment, if any)
and transfer taxes payable in connection with the delivery to Participants of
Shares acquired hereunder (and shares acquired through dividend reinvestment, if
any) together with the other costs and expenses incurred in administering the
Plan, including the fees and expenses of the Custodian, will be borne by the
Company and its affiliates.
XIV. EFFECTIVE DATE
This plan became effective on October 1, 1983.
Page 10 of 10
<PAGE> 1
Exhibit 10.30
-------------
BIOGEN, INC.
1987 SCIENTIFIC BOARD STOCK OPTION PLAN
(AS AMENDED THROUGH SEPTEMBER 12, 1997)
1. PURPOSE OF THE PLAN
The Biogen, Inc. 1987 Scientific Board Stock Option Plan (the "Plan") is
intended to encourage ownership of shares of the common stock, $.01 par value
(the "Common Stock"), of the Company by members of the Scientific Board of the
Company and to provide an additional incentive to those Scientific Board members
to promote the success of the Company and its Affiliates.
2. DEFINITIONS
2.1 "Company" means Biogen, Inc. and any successor to its business.
2.2 "Affiliate" means a corporation in respect of which the Company owns
directly or indirectly fifty percent (50%) or more of the voting shares thereof
or which is otherwise controlled by the Company.
2.3 "Committee" means the Stock and Option Plan Administration Committee of
the Board of Directors of the Company.
2.4 "Option" means a stock option granted under this Plan.
3. SHARES SUBJECT TO THE PLAN
The aggregate number of shares as to which Options may be granted from time
to time under this Plan shall be 3,000,000 of the shares of Common Stock.
If an Option ceases to be "outstanding", in whole or in part, other than by
reason of the exercise of such Option, the shares which were subject to such
Option shall be available for the granting of other Options. Any Option shall be
treated as "outstanding" until such Option is exercised in full, terminates
under the provisions of the Plan or expires by reason of lapse of time.
The aggregate number of shares as to which Options may be granted shall be
subject to change only by means of an amendment of the Plan in accordance with
Article 11 below or pursuant to the provisions of Article 8 below.
4. ADMINISTRATION OF THE PLAN
<PAGE> 2
The Plan shall be administered by the Committee. The membership of the
Committee shall be determined, and shall be subject to change without cause and
without notice from time to time, by the Board of Directors of the Company.
The Committee is authorized to interpret the provisions of the Plan or of
any Option and to make all rules and determinations necessary or advisable for
the administration of the Plan. Subject to the provisions of the Plan, Options
may be granted upon such terms and conditions as the Committee may prescribe.
This Plan is intended to comply in all respects with Rule 16b-3 or its
successors promulgated under the Securities Exchange Act of 1934 ("1934 Act")
with respect to participants who are subject to Section 16 of the 1934 Act, and
any provision in this Plan with respect to such persons contrary to Rule 16b-3
shall be deemed null and void to the extent permissible by law and deemed
appropriate by the Committee.
5. ELIGIBILITY FOR PARTICIPATION
The Committee shall determine which Scientific Board members shall be
eligible to participate in the Plan, may grant to one or more such Scientific
Board members one or more Options, and shall designate the number of shares to
be optioned under each Option so granted; provided, however, that no Options
shall be granted after December 31, 2002.
6. TERMS AND CONDITIONS OF OPTIONS
No Option issued pursuant to this Plan shall be an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Each Option shall be set forth in an Option agreement, duly executed on behalf
of the Company and by the person to whom such Option is granted. No Option shall
be deemed to have been granted and no purported grant of any Option shall be
effective until such Option shall have been approved by the Committee. The
Committee shall determine the terms and conditions of Options granted, including
provisions relating to termination of the Option holder's consultancy, death and
disability; provided, however, that each such Option agreement shall be subject
to at least the following terms and conditions:
6.1 Option Price: Except as otherwise determined by the Committee, the
Option price per share for Options granted under the Plan shall be equal to the
fair market value per share of Common Stock on the date of grant of the Option;
provided, however, that in no event shall the Option price be less than the par
value per share of the Common Stock. Fair market value shall be the average of
the "high" and "low" sale prices as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the date of grant
of the Option or, if none, for the most recent trading date thirty (30) days or
less prior to the date of grant of the Option on which the Common Stock was
traded.
<PAGE> 3
6.2 Term of Option: Each Option shall terminate upon a date determined at
the time of grant by the Committee, but not later than ten (10) years from the
date of the grant thereof.
6.3 Date of Exercise: The Committee may prescribe the date or dates on
which the Option becomes exercisable, and may provide that the Option rights
accrue or become exercisable in installments over a period of months or years,
or upon the attainment of stated goals. The Committee may stipulate that any
Option which becomes exercisable shall be subject to cancellation or that shares
purchased upon the exercise of such Option shall be subject to repurchase rights
in favor of the Company. In such event the Committee shall determine the date or
dates, or event or events, upon which such cancellation or repurchase rights
shall become effective or shall lapse, as the case may be.
6.4 Medium of Payment: The option price shall be payable upon the exercise
of the Option. It shall be payable in cash or, if permitted by the Committee and
permitted by law, in shares or other consideration.
6.5 Exercise of Option and Issue of Shares: Options shall be exercised by
giving written notice to the Company, addressed to the Company at the address
specified in the Option agreement, with which the Option holder shall tender the
Option price. Such written notice shall be signed by the person exercising the
Option, shall state the number of shares with respect to which the Option is
being exercised, and shall contain any warranty required by Article 7 of the
Plan. The issuance of the Option shares may be delayed by the Company if any law
or regulation requires the Company to take any action with respect to the Option
shares prior to the issuance thereof. Without limiting the generality of the
foregoing, nothing contained herein shall be deemed to require the Company to
issue any Option shares if prohibited by law or applicable regulation.
The shares shall, upon issuance, be evidenced by an appropriate certificate
or certificates in respect of paid-up, non-assessable shares.
6.6 Assignability and Transferability of Option: By its terms, an Option
granted to an Option holder shall not be transferable by such Option holder
other than (i) by will or by the laws of descent and distribution, (ii) pursuant
to a qualified domestic relations order, as defined by the Code or Title 1 of
the Employee Retirement Income Security Act or the rules thereunder, or (iii) as
otherwise determined by the Committee and set forth in the applicable Option
agreement. The designation of a beneficiary of an Option holder shall not be
deemed a transfer prohibited by this paragraph. Except as provided in the
preceding sentences of this paragraph, an Option shall be exercisable, during an
Option holder's lifetime, only by the Option holder (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation, or other disposition of any Option or of any rights
granted thereunder contrary to the provisions of this Plan, or the levy of any
attachment or similar process upon an Option or other such rights shall be null
and void.
<PAGE> 4
6.7 Other Provisions: The Option agreements authorized under the Plan shall
be subject to such additional terms and conditions, including, without
limitation, restrictions upon the exercise of the Option, as the Committee shall
deem advisable.
6.8 Tax Withholding: In the event that any federal, state, or local income
taxes, employment taxes, Federal Insurance Contributions Act ("F.I.C.A.")
withholdings or other amounts are required by applicable law or governmental
regulation to be withheld from the Option holder's salary in connection with the
exercise of an Option, the Option holder shall advance in cash to the Company,
or to any Affiliate of the Company which employs or employed the Option holder,
the amount of such withholdings unless a different withholding arrangement,
including the use of shares of the Company's Common Stock, is authorized by the
Committee (and permitted by law), provided, however, that with respect to
persons subject to Section 16 of the 1934 Act, any such withholding arrangement
shall be in compliance with any applicable provisions of Rule 16b-3 promulgated
under Section 16 of the 1934 Act. For purposes hereof, the fair market value of
the shares withheld for purposes of payroll withholding shall be determined in
the manner provided in Article 6.1. above, as of the most recent practicable
date prior to the date of exercise. If the fair market value of the shares
withheld is less than the amount of payroll withholdings required, the Option
holder may be required to advance the difference in cash to the Company or the
Affiliate employer.
6.9 Reload Options: The Committee may authorize reload options ("Reload
Options") to purchase for cash or shares a number of shares of Common Stock. The
number of Reload Options shall equal (i) the number of shares of Common Stock
used to exercise the underlying Options and (ii) to the extent authorized by the
Committee, the number of shares of Common Stock used to satisfy any tax
withholding requirement incident to the exercise of the underlying Options. The
grant of a Reload Option will become effective upon the exercise of underlying
Options through the use of shares of Common Stock held by the optionee for at
least 6 months. Reload Options must be evidenced in Option agreements or
amendments to those agreements. The Option price per share of Common Stock
deliverable upon the exercise of a Reload Option shall be the fair market value
of a share of Common Stock on the date the grant of the Reload Option becomes
effective. The term of each Reload Option shall be equal to the remaining option
term of the underlying Option. No additional Reload Options shall be granted to
Option holders when Options and/or Reload Options are exercised pursuant to the
terms of this Plan following termination of the Option holder's employment or on
account of death or total and permanent disability. All other provisions of this
Plan with respect to Options shall apply equally to Reload Options.
6.10 Rights as a Shareholder: No Option holder shall have rights as a
shareholder with respect to any shares covered by such Option except as to such
shares as have been registered in the Company's share register in the name of
such person upon the due exercise of the Option.
7. PURCHASE FOR INVESTMENT
If and to the extent that the issuance of shares pursuant to the exercise
of Options is deemed by the Company to be subject to the United States
Securities Act of 1933, as now in force or
<PAGE> 5
hereafter amended (the "Act"), or to the securities law of any other
jurisdiction, the Company shall be under no obligation to issue shares covered
by such exercise unless the person or persons who exercises or who exercise such
Option shall make such warranty or take such action as may be required by any
applicable securities law or shall, in the case of the applicability of the Act,
in the absence of an effective registration under the Act with respect to such
shares, warrant to the Company, at the time of such exercise, that such person
is or that they are acquiring the shares to be issued to such person or to them,
pursuant to such exercise of the Option, for investment and not with a view to,
or for sale in connection with, the distribution of any such shares; and in such
events the person or persons acquiring such shares shall be bound by the
provisions of a legend endorsed upon any share certificates expressing the
requirements of any applicable non-United States securities law, or, in cases
deemed governed by the Act, substantially the following legend, or such other
legend as counsel for the Company shall deem appropriate, which shall be
endorsed upon the certificate or certificates evidencing the shares issued by
the Company pursuant to such exercise:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 and may not be
sold, assigned or transferred in the absence of an effective
registration statement under said Act or an opinion of counsel
satisfactory to the Company that such registration is not, in
the circumstances, required."
Without limiting the generality of the foregoing, the Company may delay
issuance of the shares until completion of any action or obtaining of any
consent which the Company deems necessary under any applicable law (including
without limitation state securities or "blue sky" laws and federal or state
payroll tax withholding laws).
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event that the outstanding Common Stock, $.01 par value, of the
Company is changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification,
change in par value, stock split-up, combination of shares or dividend payable
in capital stock, or the like, appropriate adjustment shall be made in the
number and kind of shares for the purchase of which Options may be granted under
the Plan, and, in addition, appropriate adjustment shall be made in the number
and kind of shares and in the option price per share subject to outstanding
Options so that each Option holder shall be in a position equivalent to the
position the Option holder would have been in had the Option holder exercised
the Options immediately prior to the applicable event.
9. DISSOLUTION OR LIQUIDATION OF THE COMPANY
Upon the dissolution or liquidation of the Company other than in connection
with a transaction to which the preceding Article 8 is applicable, all Options
granted hereunder shall
<PAGE> 6
terminate and become null and void; provided, however, that if the rights
hereunder of an Option holder or one who acquired an Option by will or by the
laws of descent and distribution have not otherwise terminated and expired, the
Option holder or such person shall have the right immediately prior to such
dissolution or liquidation to exercise any Option granted hereunder to the
extent that the right to purchase shares thereunder has accrued as of the date
of exercise immediately prior to such dissolution or liquidation.
10. TERMINATION OF THE PLAN
Unless the Committee shall decide to reduce or, subject to shareholder
approval if required under Section 11, extend the duration of the Plan, the Plan
shall terminate on December 31, 2002. Termination of the Plan shall not affect
any Options granted or any Option agreements executed prior to the effective
date of termination.
11. AMENDMENT OF THE PLAN
The Plan may be amended by the Committee or the Board of Directors of the
Company, provided, however, that if the scope of any amendment is such as to
require shareholder approval in order to comply with Rule 16b-3 under the 1934
Act, then such amendment shall require approval by the shareholders. Any
amendment shall not affect any Options theretofore granted and any Option
agreements theretofore executed by the Company and any Option holder unless such
amendment shall expressly so provide. No amendment shall adversely affect any
Option holder with respect to an outstanding Option without the written consent
of such Option holder. With the consent of the Option holder affected, the
Committee may amend any outstanding Option agreement in a manner not
inconsistent with the Plan, including, without limitation, to accelerate the
date of exercise of any installment of any Option.
12. EMPLOYMENT RELATIONSHIP
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment or consultancy of any Option holder,
nor to present any Option holder from terminating his/her employment or
consultancy with the Company or an Affiliate.
13. EFFECTIVE DATE
This Plan became effective as of March 6, 1987.
<PAGE> 1
Exhibit 10.32
-------------
BIOGEN, INC.
VOLUNTARY EXECUTIVE SUPPLEMENTAL SAVINGS PLAN
AMENDMENT NO. 1
WHEREAS, Biogen, Inc. ("Biogen") adopted the Biogen, Inc. Voluntary
Executive Supplemental Savings Plan (the "Plan") effective April 18, 1994,
and
WHEREAS, Section 7.1 of the Plan permits Biogen, by action of the Board of
Directors of Biogen (or its delegate) to amend the Plan; and
WHEREAS, Biogen desires to amend the Plan to increase the frequency by
which a participant may change his designation of mutual funds with respect to
which deemed investment results are determined;
NOW, THEREFORE, the Plan is hereby amended effective May 1, 1997 as
follows:
Section 5.1 (Participant Accounts) is amended by deleting the second
sentence of the second paragraph of subsection (c) thereof and replacing it with
the following:
"Thereafter, a participant may change his designation either with respect
to the deemed investment of future savings deposits and matching credits
or the deemed transfer of amounts from a previously designated mutual fund
to another fund. The Committee shall establish the frequency by which such
a change may be made, the method of making such a change, and the
effective date of such a change and shall prescribe such other rules and
procedures as it deems appropriate."
IN WITNESS WHEREOF, Biogen has caused this instrument to be executed by the
individual duly authorized as of the 25th day of April, 1997.
BIOGEN, INC.
By:
-----------------------------------
Frank A. Burke, Jr.
Vice President - Human Resources
<PAGE> 1
Exhibit 10.33
-------------
BIOGEN, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
-1-
<PAGE> 2
July 1997
Execution Copy
SECTION 1.
PURPOSE AND EFFECTIVE DATE
The purpose of this plan is to provide certain key executives of Biogen (or its
subsidiaries) with additional retirement income by supplementing the retirement
benefits provided under the Biogen Retirement Plan. In addition, this plan
provides benefits to participants whose benefit under the Biogen Retirement Plan
is affected by Internal Revenue Code limits on the amount of compensation that
may be taken into account under the Retirement Plan for any plan year (Code
Section 401(a)(17)) or on the amount of benefits that may be provided from the
Retirement Plan (Code Section 415). The effective date of this plan is January
1, 1991. The plan was amended and restated effective April 1, 1996 in
conjunction with the amendment and restatement of the Biogen Retirement Plan.
-2-
<PAGE> 3
SECTION 2.
DEFINITIONS
This section contains definitions of terms used in the plan. Where the context
so requires, the masculine includes the feminine, the singular includes the
plural, and the plural includes the singular.
2.1 APPLICABLE COMPENSATION has the same meaning as in the Retirement Plan,
without regard, however, to either (a) any dollar limitation on applicable
compensation that may be imposed under the Retirement Plan, or (b) any
amount excluded from a participant's applicable compensation under the
Retirement Plan by reason of the participant's reducing his salary and/or
bonus under any non-qualified deferred compensation plan or arrangement
maintained by Biogen (or a subsidiary).
2.2 BIOGEN means Biogen, Inc., a Massachusetts corporation, or any successor to
all or the major portion of its assets or business which assumes the
obligations of Biogen, Inc. under this plan.
2.3 BOARD means the Board of Directors of Biogen.
2.4 COMMITTEE means the Retirement Plan committee constituted under the
Retirement Plan.
2.5 PARTICIPANT means an employee of Biogen (or a subsidiary) who has been
designated a participant in this plan in accordance with Section 3 hereof.
2.6 PLAN means the Biogen, Inc. Supplemental Executive Retirement Plan, as set
forth in this plan instrument, and as it may be amended from time to time.
-3-
<PAGE> 4
2.7 PLAN YEAR means the 12-month period beginning each January 1 during the
continuation of the plan.
2.8 RETIREMENT PLAN means the Biogen Retirement Plan, as amended from time to
time. Any term defined in the Biogen Retirement Plan will have the same
meaning when used in this plan unless otherwise defined herein.
2.9 SINGLE SUM CONVERSION BASIS means the assumptions set forth in Section
2.1(b) of the Retirement Plan.
-4-
<PAGE> 5
SECTION 3.
PARTICIPATION
3.1 PARTICIPATION IN SUPPLEMENTAL PENSION FORMULA. Each person
listed on Appendix A is a participant in the supplemental
pension formula under Section 4.1 as of January 1, 1991.
3.2 PARTICIPATION IN EXCESS BENEFIT FORMULAS. Each participant in the
Retirement Plan (other than a person listed on Appendix A) (a) whose
applicable compensation for any plan year exceeds the dollar limitation on
applicable compensation imposed under Code Section 401(a)(17) for such plan
year, (b) whose benefit under the Retirement Plan is reduced upon his
retirement or other termination of employment by the limitations imposed
under Code Section 415, or (c) who has reduced his salary and/or bonus
under any non-qualified deferred compensation plan or arrangement
maintained by Biogen (or a subsidiary) will be a participant in the excess
benefit formula under Section 4.2.
3.3 END OF PARTICIPATION. Except as specifically provided in an appendix, an
employee's active participation in this plan accruing additional benefits
under the applicable provisions of the plan will end when his participation
in the Retirement Plan ends.
-5-
<PAGE> 6
SECTION 4.
BENEFIT FORMULAS
4.1 SUPPLEMENTAL PENSION FORMULA.
(a) For each plan year during the existence of this plan, a participant in
the supplemental pension formula will be credited with a supplemental
pension amount equal to 1 1/2% of his applicable compensation during
such year up to the Social Security taxable wage base for such year
(prorated for any partial year of employment as an employee of Biogen
(or a U.S. subsidiary)), plus 2 1/2% of his applicable compensation
during such year above the Social Security taxable wage base for such
year (as so prorated). In addition, a participant will be credited with
a supplemental pension amount in accordance with the preceding sentence
for 1989 and 1990 provided such individual was an employee of Biogen
(or subsidiary) during such year.
(b) A participant's accrued supplemental pension benefit hereunder as of
any date of reference will be the sum of the supplemental pension
amounts he is credited with under the preceding paragraph.
4.2 EXCESS BENEFIT FORMULAS. A participant's accrued excess benefit under this
section will be the benefit he would have earned under the accrued benefit
formula in Section 6.1(a) of the Retirement Plan if (a) his applicable
compensation taken into account had never been limited under Code Section
401(a)(17), (b) the limitations on benefits imposed under Code Section 415
(as specified in Sections 12.1 to 12.3 of the Retirement Plan) were
disregarded, and (c) he had never reduced his salary and/or bonus under a
non-qualified deferred compensation plan or arrangement maintained by
Biogen (or a subsidiary).
-6-
<PAGE> 7
4.3 VESTED INTEREST. A participant who terminates employment before his normal
retirement date will have the same vested percentage in his supplemental
pension benefit or excess benefit under this plan that he has in his
accrued benefit under the Retirement Plan.
4.4 ADDITIONAL SPECIAL BENEFITS. In addition to any supplemental pension
benefits, excess benefits or other benefits provided under the terms of the
plan, a participant who is specified in an appendix to this plan will be
entitled to benefits calculated in accordance with the provisions of such
appendix.
-7-
<PAGE> 8
SECTION 5.
PROVISIONS ON PAYMENT OF BENEFITS
5.1 SUPPLEMENTAL PENSION BENEFIT AND EXCESS BENEFITS. Supplemental pension
benefit amounts or excess benefit amounts as calculated under the formulas
in Sections 4.1 and 4.2 above are payable as an annual pension beginning on
the participant's normal retirement date in the form of an annuity for the
life of the participant only. If a participant's supplemental pension
benefits or excess benefits hereunder are actually paid beginning on an
earlier date or in a different form in accordance with Section 5.2, the
amount will be adjusted as provided in Section 5.2.
5.2 FORM AND TIME OF BENEFIT PAYMENTS. A participant's vested supplemental
pension benefit or excess benefit under Section 4.1 or Section 4.2 will be
paid in the same form and beginning on the same date that his benefit under
the Retirement Plan is payable. Notwithstanding the preceding sentence, if
a participant elects a lump sum form of payment, such election shall be
made prior to the date the participant actually retires, and will be
subject to the approval of the committee.
(a) ANNUITY OPTIONS. If the participant's supplemental pension benefit or
excess benefit is payable in any form other than a lump sum or a life
annuity, the actuarial factors used to convert his supplemental pension
benefit or excess benefit amount from a life annuity to such other form
of payment will be the same as the factors used for such purpose in the
Retirement Plan.
-8-
<PAGE> 9
(b) LUMP SUM OPTION.
(i) Supplemental pension: If a participant's supplemental pension
under Section 4.1(b) is payable as a lump sum, the amount shall
be the supplemental pension amount under Section 4.1 converted to
a single sum benefit using the assumptions set forth in Section
2.9.
(ii) Excess pension: If a participant's excess benefit under Section
4.2 is payable as a lump sum, the amount will be the lump sum
benefit he would have received under the Retirement Plan without
regard to Internal Revenue Code Section 401(a)(17) and
regulations thereunder, Internal Revenue Code Section 415 and
regulations thereunder and any reductions of his salary and/or
his bonus under a non-qualified deferred compensation plan or
arrangement maintained by Biogen (or a subsidiary).
(c) EARLY RETIREMENT.
(i) Supplemental pension: If the participant's supplemental pension
benefit is payable as an annuity starting before his normal
retirement date, his benefit will equal the supplemental pension
amount he is credited with under Section 4.1, reduced by 5/9ths
of 1% per month for each of the first 60 months, and by 5/18ths
of 1% per month for each additional month, that the start of
payments precedes his normal retirement date.
-9-
<PAGE> 10
(ii) Excess pension: If the participant's excess benefit is payable as
an annuity starting before his normal retirement date, his
benefit shall equal the early retirement annuity amount he would
have received under the Retirement Plan without regard to
Internal Revenue Code Sections 401(a)(17) and regulations
thereunder, Internal Revenue Code Section 415 and regulations
thereunder, and any reductions in his salary and/or bonus under
any non-qualified deferred compensation plan or arrangement
maintained by Biogen (or a subsidiary).
5.3 REDUCTION FOR RETIREMENT PLAN BENEFITS. Notwithstanding any other provision
of this plan, the amount payable to a participant under this plan (as
calculated under the applicable provisions of the plan) will be reduced by
the amount actually paid to such participant as a benefit from the
Retirement Plan. If Retirement Plan benefits to a participant are paid in a
different form or commence at a different time compared to benefits under
this plan, for purposes of calculating the reduction for Retirement Plan
benefits under the preceding sentence, the Retirement Plan benefit amount
will be converted to an amount payable in the same form and commencing at
the same time as the participant's benefit under this plan, with such
conversion performed in accordance with the actuarial assumptions specified
in the Retirement Plan or, if applicable, in Section 2.9.
-10-
<PAGE> 11
SECTION 6.
DEATH BENEFITS
6.1 APPLICATION OF THIS SECTION. This section specifies the benefits payable
upon the death of a participant, either before or after the date his
benefit payments hereunder begin. Except as specified in this section, no
benefits are payable upon the death of a participant.
6.2 PRERETIREMENT DEATH BENEFIT.
(a) ELIGIBILITY. If a participant in this plan dies after the date when he
has a vested interest hereunder but before the date when his benefit
payments begin, his beneficiary will receive the preretirement death
benefit described under this section.
(b) PAYMENT. Preretirement death benefit payments will be made or will
begin on the same date that payments of the Retirement Plan's
preretirement death benefit under Section 9.2 of the Retirement Plan is
made or begins.
(c) AMOUNT. The amount of each monthly payment to the beneficiary will be
the amount the participant would have received on the payment starting
date (had he survived to such date), based upon his vested accrued
supplemental pension benefit or excess benefit hereunder as of the
earlier of his date of death or his date of retirement or other
termination of employment, with actuarial reduction if applicable, for
payments starting before the participant's normal retirement date.
Notwithstanding the preceding sentence, for purposes of converting a
participant's Retirement Plan cash balance account to a life annuity,
the applicable factor shall be based on the attained age of the
beneficiary as of the date payments begin.
-11-
<PAGE> 12
(d) If the preretirement death benefit under the Retirement Plan is payable
as a commuted single sum payment, the beneficiary's benefit under this
section will also be paid as a commuted single sum payment. Such single
sum payment shall equal the lump sum benefit the participant would have
received under Section 5.2(b) (had he survived to such date and elected
such form of payment).
(e) OFFSET FOR RETIREMENT PLAN BENEFITS. Notwithstanding any other
provision of this Section 6.2, the amount payable to a beneficiary
under this section (as calculated under the applicable provisions of
the plan) will be reduced by the amount payable to such beneficiary as
a preretirement death benefit from the Retirement Plan.
6.3 DEATH AFTER BENEFIT PAYMENTS BEGIN. If a participant dies while receiving
benefit payments hereunder, his surviving spouse, contingent annuitant or
beneficiary will receive the benefit, if any, payable under the form of
payment in effect for such participant.
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<PAGE> 13
SECTION 7.
DISABILITY
7.1 A participant who suffers a total and permanent disability for purposes of
the Retirement Plan will continue to participate in this plan during his
period of covered disability (as defined in the Retirement Plan). Such a
participant will continue to accrue supplemental pension benefits or excess
benefits under this plan in accordance with the applicable provisions of
Section 4 as if such participant had continued to be an active employee of
Biogen (or a subsidiary) during his period of covered disability and as if
he had continued receiving applicable compensation during his period of
covered disability at the same rate as his rate of applicable compensation
in effect immediately before the onset of his disability and the Social
Security taxable wage base had remained at the same level as in effect for
the year when his disability began. The accrual of additional supplemental
pension benefits or excess benefits under the preceding sentence will end
when his period of covered disability ends in accordance with the terms of
the Retirement Plan.
7.2 If a participant dies while disabled, his beneficiary will receive the
pre-retirement death benefit determined under Section 6.2.
7.3 A participant may not receive benefits under this plan at any time when he
is receiving disability income benefits under any long-term disability
income plan maintained by Biogen.
-13-
<PAGE> 14
SECTION 8.
BENEFITS NOT CURRENTLY FUNDED
8.1 Nothing in this plan will be construed to create a trust or to obligate
Biogen (or any subsidiary) to segregate a fund, purchase an insurance
contract, or in any other way currently to fund the future payment of any
benefits hereunder, nor will anything herein be construed to give any
participant or any other person rights to any specific assets of Biogen or
of any other employer or entity.
8.2 Notwithstanding Section 8.1, Biogen in its sole discretion may establish a
trust of which it is treated as the owner under Section 671 of the Internal
Revenue Code (a "grantor trust") to provide for the payment of benefits
hereunder, subject to such terms and conditions as Biogen may deem
necessary or advisable to ensure that benefits are not includable, by
reason of the trust, in income of trust beneficiaries before actual
distribution and that the existence of the trust does not cause the plan or
any other arrangement to be considered funded for purposes of Title I of
the Employee Retirement Income Security Act of 1974, as amended.
-14-
<PAGE> 15
SECTION 9.
ADMINISTRATION
The plan will be administered by the committee, which will have full power and
authority to construe, interpret and administer the plan. Decisions of the
committee will be final and binding on all persons. The committee in its
discretion may adopt, amend, and rescind rules and regulations relating to the
administration of the plan.
-15-
<PAGE> 16
SECTION 10.
RIGHTS NON-ASSIGNABLE
No participant, surviving spouse, or any other person will have any right to
assign or otherwise to alienate the right to receive payments under the plan, in
whole or in part.
-16-
<PAGE> 17
SECTION 11.
AMENDMENT OR TERMINATION
Biogen reserves the right at any time by action of the board to terminate this
plan or to amend its provisions in any way. In addition, if the Retirement Plan
is terminated, this plan will automatically terminate also as of the same
effective date. Notwithstanding the foregoing, no termination or amendment of
the plan may reduce the benefits payable under the plan to any person with
respect to a participant whose employment with Biogen (or a subsidiary) was
terminated before such termination or amendment, and no termination or amendment
may reduce the benefits to be paid with respect to a participant on the date of
such termination or amendment below the amount which such participant would have
received if his employment had terminated on the date before such termination or
amendment.
In witness whereof, Biogen, Inc. has caused this instrument to be restated and
effective April 1, 1996 and to be executed as of the ______ day of ______, 1997.
BIOGEN, INC.
By:
--------------------------------------------
Frank A. Burke, Jr. V.P., Human Resources
-17-
<PAGE> 18
APPENDIX A
LIST OF PARTICIPANTS IN THE SUPPLEMENTAL PENSION FORMULA
The following employees are participants in the supplemental pension formula
under Section 4.1, effective as of January 1, 1991:
Frank A. Burke, Jr.
John W. Catterall
Adrian W. Dawson, M.D.
Frederic A. Eustis, III
James Mullen
Vicki L. Sato, Ph.D.
Michael R. Slater
Alan W. Tuck
James L. Vincent
-18-
<PAGE> 19
APPENDIX B
SPECIAL ADDITIONAL BENEFITS APPLICABLE TO CERTAIN PARTICIPANTS
B.1 Special Additional Benefits for James L. Vincent
(a) APPLICABILITY. This Section B.1 provides for special additional
benefits for James L. Vincent, Chairman and Chief Executive Officer
of Biogen, Inc. ("Vincent"), in order to carry out the provisions of
Paragraph 6 of the letter agreement dated November 21, 1996 from
Biogen, Inc. to Vincent (the "Letter Agreement"). Capitalized or
other terms used in this Section B.1 not otherwise defined by or in
accordance with this plan have the meanings given to them in such
Letter Agreement or in the Employment Agreement referred to in the
first paragraph of the Letter Agreement.
(b) SPECIAL ADDITIONAL BENEFITS. In addition to the benefits payable to
Vincent under the other provisions of this plan, Vincent will be
entitled to benefits hereunder calculated in accordance with the
following provisions:
(i) during the period following the Change Date while Vincent
continues to serve as Chairman (including during any period
while Vincent has a condition or other disability for which
Vincent is entitled to payment of disability benefits for a
"covered disability", as defined in the Biogen Retirement
Plan), Vincent will continue to accrue additional retirement
benefits calculated under the supplemental pension formula in
Section 4.1, treating Vincent's service as Chairman as if it
were full-time service as an eligible employee and treating the
salary and bonus paid to Vincent for service as Chairman (which
during any period of "covered disability" shall be deemed to be
the salary and bonus for the year immediately preceding such
period) as Vincent's "applicable compensation" for purposes of
the supplemental pension formula;
(ii) in the event of a termination of Vincent's employment, before
or after the Change Date, (I) by Biogen, other than for cause
or permanent total disability, (II) by Vincent, under
circumstances constituting Constructive Termination, or (III)
by Vincent after Vincent has reached age 61, in each case
before Vincent has reached age 65, Vincent will receive
additional retirement benefits calculated under the
supplemental pension formula as if Vincent has continued to
serve as Chairman until age 65 and had continued to receive the
same compensation as the annual rate of compensation in effect
for Vincent immediately prior to such termination of
employment; and
(iii) in the event of a termination of Vincent's employment as
Chairman before age 65, under circumstances entitling Vincent
to benefit payments under subparagraph (i) or (ii), Vincent may
thereafter elect to commence receiving such benefit payments
under either clause (I) or (II) below:
(I) in the event Vincent's employment is terminated under
circumstances entitling Vincent to a payment under
paragraph 11(c)(v) of the Letter Agreement, starting on
the earlier of:
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<PAGE> 20
(A) Vincent's normal retirement date, or
(B) the date which follows the date of termination of
Vincent's employment by a number of months equal to
the Severance Multiple (as defined in paragraph
11(c)(v) of the Letter Agreement) multiplied by 12,
(II) in the event Vincent's employment is terminated under
circumstances not entitling Vincent to a payment under
paragraph 11(c)(v) of the Letter Agreement, starting on
the date of such termination.
In any event, benefit payments under either clause (I) or (II)
above will not be reduced for payments received before
Vincent's normal retirement date.
For example, if the Change Date occurs on Vincent's 57th
birthday, and Vincent's employment is terminated by Biogen on
Vincent's 58th birthday under circumstances entitling Vincent
to a payment under paragraph 11(c)(v) of the Letter Agreement,
then Vincent's Severance Multiple would be 5.5 which,
multiplied by 12, results in a period of 66 months. Therefore,
in this example, pursuant to subparagraph (iii)(I)(B), Vincent
could elect to commence receiving benefit payments at the time
Vincent reaches age 63 1/2 (which is 66 months after the
assumed date of termination of Vincent's employment at age 58)
without reduction for payments received before Vincent's normal
retirement date.
The rules governing the presumed form of payment for calculations of
benefits amounts under the foregoing provisions of this paragraph,
and the rules governing the conversion of actual benefits into any
other form of payment elected by Vincent, will be the same rules used
for such purposes under the Biogen Retirement Plan and under the
provisions of this plan.
Vincent's gross retirement benefit amount will be the amount
calculated under this Section B.1 and the actual amount payable to
Vincent under this Section B.1 will be such amount reduced by the
amounts Vincent actually receives under the other provisions of this
plan and the Biogen Retirement Plan.
-20-
<PAGE> 1
Exhibit 10.35
-------------
BIOGEN, INC.
VOLUNTARY BOARD OF DIRECTORS SAVINGS PLAN
AMENDMENT NO. 1
WHEREAS, Biogen, Inc. ("Biogen") adopted the Biogen, Inc. Voluntary
Board of Directors Savings Plan (the "Plan") effective October 1, 1994, and
WHEREAS, Section 7.1 of the Plan permits Biogen, by action of the Board of
Directors of Biogen (or its delegate) to amend the Plan; and
WHEREAS, Biogen desires to amend the Plan to increase the frequency by
which a participant may change his designation of mutual funds with respect to
which deemed investment results are determined;
NOW, THEREFORE, the Plan is hereby amended effective May 1, 1997 as
follows:
Section 5.1 (Participant Accounts) is amended by deleting the second
sentence of the second paragraph of subsection (c) thereof and replacing it with
the following:
"Thereafter, a participant may change his designation either with respect
to the deemed investment of future savings deposits and matching credits
or the deemed transfer of amounts from a previously designated mutual fund
to another fund. The Committee shall establish the frequency by which such
a change may be made, the method of making such a change, and the
effective date of such a change and shall prescribe such other rules and
procedures as it deems appropriate."
IN WITNESS WHEREOF, Biogen has caused this instrument to be executed by the
individual duly authorized as of the 25th day of April, 1997.
BIOGEN, INC.
By:
-----------------------------------
Frank A. Burke, Jr.
Vice President - Human Resources
<PAGE> 1
EXHIBIT 13
SELECTED FINANCIAL DATA
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Product sales .............................................. $ -- $ -- $ -- $ 78,202 $239,988
Royalty revenue ............................................ 136,418 140,433 134,653 181,502 171,921
Total revenues ............................................. 149,287 156,344 151,691 277,090 434,044
Total expenses and taxes ................................... 116,870 161,241 146,031 236,560 344,877
Net income (loss)(a) ....................................... 32,417 (4,897) 5,660 40,530 89,167
Basic earnings (loss) per share (b) ........................ 0.51 (0.07) 0.08 0.57 1.21
Diluted earnings (loss) per share (b) ...................... 0.47 (0.07) 0.08 0.55 1.17
Cash and cash equivalents and short-term marketable
securities .............................................. 270,351 267,802 307,948 321,381 440,088
Total assets ............................................... 356,950 377,862 469,201 634,572 813,825
Long-term debt, less current portion ....................... -- -- 32,826 62,254 61,846
Shareholders' equity ....................................... 325,174 329,934 382,980 484,370 536,293
Shares used in calculating diluted earnings per share(b).... 69,440 65,548 72,890 73,221 76,500
</TABLE>
(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 the HIRULOG(R) thrombin
inhibitor product. Net income for the year ended December 31, 1996 includes
an income tax benefit of approximately $23 million resulting from the
reversal of a deferred tax asset valuation allowance.
(b) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings per Share"
("SFAS 128"), which changed the method of calculating earnings per share.
SFAS 128 requires the presentation of "basic" earnings per share and
"diluted" earnings per share. Basic earnings per share is computed by
dividing the net income available to common shareholders by the weighted
average number of shares of common stock outstanding. For purposes of
calculating diluted earnings per share the denominator includes both the
weighted average number of shares of common stock outstanding and the
number of dilutive common stock equivalents such as stock options and
warrants. The Company adopted SFAS 128 in the fourth quarter of 1997. All
prior period per share amounts have been restated to comply with the
standard.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
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(R)(Interferon beta-1a) for the treatment of relapsing forms of
multiple sclerosis ("MS")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 vaccines and diagnostic
products.
RESULTS OF OPERATIONS
1997 AS COMPARED TO 1996
REVENUES
Total revenues in 1997 were $434 million, as compared to $277.1 million in 1996,
an increase of approximately 57%.
Product sales in 1997 were $240 million as compared to $78.2 million in 1996, an
increase of approximately 207%. The Company began selling AVONEX(R) in the
United States in May 1996. In March 1997, the Company received regulatory
approval to market AVONEX(R) in the fifteen member countries of the European
Union("EU"). By the end of 1997, AVONEX(R) had received reimbursement approval
and was on the market in all of the EU countries. AVONEX(R) sales outside of the
United States were approximately $19.1 million in 1997 as compared to $593,000
in 1996. The Company expects product sales as a percentage of total revenues to
increase in the near term as the Company continues to market AVONEX(R)
worldwide. The Company also expects sales from AVONEX(R) in Europe to increase
as a percentage of total product sales. The Company, however, faces increasing
competition worldwide. See "Outlook - Competition".
Revenues from royalties in 1997 were $171.9 million, a decrease of $9.6 million
or 5% as compared to $181.5 million of royalty revenue in 1996. Included in
royalty revenue in 1997 is a one-time non-refundable licensing payment of $15
million from Merck & Co., Inc.("Merck") paid under a collaborative research,
development and license agreement (the "Merck Agreement"). Merck paid the
$15 million license fee to Biogen for the transfer of technology, rights granted
and the research and development previously performed by Biogen. Under the Merck
Agreement, Merck will have rights to develop and market small molecule VLA-4
inhibitors in all therapeutic areas other than certain small indications such as
multiple sclerosis and kidney diseases and disorders, which Biogen will continue
to work on itself. The Merck Agreement also provides for payments to be made by
either party upon the achievement of certain development milestones by the other
party. In addition, if a product is successfully developed by either party, the
other party will receive royalties on sales of the product. Included in royalty
revenue in 1996 is a one-time royalty payment of $30 million for sales which
occurred prior to 1996 received under a license agreement with Pharmacia &
Upjohn A.B. ("Pharmacia & Upjohn"). Under the terms of this license agreement
Biogen granted Pharmacia & Upjohn a sublicense under certain patents related to
a proprietary protein secretion technology licensed exclusively to Biogen by
Harvard University. Excluding the one-time payments from Merck in 1997 and
Pharmacia & Upjohn in 1996, royalty revenue increased 3.6% from 1996 to 1997. In
the near term, the
<PAGE> 3
Company expects overall sales of licensee products and royalty revenues to
fluctuate depending on changes in sales volumes for specific products, patent
expirations, new licensing arrangements, if any, or other developments. See
"Outlook - Royalty Revenue" and "Outlook - Patents and Other Proprietary
Rights".
Interest income in 1997 was $22.1 million, an increase of $4.7 million or 27% as
compared to 1996. This increase is a result of increased funds invested and
higher average yields. The Company expects interest income to vary based on
changes in the amount of funds invested and fluctuations in interest rates.
EXPENSES
Total expenses in 1997 were $285.1 million as compared to $236.3 million in
1996, an increase of approximately 21%.
Cost of sales in 1997 totaled $50.2 million, an increase of $21.7 million or 76%
as compared to 1996. This increase was due to the higher sales volume of
AVONEX(R). Included in cost of sales in 1997 and 1996 is $37.1 million and
$11.4 million, respectively, from product sales and $13.1 million and
$17.1 million, respectively, relating to royalty revenue. Gross margins for
product sales remained flat at 85% in both 1997 and 1996. Cost of sales relating
to royalty revenue for 1997 decreased $4 million, or approximately 23% as
compared to 1996, due to a lower percentage of royalty revenue with associated
royalty costs. The Company expects that gross margins on royalty revenue will
fluctuate in the future based on the impact of one-time royalty and milestone
payments.
Research and development expenses in 1997 were $145.5 million, an increase of
$13.1 million or 10% as compared to 1996. This increase was primarily due to the
costs associated with funding of collaboration agreements, an increase in
clinical trial costs and an increase in the Company's other development efforts
related to its ongoing research and development programs. In 1997, the Company
completed Phase 2 trials of several of its drug candidates, including LFA3TIP, a
T-cell inhibiting protein being tested as a potential treatment for moderate to
severe psoriasis and CVT-124, which is being developed for treatment of edema
associated with congestive heart failure. Additional Phase 2 studies of LFA3TIP
and CVT-124 are underway or planned. Biogen also plans to initiate in 1998
Phase 2 trials of humanized 5c8 anti-CD40, a monoclonal antibody for potential
use in the treatment of several inflammatory and autoimmune diseases, such as
lupus. In addition, the Company is working on ongoing studies of AVONEX(R) to
support a broader label and additional indications. The Company expects that, in
the near and long-term, research and development expenses will increase as the
Company expands its pipeline and related development efforts with respect to
potential new product candidates and continues clinical trials of AVONEX(R).
Selling, general and administrative expenses in 1997 were $90.1 million, an
increase of $16.5 million or 22% as compared to 1996. This increase was
primarily due to the selling and marketing expenses related to the sale of
AVONEX(R), principally in support of the European launch. The Company expects
that selling, general, and administrative expenses will continue to increase in
the near term as the Company continues to expand the sales and marketing
organizations necessary to sell AVONEX(R) in additional European markets.
Other income, net in 1997 was $711,000 compared to other expense of $1.7 million
in 1996. The increase is principally due to an increase in foreign currency
gains of $6.3 million resulting from notes payable denominated in foreign
currencies offset by an increase in interest expense of $2.9 million.
<PAGE> 4
The Company's effective tax rate in 1997 was 40.1%. Income tax expense for 1997
varied from the amount computed at U.S. federal statutory rates primarily due to
the benefit of research and development and investment tax credits offset by
foreign losses for which the Company will receive no current tax benefit. The
Company expects its effective tax rate to decline as sales in Europe increase.
During the third quarter of 1996, the Company determined it was more likely than
not that it would realize the benefits of its net deferred tax assets, and
reversed the related valuation allowance. The reversal of the valuation
allowance resulted in a realization of income tax benefit of approximately
$23 million and an increase in additional paid-in capital of $38.6 million which
related to deductions for non-qualified stock options.
RESULTS OF OPERATIONS
1996 AS COMPARED TO 1995
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(R) product in
the United States in May 1996, which accounted for $76.5 million of product
sales.
Revenues from royalties in 1996 were $181.5 million, an increase of
$46.8 million or 35% as compared to 1995. Included in royalty revenue in 1996
was a one-time royalty payment of $30 million, relating to sales occurring prior
to 1996, received under a license agreement with Pharmacia & Upjohn. Under the
terms of this 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% in 1996 as compared to 1995, primarily as a result of an increase in
ongoing royalties received from Schering-Plough Corporation ("Schering-Plough"),
the Company's licensee for alpha interferon.
Interest income in 1996 was $17.4 million, an increase of $348,000 or 2% as
compared to 1995. The increase was primarily a result of increased funds
invested.
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
172% as compared to 1995. Included in cost of sales in 1996 was $11.4 million
from product sales and $17.1 million relating to royalty revenue. The gross
margin in 1996 for product sales was approximately $66.8 million or 85%. Cost of
sales relating to royalty revenue for 1996 increased $6.6 million, or
approximately 63%. Excluding the cost 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.
Research and development expenses in 1996 were $132.4 million, an increase of
$44.9 million or 51% 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
<PAGE> 5
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 was $13.2 million relating to the research
collaboration and license agreement with CBM. In 1996, Biogen had two early
stage compounds in clinical trials, LFA3TIP, a T-cell inhibiting protein tested
as a potential treatment for severe psoriasis and Gelsolin, a mucolytic agent,
that was being studied for treatment of cystic fibrosis, chronic bronchitis and
several other pulmonary diseases.
Selling, general and administrative expenses in 1996 were $73.6 million, an
increase of $33.3 million or 83% as compared to 1995. This increase was
primarily due to the costs associated with the commercial launch of AVONEX(R) in
the United States, including the formation of a domestic sales organization. In
addition, the Company invested resources in market development efforts in Europe
related to AVONEX(R). 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.
Other expenses, net in 1996 were $1.7 million, a decrease of $4.3 million
compared to 1995. The decrease was 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 and the reversal of the deferred tax asset valuation allowance in
1996. 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. During the third
quarter of 1996, the Company determined it was more likely than not that it
would realize the benefits of its net deferred tax assets, and reversed the
related valuation allowance. The reversal of the valuation allowance resulted in
realization of income tax benefit of approximately $23 million and an increase
in additional paid-in capital of $38.6 million which related to deductions for
non-qualified stock options.
FINANCIAL CONDITION
At December 31, 1997, cash, cash equivalents and short-term marketable
securities were $440.1 million compared with $321.4 million at December 31,
1996, an increase of $118.2 million. Working capital increased $124.3 million to
$472.2 million. Net cash provided by operating activities for the year ended
December 31, 1997 was $97.6 million compared with $42.3 million in 1996. Cash
outflows during 1997 included investments in property and equipment and patents
of $35.6 million and $11 million related to investments under collaborative
agreements. Significant cash inflows included $29.3 million from loan and notes
payable agreements with banks and $24.5 million from common stock option and
purchase plan activity.
In August 1995, the Company entered into a loan agreement with a bank for
financing the construction of its biological manufacturing facility in North
Carolina (the "Construction Loan"). During 1997, the Company completed
construction of the facility and the funds advanced under the Construction Loan
were converted to a floating rate ten year term loan with principal and interest
payable quarterly. As of December 31, 1997, the Company had $45.9 million
outstanding under the Construction Loan. The loan is secured by the underlying
building. The Company also entered an interest rate swap agreement with the same
bank, fixing its interest rate on the Construction Loan at 7.75% during the
remaining term of the loan with interest payable quarterly. As of December 31,
1997, the Company had $20.8 million outstanding under a floating rate loan with
a bank (the "Term Loan"). The Term loan is secured by
<PAGE> 6
the Company's laboratory and office building in Cambridge, Massachusetts. The
Company has fixed its interest rate on the Term Loan at 7.5% under the terms of
a swap agreement.
Terms of the Company's loan agreements include various covenants, including
financial covenants which require the Company to maintain minimum net worth,
cash flow and various financial ratios.
On October 6, 1997, the Company announced that its Board of Directors has
authorized the repurchase of up to 2.5 million shares of the Company's common
stock. The repurchased stock will provide the Company with treasury shares for
general corporate purposes, such as stock to be issued under employee stock
option and stock purchase plans. Stock purchases are expected to occur from time
to time over the next two years. The stock repurchase program may be
discontinued at any time. In 1997, the Company repurchased 200,000 shares of its
common stock at a cost of $7.0 million. To minimize the cost of the repurchase
program, the Company sold put options and purchased call options covering a
large portion of the shares intended to be repurchased.
The Company has several research programs and collaborations underway. In
December 1997, the Company entered into a collaborative research, development
and license agreement (the "Merck Agreement") with Merck & Co., Inc. ("Merck").
Under the Merck Agreement, Merck paid a non-refundable license fee of
$15 million to Biogen for the transfer of technology, rights granted and
research and development previously performed by Biogen. Under the Merck
Agreement, Merck will have rights to develop and market small molecule VLA-4
inhibitors in all therapeutic areas other than certain small indications such as
multiple sclerosis and kidney diseases and disorders, which Biogen will continue
to work on itself. The Merck Agreement also provides for payments to be made by
each party upon the achievement of certain development milestones by the other
party. The payments could total approximately $130 million paid by Merck to
Biogen and approximately $21 million paid by Biogen to Merck if all milestones
are met. In addition, if a product is successfully developed by a party, the
other party will receive royalties on sales of the product.
In June 1997, the Company purchased 100,000 shares of Series E Preferred Stock
of CuraGen Corporation ("CuraGen") for $1 million. In October 1997, the Company
signed a research and option agreement (the "CuraGen Agreement") with CuraGen
under which the Company and CuraGen will collaborate in the discovery of novel
genes using CuraGen's functional genomics technologies. The Company has an
option to acquire an exclusive license to certain discoveries arising out of the
collaborative effort. Under the terms of the CuraGen Agreement, the Company has
agreed to purchase CuraGen common stock totaling $5 million in the event of
CuraGen's initial public offering and to establish a $10 million line of credit
with a maximum drawdown limit of $5 million in the first year. The Company has
also agreed to fund research activities of CuraGen related to the collaboration
up to a maximum of $7.5 million over the next five years. At December 31, 1997,
CuraGen had not completed its initial public offering and there were no
borrowings outstanding under the line of credit.
In March 1997, the Company signed a research collaboration and license agreement
(the "CVT Agreement") with CV Therapeutics, Inc. ("CVT") under which Biogen
obtained rights to develop and market CVT's therapeutic CVT-124 for the
treatment of edema associated with congestive heart failure. Under the terms of
the CVT Agreement, the Company purchased approximately 670,000 shares of CVT
common stock for $7 million and paid a one-time license fee of $5 million. In
addition, pursuant to the terms of the CVT Agreement, the Company established a
$12 million line of credit that CVT may use for operating purposes. At
December 31, 1997, the Company had advanced $3 million under the line of credit
to CVT.
<PAGE> 7
In December 1996, the Company signed a research collaboration and license
agreement(the "CBM 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. During 1996, under the CBM
Agreement, 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
research and development of up to a maximum of $10.5 million through 1999 of
which $4 million was funded in 1997.
Effective July 1, 1996, the Company signed a collaborative research and
commercialization agreement(the "Ontogeny Agreement") with Ontogeny, Inc.
("Ontogeny"), a private biotechnology company, for the development and
commercialization of three specific hedgehog cell differentiation proteins. The
Company acquired an equity interest in Ontogeny totaling $1 million as well as
certain exclusive, worldwide rights related to products based on the hedgehog
proteins for most disease areas. Under the Ontogeny Agreement, the Company
committed to fund a total of $4 million of research and development work at
Ontogeny through the end of the research phase. The Company has funded
$3 million through December 31, 1997. In 1998, the Company has the option to
proceed with commercialization of one or more of the hedgehog proteins. If the
Company exercises its option, it will be committed to fund an additional
$4 million of research at Ontogeny through mid 2001 and would be committed to
additional funding of up to $23.8 million per hedgehog protein selected in a
combination of license fees, additional equity investments, a line of credit,
and potential milestone payments. The Company would also pay royalties if
products are successfully developed.
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, of
which $18.1 million of the funding has been paid through December 31, 1997.
The Company believes that existing funds and cash generated from operations are
adequate to satisfy its working capital and capital expenditure requirements in
the foreseeable future. However, the Company may raise additional capital to
take advantage of favorable conditions in the market or in connection with the
Company's development activities. The Company believes that "Year 2000" costs
will be minimal. Most of the Company's business and operating computer systems
were installed in early 1996, in connection with the launch of its product
AVONEX(R). The Company believes the Year 2000 conversion requirements will be
achieved though routine upgrades to these software systems. The Company expects
to complete these upgrades by the end of 1998.
LEGAL MATTERS
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 claims remaining in the case pertain to a statement
concerning the results of the HIRULOG(R) 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
<PAGE> 8
summary judgment in the case. On September 4, 1997, the Court denied the motion
but narrowed the plaintiff class. A trial is scheduled for April 1998.
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(R). 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; however, the ultimate outcome is not determinable
at this time. Prior to the date of the suit filed by Berlex on the McCormick
patent, 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(R), 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. In February
1997, the U.S. District Court in Massachusetts dismissed Biogen's declaratory
judgment action as to Schering without prejudice if such dismissal is later
shown to result in an injustice to Biogen. Biogen and Stanford subsequently
entered into an agreement voluntarily dismissing Stanford from the suit. The
suit involving Berlex is still pending. A trial is not expected before the early
part of 1999.
In June 1996, ASTA Medica Aktiengesselschaft ("ASTA") 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 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. Arbitration proceedings
were held in late 1997 in Zurich under Swiss law. The parties expect a decision
in the first half of 1998.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131 "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
establishes standards for reporting comprehensive income and its components in
the consolidated financial statements. SFAS 131 establishes standards for
reporting information on operating segments in interim and annual financial
statements. SFAS 130 and SFAS 131 will become effective for the Company
beginning in 1998. SFAS 130 and SFAS 131 require
<PAGE> 9
disclosure only and will have no impact on the Company's consolidated financial
position and results of operations.
In November 1997, the Emerging Issues Task Force("EITF") issued EITF 97-13
"Accounting for Costs Incurred in Connection with a Consulting Contract or an
Internal Project That Combines Business Process Reengineering and Information
Technology Transformation"("EITF 97-13"). EITF 97-13 requires that costs
associated with business process reengineering activities be expensed as
incurred, and that any amounts previously capitalized be charged to expense
beginning in 1997. EITF 97-13 did not have a significant impact on the Company's
financial position or results of operations.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128") which
changes the method of calculating earnings per share. SFAS 128 requires the
presentation of "basic" earnings per share and "diluted" earnings per share.
Basic earnings per share is computed by dividing the net income available to
common shareholders by the weighted average number of shares of common stock
outstanding. For purposes of calculating diluted earnings per share the
denominator includes both the weighted average number of shares of common stock
outstanding and dilutive common stock equivalents such as stock options and
warrants. The Company adopted SFAS 128 in the fourth quarter of 1997. All per
share amounts have been restated to comply with the standard.
OUTLOOK
Safe Harbor Statement under Private Securities Litigation Reform Act of 1996
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 product sales, royalty revenues,
expenses and profits, statements regarding the timing of clinical trials and
predictions as to the anticipated outcome of 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 financial condition and results of operations
are discussed below.
Dependence on AVONEX(R) Sales
The Company's ability to sustain increases in revenues and profitability will be
primarily dependent on the level of revenues and profitability from AVONEX(R)
sales. The Company's ability to sustain profitability from sales of AVONEX(R)
will depend on a number of factors, including: continued market acceptance of
AVONEX(R) worldwide; the Company's ability to maintain a high level of patient
satisfaction with AVONEX(R); the nature of regulatory and pricing decisions
related to AVONEX(R) worldwide; the extent to which AVONEX(R) receives
reimbursement coverage; and the impact of competitive products. The
profitability from AVONEX(R) sales is also dependent on the successful
resolution of the Berlex suit and the Asta arbitration, both of which are
described above under "Legal Matters".
Competition
The Company faces increasing competition from other products for the treatment
of relapsing forms of multiple sclerosis. AVONEX(R) 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
<PAGE> 10
Schering AG, Germany ("Schering AG"), and is sold in Europe under the brandname
Betaferon(R) by Schering AG. AVONEX(R) also faces competition from Copaxone(R)
glatiramer acetate(also known as copolymer-1). In the United States Copaxone(R)
is marketed by a partnership between Teva Pharmaceuticals and Hoechst Marion
Roussel, Inc. In addition, Ares Serono S.A. ("Serono") is seeking approval to
market another interferon beta-1a product in Europe. Serono is also seeking
approval to market its interferon beta-1a product in the United States but to be
approved for relapsing forms of multiple sclerosis would have to overcome the
orphan drug status afforded AVONEX(R) and Betaseron(R) by the FDA. There can be
no assurance that the Company will be able to sustain market share of AVONEX(R)
in light of competition from other products for the treatment of multiple
sclerosis.
Royalty Revenue
The Company receives royalty revenues which contribute a significant amount to
its overall profitability. In the near term, the Company expects overall sales
of licensee products and royalty revenues to fluctuate depending on changes in
sales volumes for specific products, patent expirations, new licensing
arrangements, if any, or other developments. 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. 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 government sponsored vaccination programs. Since the Company is not
involved in the development or sale of products by its licensees, the Company is
unable to predict the timing or potential impact of factors which may affect
licensee sales. In the long term, the Company expects its royalty revenue to be
affected most significantly by patent expirations. See "Outlook - Patents and
Other Proprietary Rights."
Patents and Other Proprietary Rights
The Company has numerous issued patents and patent applications pending on a
number of its processes and products. The Company has also obtained rights to
certain patents under licenses with third parties which provide for the payment
of royalties. There can be no assurances that Biogen's existing patents or
others, if obtained, will be of substantial protection or commercial benefit to
Biogen. In addition, it is not known to what extent Biogen's pending patent
applications or patent applications licensed from third parties will be granted
or whether any of the Company's patents will prevail if they are challenged in
litigation. There is also no assurance that third parties will not be granted
patents claiming subject matter necessary to Biogen's business.
Biogen has granted an exclusive worldwide license to Schering Plough Corporation
under Biogen's alpha interferon patents, and receives royalties from Schering
Plough on sales of its Intron(R) A brand of alpha interferon. In the event
Biogen does not prevail in an action it has taken against Genentech Inc. and F.
Hoffman La Roche, Inc. to overturn a priority of invention decision made against
Biogen in connection with a Biogen alpha interferon patent application or does
not resolve the matter in another manner satisfactory to Biogen, Schering
Plough's royalty obligation to Biogen on sales of Intron(R) A in the United
States will terminate upon expiration of Biogen's existing U.S. alpha interferon
patent in 2002. The parties are discussing possible alternative resolutions of
the dispute. Schering Plough's royalty obligation to Biogen on sales of
Intron(R) A in Europe will terminate upon expiration of Biogen's European alpha
interferon patent in 2001.
<PAGE> 11
Biogen has licensed its recombinant hepatitis B antigen patent rights to
manufacturers and marketers of hepatitis B vaccines and diagnostic test kits,
and receives royalties on sales of the vaccines and test kits by its licensees.
The obligation of SmithKline and Merck to pay royalties on sales of hepatitis B
vaccines and the obligation of Biogen's other licensees under its hepatitis B
patents to pay royalties on sales of diagnostic products will terminate upon
expiration of Biogen's existing hepatitis B patents. Biogen's existing United
States hepatitis B patents will expire in 2004. Biogen's European hepatitis B
patents will expire at the end of 1999, except in those countries in which
Biogen has or is able to obtain supplemental protection certificates. To date,
Biogen has received supplemental protection certificates in France, Italy,
Luxembourg, The Netherlands, and Sweden, and has a number of additional
applications pending. The additional coverage afforded by supplemental
protection certificates ranges from two to six years. There can be no assurance
as to the extent of coverage available under the supplemental protection
certificates, or that protection will be available in additional countries.
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. See also "Legal Matters".
New Products
AVONEX(R) 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 continues 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. Only a small number of research and
development programs result in the commercialization of a product. Success in
preclinical and early clinical trials does not ensure that later stage or large
scale clinical trials will be successful. 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 to 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.
Market Risk
The Company has exposure to financial risk in several areas including changes in
foreign exchange rates, interest rates and in the price of the Company's common
stock. The Company attempts to minimize its exposures by using certain financial
instruments, for purposes other than trading, in accordance with the Company's
overall risk management guidelines. Further information regarding the Company's
accounting policies for financial instruments and disclosures of financial
instruments can be found in Notes 1,2 and 3 to the Company's consolidated
financial statements.
Foreign Exchange
The Company has operations in several European countries in connection with the
sale of its product AVONEX(R). The Company also receives royalty revenues
<PAGE> 12
based on worldwide product sales by its licensees. As a result, the Company's
financial position, results of operations and cash flows can be affected by
fluctuations in foreign currency exchange rates (primarily the British pound,
French franc, German mark, and Japanese yen).
During 1997, the Company entered into a $30 million variable rate multicurrency
line of credit agreement with a bank ("Multicurrency Line"). Under the
Multicurrency Line, the Company may borrow or enter into commitments to borrow
amounts in various currencies, at which time the exchange rate for these
commitments is set. Any amounts outstanding under the Multicurrency Line are
revalued using exchange rates at each balance sheet date. At December 31, 1997
there was $24.8 million outstanding under the Multicurrency Line of which
$14.4 million was denominated in U.S. dollars. The carrying value of the amounts
outstanding under the variable rate Multicurrency Line approximates fair value.
The Company uses foreign currency forward contracts("Forward Contracts") to
manage specifically identifiable foreign currency risk but does not engage in
currency speculation. The Company uses these Forward Contracts to hedge certain
transactions denominated in foreign currencies, including amounts outstanding
under the Multicurrency Line. The contract amount of the forwards outstanding at
December 31, 1997 was $10.4 million.
The potential gain or loss for a hypothetical 10% beneficial or adverse change
in foreign currency exchange rates on the Multicurrency Line and Forward
Contracts outstanding at December 31, 1997 would not materially affect Biogen's
financial position, results of operations or cash flows.
Interest Rates
The Company is exposed to risk of interest rate fluctuations in connection with
its variable rate long term debt, which at December 31, 1997 included a
$20.8 million term loan (the "Term Loan"), and a $45.9 million construction term
loan (the "Construction Loan"). The Term Loan requires annual principal payments
of $1.7 million through 2004, with the balance due in 2005. The Construction
Loan requires principal payments of $805,000 quarterly through 2006, with the
balance due in 2007. At December 31, 1997, the carrying values of the Term Loan
and the Construction Loan approximated fair value.
The Company has fixed its interest rates on the Term Loan and Construction Loan
by entering swap agreements under which the Company exchanges the difference
between 7.5% and 7.75%, respectively, and a floating rate. The notional
principal balance on the swap agreements approximates the principal on the
underlying debt agreements. The fair value of the swap agreements at December
31, 1997, representing the cash requirements of the Company to settle the
agreements, was approximately $2.1 million.
Stock Price
The stock prices of biotechnology companies are subject to significant
fluctuations. The stock price may be affected by a number of factors including,
but not limited to clinical trial results and other product development events,
the outcome of litigation, the decisions relating to intellectual property
rights and the entrance of competitive products into the market, changes in
reimbursement policies or other practices related to the pharmaceutical industry
or other industry and market changes or trends. In addition, if revenues or
earnings in any quarter fail to meet the investment community's expectations,
there could be an immediate adverse impact on the Company's stock price.
To minimize the cost of the Company's stock repurchase program, the Company sold
put options and purchased call options covering a large portion of
<PAGE> 13
the shares intended to be repurchased. Below is a summary of the contract
amounts, weighted average strike price and fair value of these instruments at
December 31, 1997.
<TABLE>
<CAPTION>
Contract Amount Weighted Average Fair Value
(In millions) Strike Price (In millions)
---------------------------------------------------
<S> <C> <C> <C>
Put Options Sold......... $76.7 $33.34 $(4.9)
Call Options Purchased... 65.6 36.42 7.9
</TABLE>
<PAGE> 14
BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31, 1997 1996 1995
----------------------------------
<S> <C> <C> <C>
REVENUES:
Product sales ................................ $239,988 $ 78,202 $ --
Royalties .................................... 171,921 181,502 134,653
Interest ..................................... 22,135 17,386 17,038
-------- -------- --------
Total revenues ........................... 434,044 277,090 151,691
-------- -------- --------
EXPENSES:
Cost of sales ................................ 50,188 28,525 10,504
Research and development ..................... 145,501 132,384 87,448
Selling,general and administrative ........... 90,098 73,632 40,293
Other(income)expense, net .................... (711) 1,720 6,001
-------- -------- --------
Total expenses ........................... 285,076 236,261 144,246
-------- -------- --------
INCOME BEFORE INCOME TAXES ..................... 148,968 40,829 7,445
INCOME TAXES ................................... 59,801 299 1,785
-------- -------- --------
NET INCOME ..................................... $ 89,167 $ 40,530 $ 5,660
======== ======== ========
BASIC EARNINGS PER SHARE ....................... $ 1.21 $ 0.57 $ 0.08
======== ======== ========
DILUTED EARNINGS PER SHARE ..................... $ 1.17 $ 0.55 $ 0.08
======== ======== ========
SHARES USED IN CALCULATING:
BASIC EARNINGS PER SHARE ..................... 73,812 71,595 67,951
======== ======== ========
DILUTED EARNINGS PER SHARE ................... 76,500 73,221 72,890
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 15
BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
As of December 31, 1997 1996
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .......................... $ 70,358 $ 62,032
Marketable securities .............................. 369,730 259,349
Accounts receivable, less allowances of $1,645
in 1997; $1,480 in 1996 ........................... 86,802 42,952
Deferred tax asset ................................. 37,203 47,888
Other current assets ............................... 31,973 23,533
-------- --------
Total current assets ........................... 596,066 435,754
-------- --------
PROPERTY AND EQUIPMENT, NET .......................... 174,492 165,323
-------- --------
OTHER ASSETS
Patents, net ....................................... 14,935 10,458
Marketable securities .............................. 17,095 16,003
Other .............................................. 11,237 7,034
-------- --------
Total other assets ............................. 43,267 33,495
-------- --------
$813,825 $634,572
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................... $ 15,820 $ 15,722
Note payable ....................................... 24,817 --
Current portion of long-term debt .................. 4,888 4,017
Accrued expenses and other ......................... 78,358 62,071
-------- --------
Total current liabilities ...................... 123,883 81,810
-------- --------
LONG-TERM DEBT, LESS CURRENT PORTION ................. 61,846 62,254
OTHER LONG TERM LIABILITIES .......................... 15,132 6,138
PUT OPTIONS .......................................... 76,671 --
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $0.01
per share (110,000,000 shares authorized;
issued: 1997 - 74,149,391; 1996 - 72,526,009) ...... 741 725
Additional paid-in capital ......................... 516,880 471,623
Retained earnings .................................. 25,327 12,831
Unrealized losses on marketable securities ......... (2,233) (743)
Cumulative translation adjustment .................. (37) (66)
Treasury stock, at cost, 125,534 shares in 1997 .... (4,385) --
-------- --------
Total shareholders' equity ..................... 536,293 484,370
-------- --------
$813,825 $634,572
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 16
BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1997 1996 1995
------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................... $ 89,167 $ 40,530 $ 5,660
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization ................................ 19,296 15,264 10,916
Other ........................................................ 2,695 682 (3,177)
Deferred income taxes ........................................ 22,462 (5,541) --
Changes in:
Accounts receivable ....................................... (43,850) (23,340) (1,110)
Other current and other assets ............................ (8,643) (7,727) (4,269)
Accounts payable, accrued expenses and other
current and long-term liabilities ......................... 16,505 22,413 1,429
--------- --------- ---------
Net cash provided from operating activities .................. 97,632 42,281 9,449
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities ........................... (481,783) (369,893) (349,025)
Proceeds from sales and maturities of
marketable securities ...................................... 373,130 370,252 307,021
Investment in collaborative partners ......................... (11,000) (16,774) --
Acquisitions of property and equipment ....................... (28,896) (62,030) (47,998)
Additions to patents ......................................... (6,654) (3,606) (2,311)
--------- --------- ---------
Net cash used by investing activities ........................ (155,203) (82,051) (92,313)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable ................................... 24,817 -- --
Proceeds from issuance of long-term debt ..................... 4,545 33,444 35,326
Repayments on long-term debt ................................. (4,082) (1,666) (833)
Purchases of treasury stock .................................. (7,000) -- --
Tax benefit related to stock options ......................... 23,164 4,258 --
Issuance of common stock and warrant and
option exercises ........................................... 24,453 19,996 39,459
--------- --------- ---------
Net cash provided from financing activities .................. 65,897 56,032 73,952
--------- --------- ---------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS .............. 8,326 16,262 (8,912)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ..................... 62,032 45,770 54,682
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ........................... $ 70,358 $ 62,032 $ 45,770
========= ========= =========
SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
Interest .................................................. $ 5,940 $ 4,038 $ 2,000
Income Taxes .............................................. $ 3,783 $ 1,516 $ 591
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 17
BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1997, 1996, and 1995 (in thousands)
<TABLE>
<CAPTION>
Unrealized
Gains
Additional Retained (Losses)on Cumulative
Common Paid-in Treasury Earnings Marketable Translation Shareholders'
Stock Capital Stock (Deficit) Securities Adjustment Equity
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 gains 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 options .............. 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
Exercise of options .............. 16 20,841 2,548 23,405
Issuance of common stock ......... 981 67 1,048
Compensation expense
related to stock options ......... 271 271
Tax benefit related to
stock options .................... 23,164 23,164
Unrealized losses on
marketable securities, net
of taxes ......................... (1,490) (1,490)
Treasury stock purchased ......... (7,000) (7,000)
Reclassification of put
option obligation ................ (76,671) (76,671)
Net income ....................... 89,167 89,167
Translation adjustment ........... 29 29
---- -------- ------- -------- ------- ----- --------
Balance, December 31, 1997 ....... $741 $516,880 $(4,385) $ 25,327 $(2,233) $ (37) $536,293
==== ======== ======= ======== ======= ===== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 18
BIOGEN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Biogen, Inc. ("Biogen" or 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(R) (Interferon beta-la) for the treatment of relapsing forms of
multiple sclerosis 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 vaccines and diagnostic
products.
Principles of Consolidation
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.
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.
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 transaction gains and losses are included
in the results of operations. Foreign exchange gains(losses) totaled
$8.2 million, $1.9 million and ($3.2) million in 1997, 1996 and 1995,
respectively.
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 in 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:
<TABLE>
<CAPTION>
(in thousands) 1997 1996
------- -------
<S> <C> <C>
Raw materials $ 4,957 $ 3,262
Work in process 8,132 7,801
Finished goods 9,870 5,495
------- -------
$22,959 $16,558
======= =======
</TABLE>
<PAGE> 19
Marketable Securities
The Company invests its excess cash balances in short-term marketable
securities, principally corporate notes and government securities. The Company
classifies these securities as "available for sale". All available for sale
securities are recorded at fair market value and unrealized gains and losses are
included in shareholders' equity, net of related tax effects. Realized gains and
losses and declines in value, if any, judged to be other than temporary on
available for sale securities are reported in other income or expense.
As part of its strategic product development efforts, the Company also invests
in equity securities of certain biotechnology companies with which it has
collaborative agreements. Such investments, which are included in long term
marketable securities and other assets, are classified as available for sale if
a readily determinable market value exists. These investments are accounted for
under the cost or equity method depending on the facts and circumstances of the
investment and are reviewed regularly for impairment.
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. The
Agreement was terminated in early 1997. There were no amounts outstanding at
December 31, 1997 under the agreement. At December 31, 1996, the Company had
approximately $14.9 million of foreign based accounts receivable outstanding
under the agreement. All amounts were collected by the end of the first quarter
in 1997. Resulting gains and losses on the sales of the foreign based accounts
receivable were recorded in other expenses when the receivables were 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. Maintenance of computer systems, including maintenance to make
its software Year 2000 compliant, is expensed as incurred. The Company
capitalizes certain 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 associated with successful patent defenses 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 $11.8 million and
$11.3 million as of December 31, 1997 and 1996, respectively. The carrying value
of patents is regularly 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
Revenues from product sales are recognized when product is shipped and are net
of applicable allowances for returns, rebates and other applicable
<PAGE> 20
discounts and 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, including amounts funded in research
collaborations, are expensed as incurred.
Earnings per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128"), which
changed the method of calculating earnings per share. SFAS 128 requires the
presentation of "basic" earnings per share and "diluted" earnings per share.
Basic earnings per share is computed by dividing the net income available to
common shareholders by the weighted average number of shares of common stock
outstanding. For purposes of calculating diluted earnings per share the
denominator includes both the weighted average number of shares of common stock
outstanding and the number of dilutive common stock equivalents such as stock
options and warrants. The Company adopted SFAS 128 in the fourth quarter of
1997. All prior period per share amounts have been restated to comply with the
standard.
Dilutive securities include outstanding options under the Company's stock option
plans. The put options sold in connection with the Company's stock repurchase
program may have an additional dilutive effect. Below is a summary of the shares
used in calculating basic and diluted earnings per share for the years ended
December 31,:
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Weighted average number of shares of
common stock outstanding ................. 73,812 71,595 67,951
Dilutive stock options ..................... 2,688 1,626 4,939
------ ------ ------
Shares used in calculating diluted
earnings per share ....................... 76,500 73,221 72,890
====== ====== ======
</TABLE>
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131 "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
establishes standards for reporting comprehensive income and its components in
the consolidated financial statements. SFAS 131 establishes standards for
reporting information on operating segments in interim and annual financial
statements. SFAS 130 and SFAS 131 will become effective for the Company
beginning in 1998. SFAS 130 and SFAS 131 require disclosure only and will have
no impact on the Company's consolidated financial position or results of
operations.
In November 1997, the Emerging Issues Task Force("EITF") issued EITF 97-13
"Accounting for Costs Incurred in Connection with a Consulting Contract or an
<PAGE> 21
Internal Project That Combines Business Process Reengineering and Information
Technology Transformation"("EITF 97-13") which is effective for the Company in
1997. EITF 97-13 requires costs associated with business process reengineering
activities to be expensed as incurred and any amounts previously capitalized be
charged to expense. EITF 97-13 did not have an impact on the Company's financial
position and results of operations.
2. FINANCIAL INSTRUMENTS
The following is a summary of marketable securities as of December 31,:
<TABLE>
<CAPTION>
Unrealized
Fair ---------------- Amortized
(In thousands) Value Gains Losses Cost
-------- ------ ------ ---------
<S> <C> <C> <C> <C>
December 31, 1997:
U.S. Government securities $197,375 $ 250 $ 207 $197,332
Corporate debt securities 172,355 1,751 -- 170,604
-------- ------ ------ --------
$369,730 $2,001 $ 207 $367,936
======== ====== ====== ========
Marketable securities, noncurrent $ 17,095 $ 228 $5,974 $ 22,841
======== ====== ====== ========
December 31, 1996:
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
======== ====== ====== ========
Marketable securities, noncurrent $ 16,003 $ - $ 771 $ 16,774
======== ====== ====== ========
</TABLE>
The average maturity of the Company's marketable securities as of December 31,
1997 and 1996 was 16 months and 15 months, respectively. Proceeds from
maturities and other sales of marketable securities, which were primarily
reinvested, for the years ended December 31, 1997, 1996 and 1995 were
$373.1 million, $370.3 million and $307 million, respectively. The cost of
securities sold is determined based on the specific identification method.
Realized losses on these sales for the years ended December 31, 1997, 1996 and
1995 were $510,000, $783,000 and $58,000, 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's long-term debt and note payable are carried at face value, which
approximates fair market value. The Company uses interest rate swaps and foreign
currency agreements to manage specifically identifiable risks. The Company uses
swap agreements to mitigate the risk associated with its 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, 1997 and 1996, representing the cash
requirements of the Company to settle the agreements, approximated $2.1 million
and $580,000, respectively. The Company has foreign currency forward contracts
to hedge specific transactions denominated in foreign currencies. All foreign
<PAGE> 22
currency forward contracts have a duration of ninety days. These contracts are
designated as effective hedges and accordingly, any gains or losses on these
contracts are recognized as part of the hedged transaction. The contract amount
of the forwards at December 31, 1997 was $10.4 million which approximated fair
value.
To minimize the cost of the Company's stock repurchase program, the Company sold
put options and purchased call options covering a large portion of the shares to
be repurchased. Below is a summary of the contract amounts, weighted average
strike price and fair value of these instruments at December 31, 1997.
<TABLE>
<CAPTION>
Contract Amount Weighted Average Fair Value
(In millions) Strike Price (In millions)
--------------- ---------------- -------------
<S> <C> <C> <C>
Put Options Sold .................... $76.7 $33.34 $(4.9)
Call Options Purchased .............. 65.6 36.42 7.9
</TABLE>
3. BORROWINGS
Long-term debt consists of the following as of December 31,(in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Term Loan due 2005 .................. $20,834 $22,499
Construction Loan due 2007 .......... 45,900 43,772
------- -------
66,734 66,271
Current portion ............... (4,888) (4,017)
------- -------
$61,846 $62,254
======= =======
</TABLE>
As of December 31, 1997, the Company had $20.8 million outstanding under a
floating rate loan with a bank (the "Term Loan"). The Term Loan is secured by
the Company's laboratory and office building in Cambridge, Massachusetts. The
Term Loan provides for annual principal payments of $1.7 million in each of the
years 1996 through 2004 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
with the same bank, 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 as the Term Loan agreement.
As of December 31, 1997, the Company had $45.9 million outstanding under a
floating rate loan agreement with a bank for financing the construction of its
biological manufacturing facility in North Carolina (the "Construction Loan").
The Construction Loan is secured by the facility. Payments of $805,000 are due
quarterly through 2006 with the balance due in 2007. The Company also entered
into an interest rate swap agreement, with the same bank, fixing its interest
rate at 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.
During 1997, the Company entered into a $30 million variable rate multicurrency
line of credit agreement with a bank. Under the agreement, the Company may
borrow or enter into commitments to borrow amounts in various currencies, at
which time the exchange rate for these commitments is set. The agreement expires
on March 31, 2000, is secured by certain assets of the Company and requires
<PAGE> 23
compliance with certain financial ratios. Any amounts outstanding under the
Agreement are revalued using exchange rates at each balance sheet date. At
December 31, 1997 there was $24.8 million outstanding under this agreement, of
which $14.4 million was denominated in U.S. dollars.
4. CONSOLIDATED BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
(in thousands) 1997 1996
-------- --------
<S> <C> <C>
Property and equipment:
Land ........................................ $ 8,359 $ 3,470
Buildings ................................... 83,565 26,417
Construction in progress .................... -- 65,079
Leasehold improvements ...................... 49,795 50,739
Equipment ................................... 98,794 72,221
-------- --------
Total cost .................................. 240,513 217,926
Less accumulated depreciation ............... 66,021 52,603
-------- --------
$174,492 $165,323
======== ========
</TABLE>
Depreciation expense was $15.9 million, $12.7 million and $8.5 million for 1997,
1996 and 1995, respectively. The Company capitalized interest costs of $685,000,
$1.7 million and $143,000 in 1997, 1996 and 1995, respectively with respect to
qualifying construction projects. The Company completed construction of its
biological manufacturing facility in North Carolina in 1997. As of December 31,
1997, the Company had capitalized $65.5 million relating to the North Carolina
facility of which $4.9 million relates to costs associated with the validation
effort required for licensing by the FDA.
<TABLE>
<CAPTION>
(in thousands) 1997 1996
------- -------
<S> <C> <C>
Accrued expenses and other:
Royalties and licensing fees ................ $17,676 $22,784
Income taxes ................................ 20,196 6,634
Other ....................................... 40,486 32,653
------- -------
$78,358 $62,071
======= =======
</TABLE>
5. PENSIONS
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:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Service cost .............................. $1,873 $1,381 $ 847
Interest cost ............................. 876 659 371
Actual return on plan assets .............. (1,407) (532) (622)
Net amortization and deferral ............. 972 312 420
------ ------ ------
Net pension cost .......................... $2,314 $1,820 $1,016
====== ====== ======
</TABLE>
<PAGE> 24
The funded status of the defined benefit plans at December 31, is as follows:
<TABLE>
<CAPTION>
(in thousands) 1997 1996
-------- -------
<S> <C> <C>
Actuarial present value of:
Vested benefits obligation ..................... $ 7,398 $5,497
Non-vested benefits ............................ 1,493 1,348
------- ------
Accumulated benefit obligation ................. 8,891 6,845
Effect of future salary increase ............... 3,836 2,621
------- ------
Projected benefit obligation ................... 12,727 9,466
Plan assets at fair value ...................... 8,393 5,579
------- ------
Projected benefit obligation in
excess of plan assets ...................... 4,334 3,887
Unrecognized net asset ......................... 21 42
Unrecognized net loss .......................... (905) (985)
Unrecognized prior service cost ................ (401) (444)
------- ------
Accrued pension cost ........................... $ 3,049 $2,500
======= ======
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 7.5% for 1997 and 1996. The assumed long-term compensation increase rate was
5% and the assumed long-term rate of return on plan assets was 8% for 1997 and
1996.
6. INCOME TAXES
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:
<TABLE>
<CAPTION>
1997 1996 1995
(in thousands) --------- --------- ---------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic ............................. $172,973 $ 65,250 $ 28,845
Foreign .............................. (24,005) (24,421) (21,400)
-------- -------- --------
$148,968 $ 40,829 $ 7,445
======== ======== ========
Income tax expense (benefit):
Current
Federal .............................. $ 33,688 $ 4,636 $ 1,264
State ................................ 2,735 789 211
Foreign .............................. 916 415 310
-------- -------- --------
$ 37,339 $ 5,840 $ 1,785
-------- -------- --------
Deferred
Federal .............................. $ 21,416 $ (4,082) $ --
State ................................ 1,046 (1,459) --
-------- -------- --------
22,462 $ (5,541) $ --
-------- -------- --------
Total income tax expense ............... $ 59,801 $ 299 $ 1,785
======== ======== ========
</TABLE>
The Company's foreign subsidiaries generated operating losses in 1997, 1996 and
1995 reflecting the costs of building a commercial infrastructure in Europe and
the foreign subsidiaries' investment in the Company's research and development
efforts.
<PAGE> 25
Deferred tax assets (liabilities) are comprised of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1997 1996
--------- --------
<S> <C> <C>
Tax credits ...................................... $ 32,273 $26,079
Loss carryforwards ............................... -- 17,006
Inventory and other reserves ..................... 3,810 5,304
Other ............................................ 5,297 4,510
-------- -------
Deferred tax assets .............................. 41,380 52,899
-------- -------
Depreciation and amortization .................... (14,405) (7,496)
-------- -------
Deferred tax liabilities ......................... (14,405) (7,496)
-------- -------
$ 26,975 $45,403
======== =======
</TABLE>
During the third quarter of 1996, the Company determined that it was more likely
than not that it would realize the benefits of its net deferred tax assets and
therefore released the related valuation allowance. The reversal of the
valuation allowance resulted in a realization of income tax benefits of
approximately $23 million. The income tax benefit represented the balance of
tax-loss carryforwards and tax credits that had not been recognized through the
third quarter in 1996 and 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.
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:
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Income tax expense at statutory rates ..... $52,115 $ 14,350 $ 2,606
States taxes, net of federal income
tax benefit ............................... 4,090 509 138
Foreign losses without tax benefit and
foreign rate differential ................. 9,394 8,887 7,812
Current utilization of net operating
loss carryforwards, reversal of
valuation allowance, investment tax
and research and development credits ...... (5,700) (23,000) (9,485)
Other, net ................................ (98) (447) 714
------- -------- -------
Reported income tax expense ............... $59,801 $ 299 $ 1,785
======= ======== =======
</TABLE>
At December 31, 1997, the Company had tax credits of $32 million, most of which
expire at various dates through 2010.
7. RESEARCH COLLABORATIONS
The Company has several research programs and collaborations underway. In
December 1997, the Company entered into a collaborative research, development
and license agreement (the "Merck Agreement") with Merck & Co., Inc. ("Merck").
Merck paid a $15 million non-refundable license fee to Biogen for the transfer
of technology, the rights granted and the research and development previously
performed by Biogen. Under the Merck Agreement, Merck will have rights to
develop and market small molecule VLA-4 inhibitors in all
<PAGE> 26
therapeutic areas other than certain small indications such as multiple
sclerosis and kidney diseases and disorders, which Biogen will continue to work
on itself. The Merck Agreement also provides for payments to be made by either
party upon the achievement of certain development milestones by the other party.
In addition, if a product is successfully developed by a party, the other party
will receive royalties on sales of the product.
In June 1997, the Company purchased 100,000 shares of Series E Preferred Stock
of CuraGen Corporation ("CuraGen") for $1 million. The Company accounts for this
investment, which is included in other assets, using the cost method of
accounting. In October 1997, the Company signed a research and option agreement
(the "CuraGen Agreement") with CuraGen under which the Company and CuraGen will
collaborate in the discovery of novel genes using CuraGen's functional genomics
technologies. The Company has an option to acquire an exclusive license to
certain discoveries arising out of the collaborative effort. Under the terms of
the CuraGen Agreement, the Company has agreed to purchase CuraGen common stock
totaling $5 million in the event of CuraGen's initial public offering and to
establish a $10 million line of credit with a maximum drawdown limit of $5
million in the first year. The Company has also agreed to fund research
activities of CuraGen related to the collaboration up to a maximum of $7.5
million over the next five years. At December 31, 1997, CuraGen had not
completed an initial public offering and there were no borrowings outstanding
under the line of credit.
In March 1997, the Company signed a research collaboration and license agreement
(the "CVT Agreement") with CV Therapeutics, Inc. ("CVT") under which Biogen
obtained rights to develop and market CVT's therapeutic CVT-124 for the
treatment of edema associated with congestive heart failure. Under the terms of
the CVT Agreement, the Company purchased approximately 670,000 shares of CVT
common stock for $7 million and paid a one-time license fee of $5 million. In
addition, pursuant to the terms of the CVT Agreement, the Company established a
$12 million line of credit that CVT may use for operating purposes. The
investment in CVT is classified as available-for-sale and is included in non
current marketable securities. At December 31, 1997, the Company had advanced $3
million under the line of credit to CVT.
In December 1996, the Company signed a research collaboration and license
agreement (the "CBM 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 CBM Agreement, Biogen paid
a license fee of $10 million, which was charged to research and development
expense, and purchased 1.5 million shares of CBM common stock for $18 million.
The payment for the common stock included a $1.2 million premium over the fair
value of the common stock which was charged to research and development expense.
The investment is classified as available-for-sale and is included in long term
marketable securities. The Company also has agreed to fund research and
development of a maximum of up to $10.5 million through 1999 of which $4 million
was funded in 1997.
Effective July 1, 1996, the Company signed a collaborative research and
commercialization agreement (the "Ontogeny Agreement") with Ontogeny, Inc.
("Ontogeny"), a private biotechnology company, for the development and
commercialization of three specific hedgehog cell differentiation proteins. The
Company purchased 400,000 shares of preferred stock of Ontogeny for $1 million
and acquired certain exclusive, worldwide rights related to products based on
the hedgehog proteins for most disease areas. The Company accounts for this
investment, which is included in other assets, using the cost method of
accounting. Under the Ontogeny Agreement, the Company committed to fund a total
of $4 million of research and development work at Ontogeny through the end of
the research phase. The Company has funded $3 million through December 31, 1997.
In 1998, the Company has the option to proceed with commercialization of one or
more of the hedgehog proteins. If the Company
<PAGE> 27
exercises its option, the Company will be committed to fund an additional $4
million of research at Ontogeny through mid 2001 and would be committed to
additional funding of up to $23.8 million per hedgehog selected in a combination
of license fees, additional equity investments, a line of credit, and potential
milestone payments. The Company would also pay royalties if products are
successfully developed.
In August 1995, the Company signed a collaborative research agreement (the
"Genovo Agreement") for the development of human gene therapy treatments with
Genovo, Inc. ("Genovo"), a gene therapy research company. Under the Genovo
Agreement, the Company acquired 380,000 shares of Genovo Series A Preferred
stock for $4.5 million and acquired certain licensing rights. The Company
accounts for this investment, which is included in other assets, using the
equity method of accounting. The Company recorded its proportion of Genovo's net
losses as research and development which totaled $7.7 million, $5.6 million and
$1 million in 1997, 1996 and 1995, respectively. The Company has agreed to fund
research and development costs to Genovo up to approximately $37 million,
including the initial equity investment, over the life of the agreement,
depending on achievement of scientific milestones. The Company has paid $18.1
million through December 31, 1997.
8. COMMITMENTS AND CONTINGENCIES
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 2012, amounted to $7.5 million in 1997, $6.6
million in 1996 and $5.1 million in 1995. 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, 1997,
minimum annual rental commitments under noncancellable leases were as follows:
(in thousands)
<TABLE>
<CAPTION>
YEAR
<S> <C>
1998 ................................................... $ 8,131
1999 ................................................... 7,972
2000 ................................................... 7,052
2001 ................................................... 4,513
2002 ................................................... 4,544
Thereafter ............................................. 17,276
-------
Total minimum lease payments ........................... $49,488
=======
</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 a
statement concerning the results of the HIRULOG(R) 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. On September 4, 1997, the Court denied the motion but narrowed the
plaintiffs class. A trial is scheduled for April 1998.
On July 3, 1996, Berlex Laboratories, Inc. ("Berlex") filed suit against Biogen
in the United States District Court for the District of New Jersey
<PAGE> 28
alleging infringement by Biogen of Berlex's "McCormick" patent in the United
States in the production of AVONEX(R). 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; however, the ultimate outcome is not
determinable at this time. Prior to the date of the suit filed by Berlex on the
McCormick patent, 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(R), 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. In February 1997, the U.S. District Court in Massachusetts
dismissed Biogen's declaratory judgment action as to Schering without prejudice
if such dismissal is later shown to result in an injustice to Biogen. Biogen and
Stanford subsequently entered into an agreement voluntarily dismissing Stanford
from the suit. The suit involving Berlex is still pending. A trial is not
expected before the early part of 1999.
In June 1996, ASTA Medica Aktiengesselschaft ("ASTA") 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 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. Arbitration proceedings
were held in late 1997 in Zurich under Swiss law. The parties expect a decision
in the first half of 1998.
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
Convertible Exchangeable Preferred Stock
The Company has authority to issue 20,000,000 shares of $.01 par value preferred
stock.
Shareholder Rights Plan
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, 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
<PAGE> 29
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. 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, 1997, 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
The Company has several stock-based compensation plans. The Company applies APB
Opinion No. 25 "Accounting for Stock Issued to Employees" in accounting for its
plans. In 1996, the Company adopted Statement of Financial Accounting Standards
No. 123 "Accounting for Stock Issued to Employees"("SFAS 123") for disclosure
purposes only. The SFAS 123 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. Included in compensation expense in 1997 was $271,000 related to stock
based compensation plans. There were no such compensation costs in 1996 and
1995.
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. Option grants are typically made under the 1985 Non-Qualified
Stock Option Plan and the 1987 Scientific Board Stock Option Plan (the "Plans").
Options under the Plans are granted at no less than 100% of the fair market
value on the date of grant. Options generally become exercisable over various
periods, typically 5 to 7 years for employees and 3 years for Directors and
Scientific Board members and have a maximum term of 10 years. Activity under
these plans is as follows (shares are in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------ -------------------
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.......... 11,748 $20.77 11,772 $17.59 10,764 $14.71
Granted..................... 1,556 37.65 1,935 34.46 2,465 25.81
Exercised................... (1,652) 14.08 (1,478) 12.89 (1,117) 7.13
Canceled.................... (500) 24.39 (481) 20.92 (340) 21.38
------ ------ ------ ------ ------ ------
Outstanding, Dec. 31 11,152 23.95 11,748 20.77 11,772 17.59
====== ====== ====== ====== ====== ======
Options exercisable 5,208 5,692 5,925
Available for grant 1,135 2,310 3,764
Weighted average fair
value of options granted $16.78 $16.59 $12.63
</TABLE>
<PAGE> 30
The table below summarizes options outstanding and exercisable at December 31,
1997 (shares are in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.00-$10.00 970 2.58 $ 7.59 759 $ 7.44
$10.01-$20.00 3,273 5.39 15.92 2,236 15.59
$20.01-$30.00 3,852 6.76 25.02 2,013 24.42
$30.01-$40.00 2,749 9.09 35.31 195 34.48
Over $40.00 308 9.10 46.09 5 40.86
------- ------ -----
Total 11,152 $23.95 5,208
======= ====== =====
</TABLE>
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, 2007. Through
December 31, 1997, 289,450 shares have been issued under the stock purchase
plans.
Had compensation cost for the Company's 1997, 1996 and 1995 grants under the
stock-based compensation plans been determined based on SFAS 123, the Company's
pro forma net income, and pro forma diluted earnings per share for the years
ending December 31, would be as follows (in thousands except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Pro forma net income $83,244 $36,679 $3,711
Pro forma diluted earnings per share $ 1.09 $ 0.50 $ 0.05
</TABLE>
The fair value of options granted is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Expected dividend yield 0% 0% 0%
Expected stock price volatility 36% 36% 40%
Risk-free interest rate 5.5% - 5.9% 5.5% - 5.9% 5.6% - 7.7%
Expected option term 5.8 Years 6.3 Years 6.3 Years
</TABLE>
<PAGE> 31
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.
Stock Repurchase Program
On October 6, 1997, the Company announced that its Board of Directors has
authorized the repurchase of up to 2.5 million shares of its common stock. The
repurchased stock will provide the Company with treasury shares for general
corporate purposes, such as stock to be issued under employee stock option and
stock purchase plans. Stock purchases may occur from time to time over the
period ending two years from the date of the Board of Directors authorization.
The stock repurchase program may be discontinued at any time. In 1997, the
Company repurchased 200,000 shares of its common stock at a cost of $7.0
million.
To minimize the cost of the repurchase program, the Company sold put options and
bought call options covering a large portion of the shares to be repurchased. At
December 31, 1997, the Company had outstanding put options covering 2.3 million
shares at $33.34 expiring at various dates from January 1998 through November
1998. The Company may elect to pay a net cash settlement or physical settlement,
if the put options are exercised. Accordingly, the maximum potential repurchase
option obligation of $76.7 million was reclassified from shareholders equity to
put option. At December 31, 1997, the Company had call options outstanding which
entitled the Company to buy 1.8 million shares of Biogen stock at prices ranging
from $35.00 to $36.75 per share. The call options expire at various dates from
January 1998 through November 1998. In the event the call options are exercised,
the Company may elect to receive cash for the difference between the exercise
price and the market price of the Company's shares, in lieu of repurchasing the
stock. The premiums received from the sale of the put options offset in full the
cost of the call options.
10. GEOGRAPHIC DATA
Revenues, excluding interest, were derived in the following geographic areas for
the years ended December 31:
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
United States .......................... $308,660 $131,756 $ 44,764
Japan .................................. 15,362 50,342 16,082
Europe ................................. 68,164 62,459 60,523
Other .................................. 19,723 15,147 13,284
-------- -------- --------
$411,909 $259,704 $134,653
======== ======== ========
</TABLE>
The Company received revenue from four unrelated parties in 1997 accounting for
a total of 19%, 11%, 11% and 10% of total product and royalty revenues; three
unrelated parties in 1996 accounting for 27%, 17% and 13% of total royalty
revenues; and two unrelated parties in 1995 accounting for 40% and 39% of total
royalty revenue.
<PAGE> 32
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1997
Total revenues ......................... $99,738 $97,653 $106,201 $130,452 $434,044
Product revenue ........................ 52,616 56,440 60,413 70,519 239,988
Royalties revenue ...................... 42,215 36,007 40,200 53,499 171,921
Total expenses and taxes ............... 82,728 77,705 85,716 98,728 344,877
Net income ............................. 17,010 19,948 20,485 31,724 89,167
Basic earnings per share ............... 0.23 0.27 0.28 0.43 1.21
Diluted earnings per share ............. 0.22 0.26 0.27 0.42 1.17
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
Basic earnings (loss) per share ........ (0.05) (0.13) 0.64 0.11 0.57
Diluted earnings (loss) per share ...... (0.05) (0.13) 0.60 0.11 0.55
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, 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 13, 1998
<PAGE> 34
<TABLE>
<S> <C> <C> <C>
EXHIBIT 13
SHAREHOLDER INFORMATION without charge upon written request to the
BIOGEN, INC. AND SUBSIDIARIES Corporate Communications Department, Biogen, Inc.,
14 Cambridge Center, Cambridge, MA 02142
CORPORATE HEADQUARTERS: TRANSFER AGENT:
Biogen, Inc. For shareholder questions regarding lost
14 Cambridge Center certificates, address changes and changes of
Cambridge, MA 02142 ownership or name in which the shares are held,
direct inquiries to:
Telephone: (617) 679-2000
Fax: (617) 679-2617 State Street Bank and Trust Company
P.O. Box 8200
ANNUAL MEETING: Boston, MA 02266-8200
Friday, June 19, 1998 at 10:00 a.m. Telephone: (800) 426-5523
at the Company's offices at 12 Cambridge Center
All shareholders are welcome. INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
MARKET FOR SECURITIES: 160 Federal Street
Biogen's securities are quoted on the Boston, MA 02110
NASDAQ National Market System.
Common stock symbol: BGEN U.S. LEGAL COUNSEL:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
As of February 18, 1998, there were approximately One Financial Center
2,770 holders of record of the Company's Common Boston, MA 02111
Stock. The Company has not paid any cash dividends
on its Common Stock since its inception, and does ANNUAL REPORT ANNOUNCEMENT
not intend to pay any dividends in the foreseeable As a service to our shareholders and prospective
future. On November 15, 1996, the Company effected investors, copies of Biogen news releases issued
a two-for-one stock split of its Common Stock. The in the last 12 months are now available almost
quarterly high and low closing sales price immediately 24 hours a day, seven days a week on
(adjusted for all periods to reflect the stock the Internet's World Wide Web at
split) of the Common Stock on the NASDAQ National http://www.prnewswire.com and via automated fax by
Market System for 1997 and 1996 are as follows: calling "Company News On Call" at 1 800 758-5804,
ext. 101550. Biogen news releases are usually
HIGH LOW posted on both systems within one hour of being
issued and are available at no cost.
FISCAL 1997
First Quarter 51 7/8 37 3/8
Second Quarter 39 1/4 30 THE BIOGEN LOGO IS A REGISTERED TRADEMARK OF
Third Quarter 41 3/16 31 7/8 BIOGEN, INC. AVONEX(R) IS A TRADEMARK OF BIOGEN,
Fourth Quarter 37 5/16 31 5/8 INC. HIRULOG(R) IS A REGISTERED TRADEMARK OF THE
MEDICINES COMPANY. INTRON(R) A IS A REGISTERED
FISCAL 1996 TRADEMARK OF SCHERING-PLOUGH CORPORATION.
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
SEC FORM 10-K:
A copy of the Company's annual report to the
Securities and Exchange Commission on Form 10-K is
available
</TABLE>
<PAGE> 1
Exhibit 21
BIOGEN, INC.
LIST OF SUBSIDIARIES
Biogen (Switzerland) AG
Seestrasse 200
8700 Kusnacht, Switzerland
Biogen GmbH (Germany)
Carl - Zeiss-Ring 6
85737 Ismaning
Munchen, Deutschland
Biogen France S.A.
"Le Capitole"
55 Avenue des Champs-Pierreux
92012 Nanterre Cedex, France
Biotech Manufacturing Limited
C/o Rulland House, Pitt Street, St. Helier
Jersey JE4 8ZB, Channel Islands
Biogen Limited
Ocean House
The Ring, Bracknell
Berkshire RG12 1AX, United Kingdom
Biogen GmbH (Austria)
Effingergasse 21
1160 Wien, Osterreich
Biogen B.V.
World Trade Center
Strawinskylaan 757
1077 XX Amsterdam, The Netherlands
Biogen Belgium
rue Abbe Cuypers, 3
Etterbeek (B. 1040 Bruxelles)
Belgique
Biogen Canada, Inc.
3-Robert Speck Parkway
Mississauga, Ontario L4Z 1S1, Canada
<PAGE> 2
Biogen Securities Corporation
14 Cambridge Center
Cambridge, MA 02142
Biogen Realty Corporation
14 Cambridge Center
Cambridge, MA 02142
Biogen Realty Limited Partnership
14 Cambridge Center
Cambridge, MA 02142
Biogen Technologies, Inc.
913 N. Market Street, Suite 807
Wilmington, Delaware 19801
<PAGE> 1
Exhibit 24.1
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, 33-63015 and 333-42887) of Biogen, Inc.
and its subsidiaries of our report dated January 13, 1998 appearing in the 1997
Annual Report to Shareholders which is incorporated in this Annual Report on
Form 10-K.
Price Waterhouse LLP
Boston, Massachusetts
March 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1,000
<CASH> 70,358
<SECURITIES> 369,730
<RECEIVABLES> 88,447
<ALLOWANCES> 1,645
<INVENTORY> 22,959
<CURRENT-ASSETS> 596,066
<PP&E> 240,513
<DEPRECIATION> 66,021
<TOTAL-ASSETS> 813,825
<CURRENT-LIABILITIES> 123,883
<BONDS> 61,846
0
0
<COMMON> 741
<OTHER-SE> 535,552
<TOTAL-LIABILITY-AND-EQUITY> 813,825
<SALES> 239,988
<TOTAL-REVENUES> 434,044
<CGS> 50,188
<TOTAL-COSTS> 285,076
<OTHER-EXPENSES> (711)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,309
<INCOME-PRETAX> 148,968
<INCOME-TAX> 59,801
<INCOME-CONTINUING> 89,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,167
<EPS-PRIMARY> $1.21
<EPS-DILUTED> $1.17
</TABLE>
