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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Fiscal Year Eded Ended December 31, 1994
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From __________ To __________
Commission File Number
0-12406
IMMUNEX CORPORATION
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(exact name of registrant as specified in its charter)
WASHINGTON 51-0346580
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
51 UNIVERSITY STREET, SEATTLE, WA 98101
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(Address of principal executive offices) (zip code)
(206) 587-0430
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(Registrant's telephone number, including area code)
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
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(Title of Class)
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK, $.01 PAR VALUE
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(Title of Class)
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK, $.01 PAR VALUE
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(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)
Indicate by check mark if disclosure of delinquent fliers 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 amendments to
this Form 10-K.
Yes (x)
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 14, 1995 was: 332,066,142. Excludes 21,153,580 shares
of common stock held by directors, officers and shareholders whose ownership
exceeds five percent of the shares outstanding at March 14, 1995. 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 the
management or policies of the registrant, or that such person is controlled by
or is under common control with the registrant.
Common stock outstanding at March 14, 1995: 39,601,699 shares.
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Documents incorporated by reference:
(1) Portions of the Company's definitive Proxy Statement for the annual meeting
of stockholders to be held on April 26, 1995 are incorporated by reference in
Part III.
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PART I
ITEM 1. BUSINESS
PRODUCTS
Immunex Corporation ("Immunex" or the "Company") is a biopharmaceutical
company that discovers and develops, manufactures and markets innovative
therapeutic products for the treatment of cancer, infectious diseases and
autoimmune disorders.
Immunex is currently manufacturing and marketing LEUKINE[REGISTERED
TRADEMARK] granulocyte-macrophage colony stimulating factor ("GM-CSF"),
NOVANTRONE[REGISTERED TRADEMARK] (mitoxantrone) and five additional oncology
products (the foregoing products other than LEUKINE, together with certain other
products under development, are referred to herein as the "Lederle Oncology
Products") in the United States. As a result of the 1993 merger ("Merger") of
Immunex and Lederle Oncology Corporation, a subsidiary of American Cyanamid
Company ("Cyanamid") created for the purpose of merging Cyanamid's Lederle
Laboratories North American oncology business ("Lederle Oncology Business") with
the biopharmaceutical business of Immunex, Immunex was assigned certain rights
relating to the Lederle Oncology Products in the United States and Canada and is
cooperating with Cyanamid in researching, developing and commercializing new
oncology products. Cyanamid currently owns approximately 53.6% of the
outstanding common stock of Immunex, on a fully diluted basis. In late 1994,
American Home Products Corporation ("American Home Products") acquired all of
the common stock of Cyanamid. American Home Products has agreed to protect
Immunex's rights under its agreements with Cyanamid and be bound by certain
standstill restrictions assumed by Cyanamid in connection with the merger of
Immunex and Lederle Oncology Corporation.
Immunex is testing four new proprietary biotechnology products in human
clinical trials: PIXY321, a patented colony stimulating factor fusion protein,
soluble IL-1 receptor ("IL-1R"), soluble IL-4 receptor ("IL-4R") and a soluble
tumor necrosis factor receptor fusion protein ("TNFR"). Cyanamid and Immunex
are investigating several other compounds on a preclinical basis, including
humanized monoclonal antibody conjugates, multiple drug resistance blocking
agents, and chemical-based colony-stimulating factor ("CSF") inducers.
Pharmaceutical products under development are required to undergo several
phases of testing before receiving approval for marketing. In the preclinical
phase, a product is evaluated in animal models of human disease to enable
preparation of an investigational new drug application ("IND"). There are three
phases of clinical trials. In general, Phase I trials determine the safety of a
proposed therapeutic for administration to patients; Phase II trials examine
efficacy; and Phase III trials, which may be placebo-controlled, measure the
efficacy of a proposed therapeutic in comparison to approved therapies. These
trials generate the data required for regulatory approval to market products.
Data from human trials are submitted to the Food and Drug Administration
("FDA") in a new drug application ("NDA") or a product license application
("PLA") and, with respect to products to be marketed in Canada, to the Canadian
Health Protection Bureau in a new drug submission ("NDS"). Data regarding
manufacturing and bioequivalence of generic drug products are submitted to the
FDA in an abbreviated NDA ("ANDA") or an abbreviated antibiotic drug application
("AADA"). Preparing an NDA, PLA, NDS, ANDA or AADA involves considerable data
collection, verification and analysis.
A summary of the Company's products is provided in the following tables.
The information in the tables is provided solely for convenience of reference
and is qualified in its entirety by the detailed discussion of each product and
the related research and development activities following the tables.
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Products for which Immunex owns marketing rights are described in the table
below.
<TABLE>
<CAPTION>
Geographic Development
Product Market Status Clinical Indications
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<S> <C> <C> <C>
LEUKINE[REGISTERED TRADEMARK] U.S. Marketed Bone marrow transplant engraftment or
(GM-CSF) failure
PLA Filed (1) Prophylaxis of neutropenia resulting from
chemotherapy; acceleration of neutrophil
recovery and reduction of mortality
associated with treatment of patients
with acute non-lymphoblastic leukemia (ANLL)
Phase II/III Infectious disease, burns and trauma
patients, neonatal sepsis
NOVANTRONE[REGISTERED TRADEMARK] U.S. Marketed Acute nonlymphocytic leukemia ("ANLL")
mitoxantrone
Canada Marketed (2) ANLL, advanced breast cancer, non-Hodgkin's
lymphoma, hepatoma, relapsed acute lymphotic
leukemia
U.S. Phase II/III Prostate and breast cancers
Phase I/II Non-Hodgkin's lymphoma, ovarian cancer
Thiotepa (3) U.S. and Canada Marketed (2) Palliative treatment of a variety of tumors
THIOPLEX[REGISTERED TRADEMARK] U.S. and Canada. Marketed (2) Palliative treatment of a variety of tumors
lyophilized thiotepa
Methotrexate injectable U.S. and Canada Marketed (2) Various neoplastic diseases
AMICAR[REGISTERED TRADEMARK] U.S. and Canada Marketed (2) Hemostasis
aminocaproic acid
LEVOPROME[REGISTERED TRADEMARK] U.S. Marketed Analgesia
methotrimeprazine
Leucovorin calcium U.S. and Canada Marketed (4) Methotrexate rescue, modulation of 5-fluorouracil
("5-FU") drug therapy in advanced colorectal cancer
Phase II/III Modulation of 5-FU drug therapy in breast,
head and neck cancers
PIXY321 U.S. and Canada Phase III Bone marrow transplant engraftment and
high dose chemotherapy; prophylaxis
of thrombocytopenia and improvement
of neutrophils
TNFR Phase II Inflammatory bowel disease ("IBD"),
rheumatoid arthritis
Preclinical Asthma
</TABLE>
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<TABLE>
<CAPTION>
Product Geographic Development
Market Status Clinical Indications
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<S> <C> <C> <C>
IL-1R U.S. and Canada Phase I Asthma
IL-4R U.S. and Canada Phase I Asthma
Humanized monoclonal U.S. and Canada Phase I Leukemia
antibody conjugates
Isovorin[REGISTERED TRADEMARK] U.S. and Canada NDA filed Methotrexate rescue in osteosarcoma
levoleucovorin Phase II/III Modulation of 5-FU drug therapy in colorectal,
breast, head and neck cancers
Flt3-L Worldwide Preclinical Peripheral blood stem cell recruitment,
culture and transplantation
Multidrug resistance U.S. and Canada Preclinical Various cancers
("MDR") reversal
agents
CSF inducing compound U.S. and Canada Preclinical Prophylaxis and treatment of neutropenia
resulting from chemotherapy
</TABLE>
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(1) LEUKINE is approved in the United States for autologous bone marrow
transplant engraftment and autologous or allogenic bone marrow transplant graft
failure. Immunex has submitted amendments to its GM-CSF product license,
seeking FDA approval for additional label indications for (a) prophylaxis of
chemotherapy-induced neutropenia and (b) acceleration of neutrophil recovery and
reduction of mortality associated with treatment of patients with acute non-
lymphoblastic leukemia (ANLL). In 1994, Immunex and Cyanamid re-acquired all
rights in GM-CSF previously held by Behringwerke AG ("Behringwerke"), a
subsidiary of Hoechst AG ("Hoechst"). See "Certain Relationships of Immunex -
Relationship With Hoechst AG."
(2) NOVANTRONE, leucovorin calcium, methotrexate injectable, AMICAR and
THIOPLEX thiotepa are currently distributed in Canada by Cyanamid Canada, Inc.
pursuant to a distribution agreement with Immunex.
(3) In December 1994, the FDA approved Cyanamid's NDA for THIOPLEX, a
lyophilized formulation of thiotepa that is more stable than the thiotepa
formulation marketed by Immunex in 1993 and 1994. Immunex intends to
discontinue U.S. sales of thiotepa in 1995 in favor of THIOPLEX.
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Certain Immunex products are being developed for marketing by collaborators
under license agreements. These products, collaborators and clinical
indications are set forth in the table below:
<TABLE>
<CAPTION>
Licensee or Geographic Development
Product Collaborator Market Status Clinical Indications
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<S> <C> <C> <C> <C>
GM-CSF Cyanamid EEC, Canada, Argentina, License application Bone marrow transplant
Brazil, Mexico, Israel, recommended for engraftment or failure
Australia, Korea, New Zealand approval (Canada)
and certain republics formerly application filed
included in the USSR Brazil, Argentina,
Mexico
Phase III (1) Prophylaxis of neutropenia
resulting from chemotherapy;
acute non-lymphoblastic leukemia
PIXY321 Cyanamid Worldwide except U.S. and Phase I/II (2) Bone marrow transplant
Canada engraftment; treatment of
thrombocytopenia resulting
from high dose
chemotherapy; treatment of
neutropenia resulting from
chemotherapy
IL-1R Behringwerke Worldwide except U.S. and PhaseI/II Asthma
Canada
TNFR Cyanamid Worldwide except U.S. and Phase I/II (2) Rheumatoid arthritis, Crohn's
Canada disease, reversal of cytokine
toxicity
IL-2 Roche/Chiron Worldwide except Japan, Marketed (3) Renal cell cancer, melanoma,
Korea, Taiwan response to HIV infection
IL-2 Ajinomoto Japan, Korea, Taiwan Phase III Renal cell cancer, melanoma
IL-4R Behringwerke Worldwide except U.S. Phase I Asthma
and Canada
</TABLE>
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(1) LEUKINE is approved in the United States for autologous bone marrow
transplant engraftment and autologous or allogenic bone marrow transplant graft
failure. In addition, Phase III clinical trials for prophylaxis and treatment
of chemotherapy-induced neutropenia are continuing. Immunex produces all
sargramostim marketed in the United States and employed in clinical testing
worldwide, and has agreed to supply Cyanamid's requirements for marketing
outside the United States.
(2) Immunex has agreed to produce Cyanamid's requirements for clinical
testing and commercial sale outside the United States and Canada.
(3) Hoffmann-La Roche, Inc. and its parent, F. Hoffmann La Roche &
Company, Limited Company of Basel, Switzerland (collectively, "Roche"), and
Chiron are parties to certain IL-2 license and marketing agreements, pursuant to
which Roche and a Chiron subsidiary, EuroCetus B.V., are co-promoting Chiron
IL-2 (PROLEUKIN[REGISTERED TRADEMARK] IL-2) in several European countries.
PROLEUKIN[REGISTERED TRADEMARK] IL-2 was approved by the FDA for marketing in
the United States in June 1992 and is being marketed by Cetus Oncology, a wholly
owned subsidiary of Chiron. Under its agreements with Roche, Immunex is
receiving royalties on sales of IL-2 products in Europe and the United States by
Roche or Chiron.
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CYTOKINE PRODUCTS
The Company's biotechnology products are recombinant analogs of cytokines
and cytokine receptors. Cytokines are protein messengers that coordinate the
functions of immune cells (white blood cells) and certain other cells and
tissues. Immune cells include: granulocytes, macrophages and eosinophils, all
of which are scavenger cells specialized for uptake and disposal of foreign
particles or infectious agents; B cells, which produce antibodies to "flag"
foreign particles or diseased cells for destruction; cytotoxic T cells, which
recognize, contact and kill cancerous or virus-infected cells; and helper T
cells, which control and coordinate the function of other immune cells. Immunex
has developed recombinant cytokine products capable of expanding and activating
these immune cell populations, all of which must interact to provide a normal
immune response. Immunex has also cloned and expressed genes encoding cytokine
receptors. Using genetic engineering techniques, Immunex has produced soluble
versions of cytokine receptors, including fusions of soluble receptors with
fragments of human antibodies, that have been shown to be capable of suppressing
immune responses by binding to and inactivating cytokines.
LEUKINE (SARGRAMOSTIM, GM-CSF). GM-CSF stimulates the growth and
differentiation of granulocytes and macrophages. In 1984, Immunex cloned and
expressed a human GM-CSF gene, and subsequently designed an altered, or analog,
form of the protein. This analog, which is exclusively manufactured by Immunex
using recombinant yeast technology, is designated "sargramostim." Sargramostim
possesses the biological activity of natural human GM-CSF but is a chemically
distinct molecule. In 1993, Immunex received a U.S. patent covering
sargramostim. Certain competitors, however, have filed patent applications or
have been issued patents relating to GM-CSF that could adversely affect the
Company's ability to market LEUKINE. See "Patents, Licenses and Trademarks."
Clinical testing has demonstrated that GM-CSF is effective in facilitating
bone marrow transplant ("BMT") therapies currently used for the treatment of
acute leukemia, lymphoma and Hodgkin's disease and in rescuing patients whose
BMT grafts have failed. In March 1991, the FDA approved GM-CSF for facilitating
BMT engraftment and in December 1991 approved GM-CSF for treatment of BMT graft
failure. In March 1993, Behringwerke received recommendation for approval to
market sargramostim in Europe from the European Community's Committee for
Proprietary Medicinal Products. Benringwerke's rights to GM-CSF were returned
to Immunex in 1994. However, Cyanamid is unlikely to market sargramostim in
Europe due to a blocking patent owned by a competitor. See "Patents". In March
1993, Immunex filed an amendment to the LEUKINE PLA to obtain FDA approval for
an additional label indication for prophylaxis of chemotherapy-induced
neutropenia. In December 1993, the FDA completed its initial review of the
amendment and informed Immunex of the questions that the FDA would like Immunex
to address as part of the regulatory review process. In April 1994, Immunex
filed a second amendment to its LEUKINE PLA to obtain approval of a label
indication for acceleration of neutrophil recovery and reduction of mortality
associated with treatment of patients with acute non-lymphoblastic leukemia
(ANLL). In September 1994, Immunex completed its responses to the FDA's
questions using clinical data and statistical analyses obtained from Phase III
trials of LEUKINE in chemotherapy settings. Although Immunex believes that the
amendments to the LEUKINE PLA are approvable, no assurances can be given
regarding the duration or outcome of the FDA review process. In 1994, Immunex
began Phase II/III clinical trials to investigate the efficacy of GM-CSF therapy
for preventing infections in premature neonates and in surgery and trauma
patients. In January 1995, Immunex filed a supplemental product license
application with the FDA to obtain approval of a liquid formulation of LEUKINE,
which Immunex plans to provide in 500 microgram and 1 milligram multi-dose
vials. The liquid formulation will be more convenient to use and store and than
the current lyophilized formulation. In February 1995, Immunex filed a PLA
amendment to obtain approval of a label indication for use of LEUKINE in
connection with peripheral blood stem cell (PBSC) transplantation.
PIXY321. In 1991, Immunex commenced clinical trials of a GM-CSF/IL-3
fusion protein that stimulates the body's production of neutrophils and
platelets. In Phase I/II clinical studies conducted in the United States and
Canada, PIXY321 has shown the ability to raise levels of neutrophils and
platelets in patients receiving myelosuppressive chemotherapy. Immunex has been
granted U.S. and European patents covering GM-CSF/IL-3 fusion proteins and
recombinant DNA technologies for producing such fusion proteins. Additional
patents in other countries covering GM-CSF/IL-3 fusion proteins have been
granted or are pending. Certain competitors, however, have filed patent
applications or have been issued patents relating to GM-CSF or IL-3 that could
adversely affect the Company's ability to commercialize PIXY321. See "Patents,
Licenses and Trademarks."
In January 1992, Immunex and Bristol-Myers Squibb ("BMS") entered into a
product exchange agreement (the "BMS Agreement") relating to the development and
marketing of PIXY321 and certain other oncology products. The BMS Agreement was
terminated by BMS in December 1993, resulting in the return of product rights to
each party. Upon return of rights by BMS, Immunex licensed exclusive rights for
PIXY321 to Cyanamid in all territories except the U.S. and Canada. See
"Relationship with Cyanamid."
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INTERLEUKIN-2 ("IL-2"). IL-2 is a cytokine that controls the proliferation
and activation of T cells. It can both augment normal immune function and help
restore deficient immune responses. In 1983, Immunex entered into license
agreements with Roche, pursuant to which Immunex is receiving royalties on
worldwide sales of IL-2 products by Roche and its sublicensees, including
Chiron. Chiron's PROLEUKIN[REGISTERED TRADEMARK] IL-2 was approved for
treatment of metastatic renal cancers in several European countries in 1990 and
1991. In June 1992, the FDA approved the marketing of PROLEUKIN IL-2 for
treating metastatic renal cancer patients who are asymptomatic or who are
symptomatic but ambulatory. PROLEUKIN is a trademark of Chiron.
In February 1990, Immunex and Ajinomoto of Japan entered into certain
agreements concerning IL-2 rights in Japan, Korea and Taiwan. Under these
agreements, Immunex is entitled to royalties based on sales of IL-2 in such
countries by Ajinomoto and its licensees.
NEW CYTOKINES. Immunex scientists have cloned genes encoding several new
cytokines that are now being characterized in preclinical studies.
FLT3-L. In 1992, Immunex cloned cDNAs encoding a ligand for the Flt3
receptor ("Flt3-L"). Flt3-L binds to a receptor that is located on primitive
hematopoietic cells, and has been shown to be capable of stimulating
proliferation of blood cell precursors in combination with other cytokines such
as GM-CSF or IL-3. Flt3-L is currently the subject of manufacturing process
development work and preclinical studies intended to assess the utility of this
factor in augmenting harvest of PBSC and other hematopoietic precursors for
transplantation following chemotherapy.
INTERLEUKIN-15. In 1992, Immunex also cloned cDNAs encoding a
cytokine now known as Interleukin-15 ("IL-15"), a T cell growth factor that
mimics the effects of IL-2. IL-15 has also shown the ability to protect the
intestinal epithelial cells in the mucosa from the harmful effects of
chemotherapy or radiation. This property of IL-15 is the subject of continuing
preclinical studies in 1995.
CD40-L. In 1992, Immunex cloned cDNAs encoding a ligand for the cell
surface antigen CD40 ("CD40-L"). This ligand appears to be a required signal in
the development of an antibody-based immune response. Thus, CD40-L may be
useful as a vaccine adjuvant. In addition, soluble CD40-L has been shown to be
useful in directly arresting the growth of certain B-cell lymphomas in
laboratory experiments.
OTHER NEW CYTOKINES. In addition to Flt3-L and IL-15, Immunex has
cloned and expressed ligands for the antigens known as CD30, OX40, CD27, Hek and
Elk. These ligands and their receptors are involved in cell-to-cell signaling
that occurs in coordinating immune response and growth/differentiation signals.
One ligand for the cell receptor Hek has shown the ability to stimulate neural
cell growth.
RECEPTOR PRODUCTS
Cytokines act upon immune cells by binding to specific receptors. The
binding of a cytokine to its receptor triggers a complex series of events within
responsive cells that translates the cytokine's signal to that cell. This
signal can stimulate cell division or production of antibodies, enzymes or other
cytokines. In this way, circulating cytokines can control and coordinate the
function of immune cells located throughout the body.
Using genetic engineering techniques, Immunex scientists have produced
soluble versions of cytokine receptors. A soluble cytokine receptor retains the
ability to bind to a specific cytokine, but lacks that portion of the natural
receptor that is attached to a cell. This property enables the soluble cytokine
receptor to circulate in the body after administration, where it can bind to and
inactivate circulating cytokines, preventing interaction of the cytokines with
immune cells and thereby neutralizing the development of an autoimmune or
inflammatory response. In view of results obtained in certain preclinical and
clinical studies, Immunex believes that soluble cytokine receptors may be
effective as therapeutics to counteract autoimmune or inflammatory diseases.
In 1989, Immunex granted exclusive rights to IL-1R, IL-4R, IL-7 receptor
("IL-7R") and TNFR (together, the "Receptor Products") for the United States and
Canada to Receptech Corporation ("Receptech"), which was formed to accelerate
the development of soluble cytokine receptors as human therapeutics. Under a
research and development agreement with Receptech, Immunex undertook gene
cloning, expression scale-up and preclinical studies and conducted clinical
trials of IL-1R and TNFR. Pursuant to a 1989 purchase option agreement, Immunex
purchased all outstanding shares of common stock of Receptech in February 1993.
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Pursuant to a 1990 agreement, Immunex granted exclusive rights to
Behringwerke for the Receptor Products for all countries except the United
States and Canada. This grant was made in consideration of a grant by
Behringwerke to Immunex of U.S. comarketing rights for GM-CSF and certain other
CSF products. Immunex is also entitled to royalties on future product sales by
Behringwerke. In July 1992, Immunex reacquired worldwide rights to TNFR from
Behringwerke. See "Relationship with Hoechst AG." At the effective time of the
Merger, Immunex's rights to TNFR outside the United States and Canada were
licensed to Cyanamid. See "Relationship with Cyanamid".
IL-1R. IL-1R is a molecule that binds both IL-1 alpha and IL-1 beta.
Overproduction or inappropriate production of IL-1 has been implicated in the
development of autoimmune and inflammatory and allergic diseases such as
diabetes, asthma, systemic lupus erythematosis and inflammatory bowel disease,
and also in the development of septic shock. Immunex has produced genetically-
engineered soluble IL-1 receptors of two types, designated Type I and Type II,
and has conducted clinical studies of the Type I receptor. Based upon data
obtained in preclinical and Phase I clinical studies, Immunex believes that
IL-1R may be of therapeutic value in the treatment of a number of diseases and
conditions, including allergy, asthma, chronic and acute myelogenous leukemia,
organ transplant rejection, GVHD and inflammatory bowel disease. Immunex has
been granted four U.S. patents covering mammalian Type I IL-1R DNAs and
proteins, including soluble forms, and one U.S. patent covering DNAs encoding
Type II IL-1R.
The Company commenced Phase I/II clinical trials of Type I IL-1R in 1991 in
allergy patients, which included an examination of the ability of the product to
block or reduce certain immune responses to certain allergens. Additional Phase
I/II trials were conducted in 1992, 1993 and 1994 to assess the safety and
efficacy of IL-1R in treating rheumatoid arthritis, GVHD and experimental
endotoxemia. In 1993, Immunex entered into an agreement with Inhale Therapeutic
Systems, ("Inhale") a development-stage company, to manufacture a proprietary
powder formulation of IL-1R for pulmonary administration to asthma patients.
Inhale has produced a quantity of dry powder IL-1R product for use in a Phase I
trial scheduled to be completed in 1995.
TNFR. TNF is a cytokine produced by activated T cells and macrophages in
the course of severe immune reactions, such as the body's response to severe
bacterial infection (sepsis), rheumatoid arthritis, asthma, GVHD and
inflammatory bowel disease. Immunex has produced a soluble TNF receptor fusion
protein that combines two TNF-binding domains derived from TNF receptor with a
fragment of a human antibody molecule. This fusion protein exhibits a long
serum half-life and has been shown to be capable of rapidly lowering serum TNF
levels. Since TNF has been implicated in the deleterious effects of sepsis,
Immunex has investigated the use of TNFR for this indication. In 1993, Immunex
completed a Phase II dose-ranging, double-blind placebo-controlled trial of TNFR
in septic shock patients. This 141-patient clinical study was designed to
evaluate the safety and effectiveness of TNFR in treating patients with sepsis
syndrome, a systemic inflammatory response to infection. Patients in the study
were randomly assigned to receive either a placebo or TNFR at a low, medium or
high dose level. The results of the study showed no difference between the
mortality rate of patients treated with the lowest dose of TNFR and those
treated with a placebo. Patients treated at higher doses had worse outcomes
than the placebo group. On the basis of this study, development of TNFR as a
treatment for sepsis has been terminated. However, Immunex believes that TNFR
has therapeutic potential for indications such as rheumatoid arthritis, HIV
infection, and other inflammatory diseases and conditions, and additional
clinical trials are being conducted in indications other than sepsis.
IL-4R. IL-4 is a cytokine that induces the proliferation of activated T
cells and B cells. IL-4 enhances the ability of specific, activated T cells to
kill tumor cells or infected or transplanted tissue. In addition, IL-4 is
responsible for promoting the production of specific types of antibodies,
including the IgE antibody involved in allergic and asthmatic reactions.
Immunex scientists have cloned genes encoding human and murine IL-4R and have
genetically engineered and produced a soluble receptor which binds IL-4.
Soluble IL-4R has been shown by Immunex and Behringwerke to inhibit IL-4
dependent immune responses in animal models. Based on these preclinical
studies, Immunex believes that soluble IL-4R may be effective in the treatment
of organ transplant rejection, GVHD, allergy, asthma and infectious disease.
Immunex filed an IND for IL-4R in May 1994. A Phase I/II study of IL-4R in
asthma is currently in progress.
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LEDERLE ONCOLOGY PRODUCTS
Effective as of the Merger, Immunex acquired certain intellectual property
rights, including marketing rights, in the United States and Canada relating to
the following products for the treatment of oncological diseases: NOVANTRONE
mitoxantrone, leucovorin calcium, thiotepa (including THIOPLEX), AMICAR
aminocaproic acid and LEVOPROME methotrimeprazine ("Lederle Oncology Products").
Immunex also acquired marketing rights in the United States and Canada to
methotrexate injectable. Immunex also acquired marketing rights to certain
products that are the subject of pending regulatory filings completed by
Cyanamid. These include etoposide, a generic anticancer product that is the
subject of a pending Cyanamid ANDA, and ISOVORIN levoleucovorin. Cyanamid and
Immunex are also researching and developing certain new technologies for which
Immunex has been assigned U.S. and Canadian rights, including humanized
monoclonal antibody conjugates, a multidrug resistance reversal agent and an
oral CSF inducer. In 1994, Immunex and Cyanamid ceased developing photodynamic
therapy technologies and enloplatin. The rights acquired by Immunex as a result
of the Merger include patents, know-how, trademarks, clinical and other
supporting data and registrations and approvals from the FDA and the Canadian
Health Protection Bureau (the "CHPB"). Cyanamid also transferred to Immunex its
United States oncology marketing and sales force.
Cyanamid did not transfer any manufacturing facilities, research assets,
other tangible assets or other personnel to Immunex. At the effective time of
the Merger ("Effective Time"), Immunex, Cyanamid and certain of its subsidiaries
entered into agreements providing for, among other things, Immunex's
contribution to and participation in oncology research by Cyanamid, the supply
and toll manufacture of the Lederle Oncology Products by Cyanamid and Lederle
Parenterals, Inc. ("LPI") and Cyanamid's provision of certain other services to
Immunex. See "Relationship with Cyanamid."
There currently are five Lederle Oncology Products marketed in the United
States and Canada: NOVANTRONE mitoxantrone, leucovorin calcium, THIOPLEX
thiotepa, methotrexate injectable and AMICAR aminocaproic acid, and one
additional product, LEVOPROME methotrimeprazine, marketed in the United States.
NOVANTRONE MITOXANTRONE. NOVANTRONE is currently approved for the initial
therapy of ANLL in the United States, and for ANLL, advanced breast cancer, non-
Hodgkin's lymphoma and hepatoma in Canada. NOVANTRONE is an anthracenedione
similar in chemical structure to anthracyclines (doxorubicin and idarubicin),
yet lacking an amino sugar component that is thought to contribute to the
cardiotoxicity characteristic of anthracyclines. NOVANTRONE has a more
favorable nonhematological toxicity profile than anthracyclines; while
NOVANTRONE's use may result in toxicities similar to those commonly occurring
with other chemotherapeutic agents (nausea, vomiting, alopecia, mucositis and
cardiotoxicity), these can be less frequent and less severe with NOVANTRONE than
with competing anthracycline products. A composition of matter patent covering
mitoxantrone has been assigned to Immunex. This patent expires in August 1997.
However, Immunex owns a U.S. patent covering the use of NOVANTRONE in the
treatment of various cancers, which does not expire until 2006.
LEUCOVORIN CALCIUM. Leucovorin is a racemic mixture of the dextro- and
levo- isomers of leucovorin used in methotrexate rescue therapy and in
modulation of 5-FU drug therapy in advanced colorectal cancer. Immunex sells
both liquid and tablet formulations of leucovorin. Leucovorin has no
significant patent protection and has significant generic competition. See
"Competition."
THIOTEPA; THIOPLEX. Thiotepa is a cytotoxic agent approved for the
palliative treatment of a wide variety of tumor types, including adenocarcinomas
of the breast and ovary, superficial papillary bladder cancers and other
lymphomas such as lymphosarcomas and Hodgkin's disease, and for the control of
intracavity effusions secondary to localized or diffuse neoplastic disease of
serosal cavities. Immunex owns manufacturing process patents for thiotepa in
the United States and Canada that expire in 2007. Following FDA approval of an
NDA for THIOPLEX in December 1994, Immunex is now selling and distributing this
lyophilized formulation of thiotepa in the United States. THIOPLEX is more
stable and has a longer shelf life than thiotepa. THIOPLEX is marketed in
Canada by Cyanamid Canada under a distributorship agreement with Immunex.
METHOTREXATE INJECTABLE. Methotrexate injectable is an antimetabolite used
in the treatment of certain neoplastic diseases. Methotrexate injectable has no
significant patent protection and has significant generic competition. Immunex
distributes methotrexate injectable in the United States pursuant to a
distribution agreement with Cyanamid.
AMICAR AMINOCAPROIC ACID. AMICAR is a fibrinolysis-inhibitory agent useful
in enhancing hemostasis when fibrinolysis contributes to bleeding, which is
sometimes associated with neoplastic diseases. AMICAR is not subject to any
material patent protection.
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LEVOPROME METHOTRIMEPRAZINE. LEVOPROME is a potent injectable analgesic
that is indicated for the relief of pain of moderate to marked degree of
severity in nonambulatory patients. LEVOPROME is not subject to any material
patent protection.
PRODUCT LINE EXTENSIONS
NOVANTRONE MITOXANTRONE. Immunex and Cyanamid are sponsoring Phase I and
Phase II clinical trials using high dosage NOVANTRONE alone and combined with
other oncology agents in lung, ovarian, breast and prostate cancers. One of the
protocols being tested involves use of NOVANTRONE in combination with paclitaxel
in breast cancer patients. If successful, these trials could be expanded and
continued to provide the basis for a supplemental NDA to obtain approval of
labeling for new indications.
LEUCOVORIN CALCIUM. Immunex and Cyanamid are sponsoring Phase II clinical
trials of leucovorin for use as 5-FU drug modulation therapy in the treatment of
breast, head and neck cancers. In addition, clinical trials of leucovorin for
such therapy in the treatment of advanced colorectal cancer are nearing
completion by third parties. Data from such research may be submitted to the
FDA by Immunex for the foregoing indications. There can be no assurance that
the clinical trial data will be such that Immunex will deem the evidence
adequate to support a supplemental NDA or that, if it does, the FDA will approve
the NDA or will approve it within a time sufficient to permit commercial
success.
ISOVORIN LEVOLEUCOVORIN. As only the levoleucovorin isomer is active
therapeutically, Cyanamid has developed and clinically tested a purified,
nonracemic formulation of leucovorin calcium: ISOVORIN levoleucovorin. If
approved, ISOVORIN is expected to be eligible for exclusivity under the Drug
Price Competition and Patent Term Restoration Act of 1984 (the "Waxman-Hatch
Legislation") for three or five years subsequent to any U.S. approval and under
the Orphan Drug Act in the methotrexate rescue indication for seven years
subsequent to any U.S. approval. ISOVORIN is also covered by a compound patent
and a process patent held by third parties and licensed to Cyanamid, each of
which expires in 2005. An NDA for ISOVORIN's approval for use in the
methotrexate rescue in osteosarcoma indication was filed in the United States in
1990. There can be no assurance that the clinical data will be such that the
FDA will approve the NDA or will approve it within a time sufficient to permit
commercial success. Cyanamid and Immunex are also currently sponsoring Phase II
and Phase III clinical trials investigating ISOVORIN's benefits in the 5-FU
modulation indication in colorectal, breast, head and neck cancer therapies.
LEDERLE ONCOLOGY PRODUCTS UNDER DEVELOPMENT
HUMANIZED MONOCLONAL ANTIBODY CONJUGATES. The successful clinical
development of mouse monoclonal antibody-based therapies has been limited due to
a human anti-mouse antibody ("HAMA") response. Cyanamid is involved in
collaborative research and development with Celltech Limited to develop a series
of humanized monoclonal antibody drug conjugates that include Cyanamid's
proprietary calicheamicin antitumor drug. In these conjugates, the mouse amino
acid sequences in the antibody portion have been largely replaced by human amino
acid sequences. It is hoped that because humanized monoclonal antibodies
contain a reduced number of mouse amino acid sequences, they will be less
immunogenic and not trigger a HAMA response. While there are two lead
calicheamicin monoclonal conjugates that are expected to be introduced in
clinical trials in 1995 or 1996, research is still in its early stages, and
there can be no assurance that any of the agents will prove safe or effective in
any indication. The first product candidate is scheduled to be tested in acute
myelogenous leukemia patients in a Phase I trial scheduled to begin in the first
quarter of 1995.
PHOTODYNAMIC THERAPY PRODUCTS. As of the Effective Time, Lederle was
developing PHOTOFRIN porfimer sodium, a first-generation porphyrin-derived
photosensitizing agent used in photodynamic therapy, a new therapeutic approach
to cancer treatments. PHOTOFRIN is selectively retained in cancer cells and is
thought to kill cancer cells via singlet oxygen production when activated by
laser light. Immunex and Cyanamid agreed to return Cyanamid's marketing rights
to PHOTOFRIN in the U.S. and Canada to QLT in 1994.
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PRECLINICAL RESEARCH
Cyanamid is also investigating, primarily on a preclinical basis, several
other compounds, including MDR reversal agents to combat resistance of tumor
cells to chemotherapeutic drugs and chemical-based CSF inducers to reverse bone
marrow depression, a common side effect of anti-cancer products. No assurance
can be given that any of these compounds will show sufficient safety to enable
commencement of clinical trials or that such trials will show the safety or
efficacy required to gain the regulatory approvals necessary for marketing. Any
commercial products successfully developed from these research projects would be
marketed in the oncology field in the United States and Canada by Immunex. See
"Relationship with Cyanamid."
PACLITAXEL. Paclitaxel is a chemotherapeutic agent that is extracted from
the bark of the Pacific yew tree. BMS currently markets paclitaxel for
treatment of metastatic breast and ovarian cancers in the United States and
Canada under the trademark TAXOL. BMS currently enjoys marketing exclusivity
for paclitaxel in the United States under the Waxman-Hatch Legislation, which
exclusivity expires in December 1997. In 1994, Cyanamid entered into exclusive
supply and research agreements with Hauser Chemical Research, Inc., ("Hauser")
under which Hauser will supply Cyanamid and its affiliates with their
requirements for paclitaxel for development and marketing worldwide. Cyanamid
and Hauser will also collaborate in the development and testing of new taxane
derivatives related to paclitaxel. At the same time that Cyanamid entered into
the research and supply agreements with Hauser, Immunex and Cyanamid entered
into a taxane agreement under which Cyanamid and Immunex will collaborate in
conducting clinical trials and obtaining regulatory approval of paclitaxel in
their respective territories, and Cyanamid will manufacture and supply product
to Immunex for sale in the United States and Canada. Immunex and Cyanamid will
equally share the costs of research and supply under the Hauser agreements.
RELATIONSHIP WITH AMERICAN HOME PRODUCTS AND CYANAMID
At a special meeting of stockholders held June 1, 1993, the stockholders of
predecessor Immunex Corporation ("Predecessor") approved and adopted an Amended
and Restated Agreement and Plan of Merger dated as of December 15, 1992 (the
"Merger Agreement") among Predecessor, Cyanamid, LPI and Lederle Oncology
Corporation, a wholly owned subsidiary of Cyanamid ("Merger Subsidiary").
Pursuant to the Merger Agreement, Predecessor was merged with and into Merger
Subsidiary in accordance with the General Corporation Law of the State of
Delaware, with the Merger Subsidiary as the surviving corporation. Prior to the
Merger, Cyanamid and LPI contributed to Merger Subsidiary certain assets and
contractual obligations of the Lederle Oncology Business, together with $350
million in cash.
As a result of the Merger, the separate corporate existence of Predecessor
ceased, and the assets and liabilities of Predecessor and Merger Subsidiary
became the assets and liabilities of a new corporation that was renamed "Immunex
Corporation". Each share of Predecessor Common Stock outstanding immediately
prior to the effective time of the Merger ("Effective Time") was converted into
the right to receive $21 in cash (the "Cash Consideration"), and one share of
common stock of the surviving corporation (the "Stock Consideration" and,
together with the Cash Consideration, the "Merger Consideration"). A
substantial portion of the $350 million contributed to Merger Subsidiary by
Cyanamid was used to pay the Cash Consideration.
The common stock of Merger Subsidiary outstanding immediately prior to the
Effective Time, all of which was held by Cyanamid and LPI, was converted into
that number of shares of the Company's Common Stock equal to 53.5% of the total
number of shares of Common Stock outstanding immediately following the Effective
Time on a fully diluted basis. No appraisal rights were perfected. By
acquiring all of the common stock of Cyanamid in late 1994, American Home
Products became the effective owner of the shares of the Company's common stock
held by Cyanamid.
Simultaneously with entering into the Merger Agreement, Predecessor, Cyanamid
and Merger Subsidiary entered into an Amended and Restated Governance Agreement
("Governance Agreement"), which sets forth, among other things, certain
agreements of the parties relating to (i) the corporate governance of Immunex,
including the composition of its Board of Directors (the "Immunex Board"), (ii)
rights of Cyanamid to purchase additional shares of Immunex Common Stock from
Immunex upon the occurrence of certain events, (iii) future acquisitions and
dispositions of securities of Immunex by Cyanamid, (iv) the right of members of
the Immunex Board designated by Cyanamid to approve certain corporate actions of
Immunex, (v) the requirement that a supermajority of the members of the Immunex
Board approve certain corporate actions of Immunex, and (vi) payments to be made
by Cyanamid to Immunex in the event that products of the Lederle Oncology
Business and certain other products of Immunex do not achieve specified revenue
targets.
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Pursuant to the terms of the Governance Agreement, for the period ending
December 31, 1997, Cyanamid has agreed to make certain payments to Immunex if
revenues from the products of the Lederle Oncology Business do not achieve
specified targets. The specified net sales targets are as follows:
$120,600,000 in 1993 (reduced proportionately to reflect the portion of the year
Immunex sold products of the Lederle Oncology Business), $154,600,000 in 1994,
$168,600,000 in 1995, $190,500,000 in 1996 and $216,500,000 in 1997. In the
event that the expected revenues are not achieved for any year, Cyanamid will be
obligated to make certain payments. In no event will Cyanamid's payment
obligations exceed the following amounts: $45,300,000 for 1995, $56,000,000 for
1996 and $60,000,000 for 1997.
Pursuant to the Merger Agreement, Cyanamid, Immunex and certain of their
respective subsidiaries entered into certain agreements (collectively, the
"Related Agreements"). The Related Agreements include a Research and
Development Agreement relating to ongoing cooperation in research and
development and the parties' commercialization of products resulting from such
efforts. Pursuant to this agreement, Immunex and Cyanamid have established a
collaboration committee to supervise and coordinate oncology research and
development activities. Immunex is providing financial support for Cyanamid's
research and development program, and Cyanamid is supporting Immunex's TNFR
development program. This agreement and another Related Agreement together
provide for the commercialization of new oncology products by Immunex in the
United States and Canada, and by Cyanamid elsewhere. To the extent Immunex
develops products or technology other than new oncology products and determines
not to market such products or technology itself, Immunex has agreed to offer to
Cyanamid exclusive marketing rights to any such products or technology before
offering any marketing rights to third parties. Other Related Agreements
provide for, among other matters, the supply and toll manufacture by Cyanamid or
its subsidiaries for Immunex or its subsidiaries of the oncology products of the
Lederle Oncology Business, the licensing by Cyanamid or its subsidiaries to
Immunex of the LEDERLE and other trademarks for use on Immunex products, and
various other implementing licenses and distribution agreements. The Related
Agreements, together with the Governance Agreement, establish the framework for
the ongoing relationship between Immunex and Cyanamid. As the businesses and
operations of Cyanamid become fully integrated with those of American Home
Products, the relationship between Immunex and Cyanamid is expected to evolve
into a working relationship with American Home Products.
In December 1993, BMS notified Immunex of its election to terminate the BMS
Agreement and return all rights in PIXY321 to Immunex. Pursuant to a license
agreement with Cyanamid ("New Oncology Product License Agreement") that became
effective as of the Merger, Immunex has licensed exclusive rights to PIXY321
outside the United States and Canada to Cyanamid. Cyanamid will pay a royalty
to Immunex equal to 5% of the net sales of PIXY321 in Cyanamid's territory.
Pursuant to this agreement, Immunex has also agreed to supply Cyanamid's
reasonable clinical and commercial requirements for PIXY321 under a supply
agreement to be entered into by Immunex and Cyanamid, at a price that will
reimburse Immunex for its manufacturing and process development costs (including
general and administrative costs) allocable to PIXY321, plus, in the case of
commercial requirements, a reasonable profit.
In September 1993, Immunex and Cyanamid Agricultural de Puerto Rico, Inc.
("CAPRI"), a Cyanamid subsidiary, entered into a loan agreement pursuant to
which CAPRI has agreed to provide a line of credit to Immunex for working
capital purposes on a revolving credit basis. This agreement was amended in
1994 to increase the amount of the line of credit available to equal the lesser
of $50 million or 110% of the current revenue guarantee receivable. Immunex has
agreed to pay interest on the loan at market rates.
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RELATIONSHIP WITH HOECHST AG
Pursuant to a 1984 research and license agreement that has been
periodically amended, Immunex and Hoechst, through its subsidiary Behringwerke,
have conducted an international collaborative research effort devoted to CSFs.
Under the agreement, Immunex granted exclusive worldwide license rights to
Behringwerke to develop, manufacture and market CSF products in consideration
for technology transfer payments, research support payments, and royalties on
sales of licensed products. Immunex and Behringwerke, together with
Behringwerke's U.S. affiliate, Hoechst-Roussel Pharmaceuticals, Inc., ("HRPI")
collaborated in the clinical development of GM-CSF (sargramostim) in the United
States. In 1989, Immunex acquired co-marketing rights to sargramostim in the
United States and from March 1991 to April 1993, Immunex and HRPI co-marketed
sargramostim in the United States. Immunex acquired HRPI's United States rights
in April 1993. Behringwerke applied for European approvals to market
sargramostim for bone marrow transplant indications, and also initiated Phase
III clinical trials in Europe for treatment of prophylaxis of neutropenia
resulting from radiotherapy or chemotherapy. However, due to a blocking patent
owned by Sandoz, Behringwerke elected not to attempt to commercialize GM-CSF in
Europe. See "Patents, Licenses and Trademarks." Immunex reacquired worldwide
rights to sargramostim from Behringwerke in 1994, and licensed the rights
previously held by Behringwerke to Cyanamid. Immunex has agreed to supply
Cyanamid's requirements for marketing outside the United States. Immunex also
assumed responsibility for financing the completion of certain European trials
begun by Behringwerke, in order to acquire data useful in obtaining registration
of the product in other countries. In 1990, Immunex also granted Behringwerke
exclusive license rights to the Receptor Products for development and marketing
outside the United States and Canada. Pursuant to a 1992 agreement between
Behringwerke and Immunex, Immunex reacquired Behringwerke's worldwide rights to
TNFR, which it has licensed to Cyanamid. Immunex is entitled to certain payments
and royalties on sales of the other Receptor Products licensed to Behringwerke
or its sublicensees.
RELATIONSHIP WITH TARGETED GENETICS CORPORATION
Targeted Genetics Corporation ("Targeted Genetics") was formed by Immunex
in 1989 to develop proprietary human gene therapy treatments for acquired and
inherited diseases. Targeted Genetics is focusing on cytotoxic T lymphocytes as
a therapy for infectious diseases and cancer; in viro delivery of genes to non-
dividing cells, such as lung cells; and modification of peripheral blood stem
cells in order to correct genetic blood disorders. Immunex currently holds a
29% equity interest in Targeted Genetics.
Immunex granted a worldwide, exclusive field of use license to Targeted
Genetics for certain Immunex technology applicable to gene therapy. In
exchange, Targeted Genetics issued shares of stock to Immunex and agreed to
license to Immunex new technology developed by Targeted Genetics in the area of
cytokines. In addition, Targeted Genetics granted Immunex a right of first
offer with respect to non-cytokine technology if Targeted Genetics intends to
pursue a license agreement with a third party. Immunex has agreed to provide
certain administrative and other services to Targeted Genetics, subject to
availability of resources. Targeted Genetics reimburses Immunex for these
services on a fully burdened cost basis. Targeted Genetics is currently
enrolling patients in a human gene therapy trial at the Fred Hutchinson Cancer
Research Center in Seattle. The study is the first step in developing a
potential treatment for people infected with HIV.
MARKETING AND DISTRIBUTION
Immunex sells its products through a specialized oncology-based sales force
that consists of approximately 92 sales representatives and sales managers.
LEUKINE is distributed from the Company's distribution facility located in
Bothell, Washington. Distribution of the Lederle Oncology Products is handled
by Cyanamid under a service contract with Immunex. In February 1995, Immunex
entered into a distribution agreement with Cardinal Florida, Inc., an affiliate
of Cardinal Health, Inc., under which Cardinal will perform warehousing and
shipping services for LEUKINE and the Lederle Oncology Products.
COMPETITION
Competition in researching, developing, manufacturing and marketing
biopharmaceuticals and other oncology products is intense. Immunex is marketing
a group of cancer products and simultaneously developing an extensive portfolio
of cytokines, cytokine receptors and other immunological therapeutic products.
There are other companies, including established pharmaceutical and
biotechnology companies, that are researching, developing and marketing
products, based on related or competing technologies, that will compete with
those being developed by Immunex. Most of the cancer products marketed by
Immunex have established competitors. Significant competitors in the field of
oncology include BMS and Amgen. These competitors, in certain cases, have
substantially greater capital resources, greater marketing experience and larger
research and development staffs and manufacturing facilities than Immunex.
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Several companies are marketing or developing products that compete or are
expected to compete with LEUKINE. One such company, Amgen, Inc., has been
marketing its competing G-CSF product since early 1991 and has achieved a
majority share of the U.S. market for CSFs. In addition, a joint venture of
Schering-Sandoz has filed a PLA seeking approval of a competing GM-CSF product.
The Company is unable to predict the effect the Schering-Sandoz GM-CSF or other
competing products will have on sales revenues from LEUKINE.
Immunex and other pharmaceutical firms compete primarily in the pace of
research and clinical testing, acquiring patents, developing efficient
manufacturing processes, securing regulatory approvals and marketing the
resulting products to physicians. Immunex believes that its strategic focus in
immunology has resulted in expertise that can be applied to reduce development
times, create innovative and cost-saving research techniques, optimize product
quality, and discover new products and applications. Immunex possesses
manufacturing facilities to produce recombinant protein products using microbial
or mammalian cell culture technologies. Professional clinical, legal,
regulatory affairs, marketing and sales staffs have been developed to enhance
the Company's scientific resources. Immunex possesses a specialized, well-
trained oncology sales force and comprehensive professional service, including
continuing medical educational programs, publications, literature searches and
treatment information. These professional services are important because,
historically, new anticancer drugs have provided incremental treatment advances,
but few outright cures. Therefore, physicians rely heavily on peer-reviewed
clinical data in making treatment decisions.
Competition in the sale of generic pharmaceutical products is intense due
to the entry of multiple sources for each product after expiration of patents
and exclusivity grants previously covering such products. Manufacturers of
generic products compete aggressively, primarily on the basis of price. Immunex
currently faces aggressive generic competition from numerous suppliers on
methotrexate injectable and leucovorin calcium, resulting in lower prices and
lower sales. Thiotepa may be subject to generic competition in the future.
SUPPLY
In general, raw materials that Cyanamid requires to manufacture the Lederle
Oncology Products are readily available. Cyanamid directly manufactures
leucovorin, thiotepa and THIOPLEX. Heinrich Mack Nachf KG ("HMN"), a German
company, currently supplies Cyanamid with all of its requirements of
methotrexate. Methotrexate is purchased pursuant to a supply agreement which
commenced in July 1992. The agreement has a minimum term of ten years, with
termination requiring four years' prior notice. Historically, HMN also supplied
Cyanamid with its requirements of bulk mitoxantrone, the essential raw material
used to make NOVANTRONE. In October 1994, HMN informed Cyanamid that it would
no longer supply Cyanamid with bulk mitoxantrone. Cyanamid has commenced
manufacture of mitoxantrone at its facility in Gosport, England, where it has
manufactured mitoxantrone previously. Immunex expects that its current
inventories will be sufficient to meet NOVANTRONE demand until new supplies
manufactured by Cyanamid are available. However, if the supply of NOVANTRONE
were interrupted for an extended period, the Company's revenues would be
materially and adversely affected.
Substantially all the raw materials used to manufacture Immunex's
recombinant protein products are available from multiple sources.
GOVERNMENT REGULATION
The manufacturing and marketing of pharmaceutical products in the United
States requires the approval of the FDA under the Food, Drug and Cosmetic Act.
Similar approvals by comparable agencies are required in foreign countries. The
FDA has established mandatory procedures and safety standards which apply to the
clinical testing, manufacture and marketing of pharmaceutical and biotechnology
products. Obtaining FDA approval for a new therapeutic product may take several
years and involve expenditure of substantial resources.
The Company's operations are also subject to regulation under, among
others, the Occupational Safety and Health Act of 1970, the Environmental
Protection Act, the Nuclear Energy and Radiation Control Act, the Toxic
Substances Control Act, the Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, and Title III
of the Superfund Amendments and Reauthorization Act of 1986 (Community
Right-to-Know and Emergency Response Act).
The Clinton Administration and certain members of Congress have identified
control of health care costs as a top priority and are seeking to enact
legislation, possibly including the imposition of price controls or reductions,
which may have an adverse impact on Immunex.
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PATENTS, LICENSES AND TRADEMARKS
Immunex has filed applications for U.S. and foreign patents covering
numerous aspects of its technology. The Company has been granted and maintains
64 U.S. and 225 foreign patents, and currently has 72 patent applications
pending in the United States Patent and Trademark Office (the "USPTO") and 199
applications pending abroad. There can be no assurance that any of its pending
or future applications will result in issued patents. The Company also relies
upon trade secrets, unpatented proprietary know-how and continuing technological
innovation to develop and maintain its competitive position. There can be no
assurance that others will not acquire or independently develop the same or
similar technology, or that the Company's issued patents will not be
circumvented, invalidated or rendered obsolete by new technology.
It is the Company's policy to respect the valid patent rights of others.
Immunex has obtained licenses from various parties covering certain recombinant
DNA technologies it employs to make its products. The Company, however, may
need to acquire additional licenses in the future if its processes are changed
or if patents are awarded to others which cover current processes. The Company
is not aware of the need for any such additional licenses. Competitors of
Immunex, including established pharmaceutical and biotechnology companies, are
seeking to obtain patents covering technologies which Immunex may need to
manufacture or market its products. Competitors of Immunex have obtained or are
seeking patents which, if issued or granted, may have a bearing upon the
Company's ability to successfully commercialize GM-CSF, PIXY321 and TNFR.
Immunex has been issued a U.S. patent covering an altered, or analog, form
of GM-CSF, that is marketed by the Company under the LEUKINE trademark. Immunex
and several competitors, however, filed patent applications in 1984 disclosing
the isolation of mouse and human GM-CSF DNAs. Two such applications that were
filed before Immunex's application included claims which, if such patents were
issued, would be infringed by Immunex's process for making LEUKINE. A GM-CSF
interference proceeding in the United States directed to human GM-CSF DNAs was
declared in July 1990, involving competing U.S. patent applications filed by or
licensed to Immunex, Sandoz AG ("Sandoz"), Research Corporation,
Schering-Plough, Inc. and Biogen, Inc. As of February 1995, all parties to the
intereference except Immunex and Sandoz had been eliminated from future
participation in the priority determination. If Sandoz were to prevail in the
interference and a settlement could not be negotiated, litigation may result if
Sandoz elects to enforce any resulting GM-CSF patents in the U.S. Sandoz has
been granted patents in Europe and certain other countries covering recombinant
GM-CSF technologies that blocks the Company or its licensees from
commercializing GM-CSF in such countries. Genetics Institute, Inc. owns certain
U.S. patents covering recombinant DNA and protein technologies related to human
IL-3. Because PIXY321 is a fusion protein consisting of analog protein
sequences having homology to human GM-CSF and human IL-3, Sandoz or Genetics
Institute may claim that the Company's making, using or selling of PIXY321
constitutes infringement of such patents. The outcome of any litigation
involving such patents cannot be predicted. If Immunex were blocked from
manufacturing or selling LEUKINE in the United States or a license could not be
obtained upon commercially reasonable terms, the Company would be materially and
adversely affected.
The TNFR product being developed by Immunex is a fusion protein consisting
of a dimer of two subunits, each of which comprises a TNF receptor domain
derived from a TNF receptor known as "p80," fused to a segment derived from a
human antibody molecule known as an "Fc domain." Immunex believes that it was
the first to isolate a recombinant DNA encoding p80 TNFR and also the first to
express the protein using recombinant DNA technology. In March 1995, the
Company was granted a U.S. patent covering DNAs encoding p80 TNFR. Two other
companies, however, BASF and Yeda Research & Development Co. ("Yeda"), filed
patent applications relating to TNFR proteins shortly prior to the time Immunex
filed its patent applications concerning TNFR DNAs. BASF has been issued a U.S.
patent with claims covering certain TNFR proteins that differ in both structure
and function from the fusion protein being tested by Immunex. If BASF or Yeda
were able to assert TNFR patents to cover the Company's TNFR product, the
Company's commercialization of its TNFR product would be impeded in any
territories in which such patents were in force.
NOVANTRONE is a proprietary product that is covered by several U.S. and
Canadian patents. The last of such patents expires in 2006. Although Immunex
has rights to patents and pending patent applications with respect to
levoleucovorin in the United States and Canada, the protection afforded by these
patents and patent applications does not provide Immunex with patent exclusivity
for levoleucovorin. Cyanamid holds a manufacturing process patent on thiotepa
in the United States and Canada. Although methotrexate is the subject of
certain patents held by Cyanamid, the protection afforded by such patents is not
material.
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Cyanamid and Immunex are pursuing several collaborative preclinical
research areas to discover or develop other new oncology products and are also
seeking to broaden their oncology product lines by licensing rights to anti-
cancer products developed by other companies. Cyanamid and Immunex intend to
pursue all protection of all forms of intellectual property, including, but not
limited to, patents, trade secrets, Orphan Drug exclusivity, and benefits of the
Waxman Hatch legislation, for all inventions, discoveries and developments in
these areas of research.
Under its agreements with licensors of certain patents, Immunex is
obligated to pay process royalties on sales of products produced using certain
basic recombinant DNA processes and related technologies. Certain licenses, for
example, the Cohen-Boyer license covering basic recombinant DNA processes, may
be material to the Company; however, the terms of such licenses extend for the
life of the patents licensed and are subject to cancellation by the licensor
only upon default or bankruptcy by Immunex. In addition, Immunex has agreed to
pay Behringwerke product royalties in respect of sales of LEUKINE, PIXY321 and
TNFR. Both the process royalties and the product royalties currently payable by
the Company are commensurate in percentage rate to those paid by other companies
developing biotechnology products and are not expected to exceed, in the
aggregate, 10% of net sales. The Company, however, may need to enter into
additional license agreements with other companies concerning LEUKINE, PIXY321
or TNFR which may require payment of additional product royalties. There can be
no assurance that such license agreements will be available or that the total
royalties payable under such agreements will not adversely affect the Company's
results of operations with respect to such products.
Cyanamid has license arrangements with the University of Strathclyde and
with Eprova AG with respect to levoleucovorin. Cyanamid has entered into a
Collaborative Research and Development Agreement with Celltech Limited
("Celltech") to humanize monoclonal antibodies.
The U.S. and Canadian trademarks for NOVANTRONE, ISOVORIN and THIOPLEX have
been assigned to Immunex. Cyanamid's housemark for its worldwide pharmaceutical
and biologics business, LEDERLE, and two trademarks owned and currently used in
Canada by Cyanamid Canada, Inc. have been licensed to Immunex for use in
connection with current and future oncology products. Cyanamid has the right to
terminate the Lederle trademark licenses in the event that its ownership of
Immunex common stock was to decrease below 50%.
PROPERTIES
In 1986, Immunex purchased for $1.2 million the master lease for the
Immunex Building in Seattle, Washington in which its primary laboratory and
initial manufacturing facilities are located. Immunex currently occupies all
but a minor percentage of this building. Immunex also leases space in an
adjacent office building that is used for office and administrative purposes.
Immunex's facilities in these two buildings occupy a total of 160,000 square
feet. The total of current rental payments under both leases is approximately
$1.9 million per year. The master lease for the Immunex Building extends
through August 1995, with four five-year renewal options. The master lease
calls for rental increases at three-year intervals through 1995 and at five-year
intervals through the renewal periods. The leases for the adjacent office
building expire through August 1996. These leases provide the Company with
options to renew the leases at the then fair rental rate through August 2015.
The Company recently signed a lease for 36,000 square feet of additional
office space located near its headquarters. The current annual lease payment
for this facility is $0.6 million. The Company also has an option on 18,000
square feet of additional space in the same building. The Company is currently
exploring several alternatives in order to meet its long-term facility needs.
The Company owns a one-block parcel of undeveloped land adjacent to its
headquarters on which additional facilities could be constructed. The Company
also owns approximately 20 acres of undeveloped land adjacent to its
manufacturing and development center in Bothell, Washington. This site, as well
as other potential sites, is being studied to determine the feasibility of
developing a corporate campus to accommodate the Company's nonmanufacturing
operations in the future. Immunex has entered into a purchase and sale
agreement with the Port of Seattle concerning the purchase of a 29 acre parcel
of land located in Seattle, Washington, known as Terminal 88. Pursuant to the
terms of the agreement, Immunex will not be committed to complete the purchase
until it has approved the results of complete due diligence review of the
property and obtained a master use permit and other governmental authorizations
needed to enable the property to be developed and used in accordance with the
Company's plans.
17
<PAGE>
In 1988, Immunex began operating a 10,000 square foot fermentation and
pharmaceutical manufacturing facility located in the Immunex Building for the
production of recombinant protein therapeutics. This facility is designed to
comply with FDA Good Manufacturing Practices, and Immunex has received an
establishment license for this facility as a part of the PLA approval applicable
to GM-CSF. This facility can produce sufficient quantities of recombinant
cytokines using yeast and bacterial fermentation technologies to support
clinical testing, and in addition can produce commercially significant
quantities of GM-CSF. In October 1992, Immunex completed the construction of a
manufacturing and development center in Bothell, Washington which includes a
large-scale microbial manufacturing facility and a separate mammalian cell-based
protein manufacturing facility. The mammalian cell facility was used in 1992
and 1993 to produce TNFR and IL-1R for clinical trials. Validation and
manufacturing of several lots of PIXY321 in the microbial facility were
successfully conducted in 1993.
PERSONNEL
At December 31, 1994, Immunex and its wholly owned subsidiaries employed a
total of 755 persons, 78 of whom hold doctoral degrees, and of whom 256 were
engaged in research and development activities, 181 in manufacturing and 140 in
sales and marketing activities. Each employee has entered into a
confidentiality agreement which contains provisions requiring disclosure of
ideas, developments, discoveries or inventions conceived during employment, and
assignment to the Company of all proprietary rights to such matters.
ITEM 2. PROPERTIES
See Properties above, under Item 1.
ITEM 3. LEGAL PROCEEDINGS
Immunex is currently a party to a GM-CSF patent interference that may
affect products it is developing or has developed, including GM-CSF and PIXY321.
In addition, an interference may be declared which may affect TNFR. No
assurance can be given as to the outcome of these interferences. Immunex may be
materially and adversely affected by a negative outcome of any of these
interferences. See Item 1. "Patents, Licenses and Trademarks."
Several class action lawsuits were filed in April 1992 against Immunex and
certain of its executive officers. These actions, captioned IN RE IMMUNEX
SECURITIES LITIGATION, were consolidated in the United States District Court for
the Western District of Washington. The plaintiffs in this action claimed that
the defendants made materially false statements or omissions relating to
expected revenues from LEUKINE, the potential market for LEUKINE, the ability of
LEUKINE to compete with comparable products made by other companies, and the
difficulty experienced by Immunex in its business relationship with HRPI. In
March 1994, the defendants entered into a settlement of the class action,
pursuant to which Immunex paid the class $14 million. $10 million of the costs
of defending and settling this litigation was provided by the Company's
directors' and officers' liability insurance policies. Under the terms of the
settlement, the defendants did not admit any violations of federal or state laws
nor did the court make any determination concerning the merits of the various
allegations set forth in the complaint. The terms of the settlement were
approved by the court and the action dismissed on July 18, 1994.
In September 1993, Immunex filed a complaint seeking declaratory judgment
and injunctive relief against Cistron Biotechnology Inc. ("Cistron") in U.S.
District Court in the Western District of Washington at Seattle. On the same
day, Cistron filed suit against Immunex in U.S. District court in the District
of New Jersey. Both suits relate to assertions by Cistron that in 1984, Immunex
misappropriated information regarding IL-1 beta and that such information was
used by Immunex in patent applications relating to IL-1 beta. The complaint
filed by Immunex seeks a declaratory judgment that Cistron's claims are
preempted by patent law, barred by a judgment in a patent interference decided
by the United States Patent and Trademark Office, and time-barred by the statute
of limitations and doctrine of laches. In addition, Immunex seeks a declaratory
judgment that Immunex did not misappropriate any trade secrets of Cistron, and
seeks entry of an order enjoining Cistron from claiming rights in Immunex's
patents or patent applications and from claiming misappropriation of trade
secrets. Cistron's complaint seeks a determination of inventorship and alleges
misappropriation of trade secrets by Immunex and conversion of Cistron's
property interest in certain patents and patent applications. Cistron seeks
recovery of unspecified actual, punitive and exemplary damages, and cost and
attorneys' fees. These actions have been consolidated in U.S. District Court in
Seattle and are in preliminary discovery proceedings.
18
<PAGE>
In March 1994, Immunex filed a motion for summary judgment based upon the
applicability of the statute of limitations and laches, and a motion to limit
the scope of discovery to time bar issues and separate any trial between
determination of liability and damages. In June 1994, the court entered an
order finding that issues of fact existed concerning the applicability of the
statute of limitations and laches to Cistron's claims, and accordingly denied
Immunex's motion on the time bar issues. In December 1994, the court permitted
Cistron to amend its complaint against Immunex to add claims for civil
violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO
Act") and to consolidate the actions against Immunex with a separately filed
action against Steven Gillis, Stephen A. Duzan, and Christopher S. Henney, prior
employees and founders of Immunex. Immunex has indemnification agreements with
each of these individual defendants providing for indemnification of these
individuals to the full extent allowed by the applicable law. According to
Cistron's new complaints, the alleged failure of Immunex and the individual
defendants to accord inventorship of certain Immunex patents to parties
affiliated with Cistron, and the alleged misappropriation of trade secrets by
Immunex, constituted a "pattern of racketeering activity" prohibited by the RICO
Act. The court also permitted Immunex to amend its counterclaims against
Cistron to seek a declaratory judgment that Immunex's activities in researching
developing IL-1B have not infringed Cistron's patents relating to IL-1B.
Cistron has filed a motion to dismiss this added counterclaim. Discovery is
proceeding and a revised trial date has been set for October 24, 1995.
Immunex is not a party to any other material litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the fourth quarter of its fiscal year ended December 31, 1994.
19
<PAGE>
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded in the over-the-counter market on the
NASDAQ National Market System under the symbol IMNX.
The following table sets forth for each period indicated the high and low sales
prices for the Company's common stock as reported on the NASDAQ National Market
System.
<TABLE>
<CAPTION>
1994 1993
----------------- ----------------------------------------------
6/2/93 TO 12/31/93 1/1/93 TO 6/1/93
---------------------- ---------------------
HIGH LOW HIGH LOW HIGH LOW
-------- -------- -------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 19 3/4 13 3/4 - - 51 1/2 35
2nd Quarter 15 11 1/2 34 3/4 27 54 1/2 42
3rd Quarter 16 1/2 10 3/4 31 3/4 16 - -
4th Quarter 18 1/4 11 1/2 22 13 3/4 - -
</TABLE>
There were 1,886 holders of record of the Company's common stock as of December
31, 1994. A significant number of beneficial owners of the Company's common
stock hold their shares in street name.
The Company has not paid any cash dividends since its inception. The Company
currently does not intend to pay any cash dividends in the foreseeable future
but intends to retain all earnings, if any, for use in its business operations.
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
On June 1, 1993, the Company was merged with and into Lederle Oncology
Corporation, a wholly owned subsidiary of American Cyanamid Company. See Item
7, "Management's Discussion and Analysis of Financial Condition" and the notes
to the consolidated financial statements for a description of the merger. The
selected financial data as of and for the year ended December 31, 1994 and the
period ended June 2, 1993 to December 31, 1993, are those of the Company
subsequent to the merger. The selected financial data for the peiod January 1,
1993 to June 1, 1993 and as of and for the years ended 1990, 1991 and 1992 are
those of the Company prior to the merger.
<TABLE>
<CAPTION>
PERIOD PERIOD
6/2/93 1/1/93
TO TO
1994 12/31/93 6/1/93 1992 1991 1990
---- -------- ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 144,332 $ 95,310 $ 27,556 $ 60,082 $ 51,211 $ 34,677
Net income (loss) (33,104) (366,135) (64,167) (77,597) 802 (9,887)
Net income (loss)
per common share (.85) (9.58) (4.17) (5.21) .05 (1.10)
Total assets 192,665 204,118 - 235,790 254,023 121,088
Long-term debt,
including current portion 16,611 23,450 - 30,224 33,228 8,173
Shareholders' equity 111,927 137,863 - 133,987 212,182 106,507
</TABLE>
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
On June 1, 1993, Immunex Corporation (the "Predecessor") was merged into
Lederle Oncology Corporation ("LOC"), a previously non-distinct operating unit
of American Cyanamid Company ("Cyanamid"), thereby creating a new entity which
was named Immunex Corporation (the "Successor"). The consolidated financial
statements for the year ended December 31, 1992 and the five months ended June
1, 1993, are those of the Predecessor. The consolidated financial statements as
of and for the seven months ended December 31, 1993 and as of and for the year
ended December 31, 1994 are those of the Successor. The following discussion of
results of operations and financial condition has been prepared to reflect the
two distinct entities and to present meaningful historical comparisons to the
extent possible.
Prior to the merger, Cyanamid contributed to LOC, among other things, the
rights to certain oncology products in the United States and Canada ("Lederle
Oncology Products"), and $350 million in cash. In exchange for the contribution
of products and cash, Cyanamid received that number of shares of Successor
common stock equal to 53.5% of the Successor's common stock outstanding
immediately following the effective time of the merger. A substantial portion
of the $350 million contributed by Cyanamid was used to pay cash consideration
of $21 per share to the Predecessor's shareholders. In addition, pursuant to
the merger, the Successor and Cyanamid entered into certain agreements relating
to cooperation in research and development activities and the support of
manufacturing and supply of the Lederle Oncology Products.
Following the merger, revenues of the Successor increased substantially due
to the addition of the Lederle Oncology Products to the Predecessor's product
line. However, the revenues generated from the sales of the Lederle Oncology
Products were not sufficient to offset the operating expense levels of the
Successor organization. In December 1993, Bristol-Myers Squibb Company ("BMS")
terminated a product exchange agreement with the Successor, returning all rights
to PIXY321 previously licensed to BMS by the Predecessor and regaining all
rights to HYDREA and RUBEX (the "BMS Products"). Accordingly, the Successor
ceased marketing the BMS Products in early 1994. The loss of the revenue from
the BMS Products, combined with the increased operating costs and funding
requirements of the Successor organization have resulted in operating losses
during 1994.
In response to these developments, the Successor has focused efforts during
1994 towards controlling operating costs and aligning operating activities to
meet the current and expected level of sales revenue. The Successor implemented
several programs during the year to achieve this goal including a restructuring
of the sales force, staffing reductions across the organization and a refocusing
of available resources to meet the core needs of the Successor. These expense
control measures have contributed to substantially improved operating
performance over the course of 1994. Operating expenses of the Successor were
reduced from $90.7 million during the first half of 1994 to $82.7 million during
the second half of 1994, a reduction of approximately 9%.
In November 1994, all of the outstanding shares of common stock of Cyanamid
were acquired by American Home Products Corporation ("American Home Products").
Cyanamid is now a wholly owned subsidiary of American Home Products; as a
result, American Home Products now holds a majority interest in the Successor.
21
<PAGE>
RESULTS OF OPERATIONS
REVENUES. Product sales increased to $135.8 million in 1994 compared to
$119.1 million and $51.9 million in 1993 and 1992, respectively. The increase
for each comparative year is primarily attributable to the addition of the
Lederle Oncology Products to the Successor's product line after the merger in
June 1993. Sales of the Lederle Oncology Products contributed $86.7 million and
$49.3 million to the Successor's product sales for the year ended December 31,
1994 and the seven months ended December 31, 1993, respectively. Sales of the
Lederle Oncology Products experienced modest growth during 1994 compared to the
1993 12 twelve month total of $80.0 million, after a significant decrease from
the 1992 total of $106.1 million. Sales of NOVANTRONE[REGISTRATED TRADEMARK]
(mitoxantrone) decreased from $46.8 million in 1992 to $37.2 million in 1993 due
to a competing oncology product which has eroded NOVANTRONE's market share.
NOVANTRONE's market share stabilized in 1994 and sales have increased slightly
to $39.1 million. Reduced volumes and declining prices resulting from
intensified generic competition caused product sales for leucovorin calcium to
decrease from $33.9 million in 1992 to $25.4 million and $19.1 million in 1993
and 1994, respectively. Over the course of 1994, sales of leucovorin calcium
have leveled out and additional significant decreases are not expected in the
near term. Sales of the other Lederle Oncology Products have increased slightly
during 1994 as a result of the integration of the sales forces of LOC and the
Successor.
In October 1994, Cyanamid was informed by a supplier that it would no
longer supply bulk mitoxantrone, the essential raw material used to produce
NOVANTRONE. Cyanamid subsequently commenced production of mitoxantrone at one
of its facilities. The Successor expects that its current inventories of
NOVANTRONE will be sufficient to meet demand requirements until such time that
new supplies manufactured by Cyanamid are available. However, if the
Successor's supply of NOVANTRONE were interrupted for an extended period, the
Successor's operating results would be materially and adversely affected.
Net sales of LEUKINE[REGISTERED TRADEMARK] (Sargramostim) totaled $45.6
million, $42.1 million and $26.3 million in 1994, 1993 and 1992, respectively.
Sales of LEUKINE have not increased substantially since the second quarter of
1993 and future increases in sales are largely dependent upon the Successor's
ability to increase its share of the colony stimulating factor ("CSF") market.
LEUKINE's current approved label indication is for the treatment of bone marrow
transplants, a narrow indication. In order to increase its access to the CSF
market, the Successor is seeking to expand the approved label indications for
LEUKINE. Two amendments to its product license application have been filed with
the Food and Drug Administration ("FDA") to include label indications for
treatment of prophylaxis of chemotherapy-induced neutropenia and acute
myelogenous leukemia. These amendments are being actively reviewed by the FDA;
however, there can be no assurance that the Successor will receive approval of
an expanded label indication or what impact, if any, these actions will have on
future sales of LEUKINE.
Sales of LEUKINE could be adversely affected by the resolution of certain
patent and contractual matters. No U.S. patents have been issued with respect
to GM-CSF, but the Successor is a party to a patent interference proceeding
directed at establishing which of the parties to the proceeding was first to
invent recombinant DNA technologies for producing GM-CSF. If a patent were to
be granted to the other party, the Successor might be blocked from selling, or
be required to pay royalties in respect of future sales of LEUKINE. Similarly,
if the Successor were to enter into license agreements to eliminate the potenial
for patent conflicts involving PIXYKINE, the Successor may be reqiured to pay
license fees and royalties.
The Predecessor and BMS entered into a product exchange agreement in 1992,
pursuant to which, the Predecessor licensed exclusive foreign marketing rights
for PIXY321 to BMS in exchange for exclusive U.S. marketing rights to HYDREA and
RUBEX. BMS had the right to terminate the agreement in the event of a change in
control of the Predecessor, or at any time through December 31, 1993. BMS
exercised this right in December 1993 and the licenses to each party's products
were terminated. As a result of the termination of the agreement, the Successor
ceased marketing the BMS Products in early 1994. The BMS Products generated
$2.7 million, $25.5 million and $23.7 million of revenue in the years ended
December 31, 1994, 1993 and 1992, respectively.
22
<PAGE>
Royalty and contract revenue increased to $8.5 million in 1994 compared to
$3.8 million in 1993. Effective January 1994, Cyanamid began making quarterly
payments of $1.0 million to the Successor to support development of tumor
necrosis factor receptor ("TNFR"). These payments will continue through 1997 or
until such time that Cyanamid elects to cease support of TNFR development. In
such case, all rights to TNFR will revert to the Successor. In addition, the
Successor earns royalties on sales of the Lederle Oncology Products by Cyanamid
outside of North America. Royalties earned totaled $2.6 million and $0.7
million in 1994 and 1993, respectively. In 1992, royalty and contract revenue
totaled $8.2 million which included $4.1 million of collaborative research
revenue. This research collaboration expired in 1992.
The Successor is pursuing several opportunities to perform contract
manufacturing services at its manufacturing development center. These services
would increase contract revenue and offset maintenance costs during otherwise
slow periods. The Successor has entered into discussions with several
interested parties, but has not currently entered into any significant
agreements.
OPERATING EXPENSES. Cost of product sales, as a percentage of product
sales, decreased to 21% for the year ended December 31, 1994 compared to 26%,
34% and 30% for the periods June 2, 1993 to December 31, 1993, January 1, 1993
to June 1, 1993 and the year ended December 31, 1992, respectively. The
addition of the Lederle Oncology Products to the Successor's product line in
June 1993 substantially reduced the cost of product sales percentage. The cost
of the Lederle Oncology Products as a percentage of product sales varies
significantly among the individual products; however, as a group, the percentage
is lower than that incurred by the Predecessor on its products prior to the
merger. The cost of product sales percentage decreased in 1994 from the seven-
month period ended December 31, 1993 due to cessation of the BMS product sales
in early 1994. The cost of the BMS products was approximately 40% of net sales
in 1993. The increase in the cost of product sales percentage for the five-
month period ended June 1, 1993 to 34% compared to 30% in 1992 resulted from the
cost of reconditioning and preventive maintenance related to the LEUKINE
manufacturing facility totaling approximately $1.1 million charged to cost of
product sales during the period. Cost of product sales, as a percentage of
product sales, will fluctuate moderately from period to period, reflecting any
change in the mix of the Successor's product sales. Significant fluctuations in
the total gross profit margin will occur only if there is a significant
fluctuation in the mix of the Successor's product sales or if substantial period
costs are incurred for reconditioning or preventive maintenance at any of the
manufacturing facilities utilized by the Successor.
Research and development expense increased to $77.6 million in 1994,
compared to $49.7 million, $22.8 million and $36.5 million for the periods June
2, 1993 to December 31, 1993, January 1, 1993 to June 1, 1993, and the year
ended December 31, 1992, respectively. Research and development expense of the
Successor is higher than that of the Predecessor primarily due to monthly
payments, beginning in June 1993, to fund a portion of Cyanamid's research and
development programs. Payments under this agreement totaled $15.3 million and
$17.8 million for the year ended December 31, 1994 and the period June 2, 1993
to December 31, 1993, respectively. In addition, the operating costs of the
Successor's manufacturing development center, which was completed in April 1993,
increased research and development expenses. Research and development expense
levels increased further during 1994 due to medical development efforts in
pursuit of expanded label indications for LEUKINE, increased funding of several
collaborative research partnerships and higher development costs related to
PIXY321. Expenditures for research and development during the five months ended
June 1, 1993 increased from the 1992 level due to funding of expanded clinical
trials of PIXY321, TNFR and interleukin-1 receptor ("IL-1R"), growth of internal
basic research programs and the initial operation of the manufacturing
development center. Research and development expense is expected to increase
further in 1995 as the Successor focuses clinical trials on two marketed
products, LEUKINE and NOVANTRONE, as well as continued clinical programs for
PIXY321 and TNFR.
23
<PAGE>
Selling, general and administrative expense of the Successor has increased
substantially compared to that of the Predecessor. For the year ended December
31, 1994, selling, general and administrative expense totaled $67.7 million,
compared to $41.2 million, $21.0 million and $36.9 million for the seven months
ended December 31, 1993, the five months ended June 1, 1993 and the year ended
December 31, 1992, respectively. A considerable part of the increase is the
result of payments made to Cyanamid for certain ongoing services. The Successor
incurred costs of $6.8 million and $5.9 million under the services agreement
with Cyanamid for the year ended December 31, 1994 and the seven months ended
December 31, 1993, respectively. In addition, the Successor has incurred
increased operating costs as a result of the merger including the addition of
the LOC sales organization to that of the Predecessor, expanded sales and
marketing programs to encompass the Lederle Oncology Products and administrative
costs to support the Successor organization. The increases to selling, general
and administrative expense were partially offset in 1994 by the cessation of
certain costs to market and support the BMS Products which the Successor ceased
marketing early in 1994. Selling, general and administrative expense levels for
the five month period ended June 1, 1993, increased over the 1992 level due
primarily to expanded selling and marketing programs for LEUKINE and increased
administrative costs related to preparation for the merger.
In order to reduce its ongoing operating costs and move the Successor
towards profitability, the Successor implemented several programs during 1994.
These actions were aimed at redirecting the Successor's activities to meet the
needs of its core business and included a reorganization of the sales force,
elimination of certain non-essential programs and staffing reductions across the
organization. In connection with the staffing reductions, the Successor
recorded a charge of $1.7 million to selling, general and administrative expense
during the third quarter of 1994 to cover severance and termination benefits.
As a result of these cost control measures, selling, general and administrative
expenditures have steadily been reduced during the year from $18.2 million and
$17.9 million during the first and second quarters of 1994 to $16.4 million and
$15.2 million during the third and fourth quarters of 1994. It is anticipated
that the expenditure level incurred during the last two quarters of 1994 can be
maintained during 1995, barring any significant non-recurring items.
The merger with LOC resulted in three one-time charges to operations. The
merger was accounted for using the purchase method, under which the purchase
price is allocated to assets and liabilities acquired based on fair values. In
accordance with generally accepted accounting principles, all of the purchase
price allocated to in-process research and development, totaling $346.4 million,
was expensed by the Successor in June 1993. In connection with the merger,
holders of employee stock options of the Predecessor were given the right to
exercise their options on a cashless basis, whereby employees tendered a number
of option shares to satisfy the exercise price. This resulted in a charge to
the Predecessor's compensation expense in May 1993 of $25.6 million. The
Predecessor incurred other merger-related expenses during the five months ended
June 1, 1993, totaling $14.8 million.
OTHER INCOME (EXPENSE). Interest income of the Successor has decreased
substantially compared to the Predecessor due to a decrease in funds available
for investment purposes. Interest income totaled $0.9 million and $0.6 million
for the year ended December 31, 1994 and the period June 1, 1993 to December 31,
1993, respectively, compared to $1.3 million and $9.2 million for the period
January 1, 1993 to June 1, 1993 and the year ended December 31, 1992,
respectively. The Predecessor purchased all of the outstanding shares of common
stock of Receptech Corporation in February 1993 for $59.8 million in cash which
significantly depleted the funds available for investment purposes. Interest
income is expected to remain at a nominal level until such time that significant
cash is generated from operating activities.
Interest expense increased to $2.5 million in 1994 compared to $1.0 million
and $0.2 million for the periods June 1, 1993 to December 31, 1993 and January
1, 1993 to June 1, 1993, respectively. The Successor entered into a loan
agreement with a subsidiary of Cyanamid to fund operating activities.
Borrowings under the Cyanamid loan agreement increased from $10.0 million at
December 31, 1993 to $34.0 million at December 31, 1994. The Successor expects
to reduce its borrowings upon receipt of the revenue guaranty payment from
Cyanamid during the first quarter of 1995; however, the Successor will remain a
net borrower in 1995. Prior to June 1, 1993 nearly all interest expense was
capitalized as a component of the capital cost of constructing the manufacturing
development center.
24
<PAGE>
Other income (expense) has been reduced to a nominal level following the
sale of certain income producing properties in the second quarter of 1994. For
the year ended December 31, 1994 and the seven-month period ended December 31,
1993, the Successor recorded losses of $1.0 million and $0.9 million,
respectively, related to its equity investment in Targeted Genetics Corporation
("TGC"). In December 1992, the Predecessor began recording a non-cash charge of
$2.7 million per year to cost of product sales related to the potential that
additional consideration would be payable to BMS to retain the exclusive rights
to the BMS products. Upon notification of termination of the product exchange
agreement by BMS in December 1993, the Successor reversed the accumulated non-
cash provision of $5.4 million to other income. This addition to other income
was offset by a charge of $4.5 million in December 1993 related to the
settlement of a class action lawsuit. Other income (expense) is expected to
remain nominal in 1995, except to the extent that the Successor is required to
recognize a loss from its investment in TGC. The amount of these losses, if
any, is dependent upon the timing and ability of TGC to raise additional funds
during 1995. In no circumstance will future losses exceed the carrying value of
the Sucessor's investment in TGC, which, at December 31, 1994 was $2.9 million.
The Successor's provision for income tax consists of the tax obligation of
the Successor's operations in Puerto Rico and income taxes incurred in the
states in which the Successor sells its products. During 1994, the Successor
dissolved two of its corporate subsidiaries including the Puerto Rico
corporation. As a result of this change, the provision for income taxes is not
expected to be significant during 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and securities available for sale totaled $24.7
million at December 31, 1994, compared to $13.3 million at December 31, 1993.
The Successor increased its borrowings on the Cyanamid loan agreement by $24.0
million during the year. In addition, net proceeds of $12.0 million were
received from the sale of three properties and $7.4 million was received from
Cyanamid as settlement of its 1993 revenue guaranty obligation. These cash
inflows were offset by cash used in operating activities, investment in capital
equipment and payments on outstanding debt.
The Successor's operating activities used $15.7 million of cash during
1994. Due primarily to the return of the BMS Products in early 1994 and the
existing level of sales of the Lederle Oncology Products, revenues were not
sufficient to meet the operating costs of the Successor organization during the
year. As previously discussed, the Successor has taken several steps to reduce
the costs associated with operating its business. In addition, the Successor
reduced the level of working capital used to support its existing product sales.
These improvements in operating cash flow were partially offset by the payment
of approximately $4.5 million for settlement of a class action lawsuit in early
1994. The cost reduction measures implemented during 1994 are expected to
result in improved operating cash flow in 1995. However, there can be no
assurance as to the degree of this improvement, if any, or the Successor's
ability to generate positive operating cash flow in the future.
Investing activities provided cash of $3.0 million during the year ended
December 31, 1994. The Successor received cash of $12.0 million from the sale
of three properties in the second quarter of 1994. These proceeds were offset
by capital expenditures and investments in patents and other long-term assets of
$7.8 million and $1.4 million, respectively. In 1995, capital expenditures are
expected to decline to approximately $6 million. Additionally, in accordance
with a 1992 settlement agreement with Hoechst Roussel Pharmaceuticals, Inc.
("HRPI"), a payment of $2.0 million will be made to HRPI if the Successor
receives an expanded label indication for LEUKINE for treatment of prophylaxis
of chemotherapy-induced neutropenia. No other significant investments are
anticipated.
Net cash provided by financing activities during 1994 totaled $24.6
million, primarily from proceeds of the Cyanamid loan agreement of $24.0 million
and receipt of $7.4 million from Cyanamid as settlement of its 1993 revenue
guaranty obligation. The cash provided from these financing activities was
offset by principal payments on a construction loan and capitalized lease
obligations totaling $4.8 million and $1.6 million, respectively. At December
31, 1994, the Successor had a receivable from Cyanamid of $35.8 million related
to the 1994 revenue guaranty obligation. This payment is expected to be
received during the first quarter of 1995 and will be used primarily to pay down
the borrowings on the Cyanamid loan agreement, under which the Successor had
borrowed $34.0 million at December 31, 1994. In addition, the Successor will
make a final $10.6 million payment on a construction loan in March, 1995 and
payments totaling $0.7 million will be made on the remaining capitalized lease
obligations during 1995.
25
<PAGE>
Under the terms of the Amended and Restated Governance Agreement between
Cyanamid, the Predecessor and Lederle Parenterals, Inc., dated as of December
15, 1992, Cyanamid agreed to make annual payments to the Successor if revenues
from the Lederle Oncology Products do not achieve certain sales levels through
December 31, 1997. The maximum amount of the payments are $45.3 million, $56.0
million and $60.0 million which would be due in 1996, 1997 and 1998,
respectively. As previously noted, at December 31, 1994, the Successor had a
receivable from Cyanamid of $35.8 million related to the 1994 revenue shortfall
obligation.
In 1995, operating cash flow is expected to improve from the 1994 level.
However, improvement in the near term is contingent upon several factors
including continued growth in product sales and the Successor's ability to
control operating costs. To the extent required, the Successor will utilize the
available funds on the Cyanamid loan agreement to meet its working capital
requirements. The Cyanamid loan agreement, combined with payments from Cyanamid
under the Governance Agreement should be adequate to meet the Successor's
capital requirements through 1997. The Successor's capital requirements beyond
1997 are largely dependent on the Successor's ability to expand the revenue base
of its existing products and on the results of development of certain products
in clinical trials.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page in
FORM 10-K
---------
<S> <C>
Consolidated Balance Sheets at December 31, 1994 and 1993. 27
Consolidated Statements of Operations for the year ended December 31, 1994,
the periods June 2, 1993 to December 31, 1993 and January 1, 1993 to June 1, 1993
and for the year ended December 31, 1992. 28
Consolidated Statements of Shareholders' Equity for the year ended December 31, 1994,
periods June 2, 1993 to December 31, 1993 and January 1, 1993 to June 1, 1993 and for
the year ended December 31, 1992. 29
Consolidated Statements of Cash Flows for the year ended December 31, 1994,
periods June 2, 1993 to to December 31, 1993 and January 1, 1993 to June 1, 1993
and for the year ended December 31, 1992. 30
Notes to Consolidated Financial Statements for the year ended December 31, 1994
the periods June 2, 1993 to December 31, 1993 and January 1, 1993 to June 1, 1993
and for the year ended December 31, 1992. 31 - 42
Report of Ernst and Young LLP, Independent Auditors. 43
</TABLE>
26
<PAGE>
IMMUNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
1994 1993
--------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,818 $ 2,968
Securities available for sale 9,919 10,335
Accounts receivable - trade, net 15,517 18,828
Accounts receivable - related parties 1,590 2,392
Accounts receivable - other 1,152 2,894
Inventories 11,725 13,187
Other assets 2,618 1,222
----------- ------------
Total current assets 57,339 51,826
Property, plant and equipment, net 96,323 100,495
Other assets:
Property held for future development or sale, net 5,658 15,693
Investment in affiliate 3,164 4,137
Intangible product rights, net 9,253 10,030
Goodwill, net 17,358 19,420
Patent costs and other, net 3,570 2,517
----------- ------------
$ 192,665 $ 204,118
----------- ------------
----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,983 $ 24,575
Accounts payable - related parties 4,537 3,399
Accrued compensation and related items 4,109 3,287
Note payable - Cyanamid - 10,000
Current portion of long-term debt 11,595 6,914
Other liabilities 4,498 1,544
----------- -----------
Total current liabilities 41,722 49,719
Note payable - Cyanamid 34,000 -
Long-term debt and other obligations 5,016 16,536
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none outstanding - -
Common stock, $.01 par value, 100,000,000
shares authorized, 39,449,199 and 38,719,507
outstanding at December 31, 1994 and 1993, respectively 547,182 511,371
Guaranty payment receivable from Cyanamid (35,768) (7,373)
Accumulated deficit (399,487) (366,135)
----------- ------------
Total shareholders' equity 111,927 137,863
----------- ------------
$ 192,665 $ 204,118
----------- ------------
----------- ------------
</TABLE>
See accompanying notes.
27
<PAGE>
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
-------------------------------- ---------------------------------
Period Period
Year Ended June 2, 1993 to January 1, 1993 to Year Ended
December 31, December 31, June 1, December 31,
1994 1993 1993 1992
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 135,795 $ 92,222 $ 26,833 $ 51,917
Royalty and contract revenue 8,537 3,088 723 8,165
-------------- --------------- --------------- --------------
144,332 95,310 27,556 60,082
Operating expenses:
Cost of product sales 28,180 23,537 9,091 15,736
Research and development 77,553 49,715 22,771 36,539
Selling, general and administrative 67,729 41,150 20,985 36,934
In-process research and development - 346,359 - 58,717
Compensation expense related to
stock option plan modifications - - 25,624 -
Merger-related costs - - 14,830 -
-------------- --------------- --------------- --------------
173,462 460,761 93,301 147,926
-------------- --------------- --------------- --------------
Operating loss (29,130) (365,451) (65,745) (87,844)
Other income (expense):
Interest income 925 645 1,283 9,153
Interest expense (2,528) (1,021) (159) -
Other income (expense), net (413) 777 454 1,094
-------------- --------------- --------------- --------------
(2,016) 401 1,578 10,247
-------------- --------------- --------------- --------------
Loss before income taxes (31,146) (365,050) (64,167) (77,597)
Provision for income taxes 1,958 1,085 - -
-------------- --------------- --------------- --------------
Net loss $ (33,104) $ (366,135) $ (64,167) $ (77,597)
-------------- --------------- --------------- --------------
Net loss per common share $ (.85) $ (9.58) $ (4.17) $ (5.21)
-------------- --------------- --------------- --------------
Number of shares used for per
share amounts 39,170 38,203 15,380 14,895
-------------- --------------- ---------------- --------------
</TABLE>
See accompanying notes.
28
<PAGE>
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Guaranty
Common Stock, Payments
$.01 Par Value Receivable Accumu-
----------------------- from lated
SHARES AMOUNT CYANAMID DEFICIT TOTAL
---------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1992 (Predecessor) 14,808,711 $ 248,550 $ - $ (36,368) $ 212,182
Issuance of common stock upon the exercise of
stock options and redemption of warrants 426,815 5,301 - - 5,301
Loans to employees for exercise of stock options - (5,899) - - (5,899)
Net loss for the year ended December 31, 1992 - - - (77,597) (77,597)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1992 (Predecessor) 15,235,526 247,952 - (113,965) 133,987
Issuance of common stock upon the exercise of
stock options and redemption of warrants 504,838 5,050 - - 5,050
Repayment of loans to employees for
exercise of stock options - 62 - - 62
Compensation expense related to stock option
plan modifications - 25,624 - - 25,624
Net loss for the period January 1, 1993 to June 1, 1993 - - - (64,167) (64,167)
---------- ---------- ---------- ---------- ----------
Balance, June 1, 1993 (Predecessor) 15,740,364 $ 278,688 $ - $ (178,132) $ 100,556
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Balance, June 2, 1993 (Successor) 15,740,364 $ 100,556 $ - $ - $ 100,556
Contribution by Cyanamid pursuant to
Merger agreement 21,188,752 733,449 - - 733,449
Payment of $21 per share to shareholders - (386,405) - - (386,405)
Issuance of common stock upon the exercise
of stock options and redemption of warrants 1,790,391 50,561 - - 50,561
Repayment of loans to employees for
exercise of stock options - 5,837 - - 5,837
Guaranty payment receivable from Cyanamid - 7,373 (7,373) - -
Net loss for the period June 2, 1993
to December 31, 1993 - - - (366,135) (366,135)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1993 (Successor) 38,719,507 511,371 (7,373) (366,135) 137,863
Issuance of common stock upon the redemption
of warrants 729,692 - - - -
Unrealized loss from securities available for sale - - - (248) (248)
Guaranty payment receivable from Cyanamid - 35,811 (28,395) - 7,416
Net loss for the year ended December 31, 1994 - - - (33,104) (33,104)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 (Successor) 39,449,199 $ 547,182 $ (35,768) $ (399,487) $ 111,927
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
29
<PAGE>
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------------------------- -------------------------------
Period Period
Year Ended June 2, 1993 to January 1, 1993 to Year Ended
December 31, December 31, June 1, December 31,
1994 1993 1993 1992
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (33,104) $ (366,135) $ (64,167) $ (77,597)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 14,559 7,894 2,888 5,538
Equity in loss of affiliate 974 886 - -
In-process research and development - 346,359 - 58,717
Compensation expense related to
stock option plan modifications - - 25,624 -
Loss on write-off of property and equipment - - 3,060 -
Provision for (reversal of) contractual obligation
under licensing agreement, net - (3,825) 1,125 2,700
Provision for termination benefit payable to former officers - - 1,680 -
(Increase) decrease in trade and other receivables 5,855 (11,689) (3,440) 4,513
(Increase) decrease in inventories 1,462 (4,653) (1,034) (1,977)
(Increase) decrease in interest receivable
from securities available for sale 10 (45) 907 1,129
(Increase) decrease in other current assets (1,397) 1,301 969 (1,881)
Increase (decrease) in accounts payable, accrued
compensation and other current liabilities (4,094) (1,364) 20,300 5,238
----------- ----------- ------------- -----------
Net cash used in operating activities (15,735) (31,271) (12,088) (3,620)
Cash flows from investing activities:
Purchases of property, plant and equipment (7,791) (6,119) (5,119) (29,936)
Proceeds from sale of properties 12,045 - - -
Net tangible assets of Receptech acquired - - - 1,057
Payment of obligation to purchase Receptech common stock - - (59,774) -
Investment in affiliate - - - (3,275)
Proceeds from sales and maturities of securities available for sale 4,076 15,035 71,726 181,283
Purchases of securities available for sale (3,917) (11,291) (4,576) (142,380)
Patent costs and other (1,411) (453) 51 (502)
---------- ---------- ----------- -----------
Net cash provided by (used in) investing activities 3,002 (2,828) 2,308 6,247
Cash flows from financing activities:
Principal payments under capitalized lease obligations (1,612) (892) (691) (2,142)
Cyanamid line of credit proceeds 24,000 10,000 - -
Guaranty payment received from Cyanamid 7,416 - - -
Construction loan payments (4,800) (3,600) (1,200) (4,800)
Cash contribution by Cyanamid pursuant to Merger - 350,000 - -
Payments to shareholders pursuant to Merger - (339,437) - -
Net proceeds from issuance of common stock - 4,169 5,050 5,301
Loans to employees for exercise of stock options - - - (5,899)
Repayment of loans for exercise of stock options - 5,837 62 -
Other (421) - - -
----------- ----------- ------------ ------------
Net cash provided by (used in) financing activities 24,583 26,077 3,221 (7,540)
----------- ----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents 11,850 (8,022) (6,559) (4,913)
Cash and cash equivalents, beginning of period 2,968 10,990 17,549 22,462
----------- ---------- ----------- -----------
Cash and cash equivalents, end of period $ 14,818 $ 2,968 $ 10,990 $ 17,549
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
See accompanying notes.
30
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Immunex Corporation (the "Company") is a biotechnology company that discovers,
develops, manufactures and markets human therapeutic products to treat cancer,
infectious diseases and autoimmune disorders.
On June 1, 1993, the shareholders of Immunex Corporation (the "Predecessor")
approved the Amended and Restated Agreement and Plan of Merger dated as of
December 15, 1992 between the Predecessor, American Cyanamid Company
("Cyanamid"), Lederle Parenterals Inc., a wholly owned subsidiary of Cyanamid,
("LPI") and Lederle Oncology Corporation, a wholly owned subsidiary of Cyanamid
("Merger Subsidiary"). Pursuant to this agreement, among other things, the
Predecessor was merged (the "Merger") with and into Merger Subsidiary (See Note
14). The surviving corporation was named Immunex Corporation, referred to
herein as the "Successor."
Prior to the Merger, Cyanamid and LPI contributed to Merger Subsidiary, among
other things, the rights to certain oncology products in the United States and
Canada, referred to herein as the "Lederle Oncology Products," and $350 million.
Each share of common stock of the Predecessor outstanding immediately prior to
the effective time of the Merger ("Effective Time") was converted pursuant to
the Merger into the right to receive $21 in cash consideration and one share of
common stock of the Successor; and the common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time, all of which was held by
Cyanamid and LPI, was converted pursuant to the Merger into that number of
shares of Successor common stock equal to 53.5% of the total number of shares of
Successor common stock outstanding immediately following the Effective Time, on
a fully diluted basis. A substantial portion of the $350 million contributed by
Cyanamid to Merger Subsidiary was used to pay the cash consideration to
Predecessor shareholders.
In November 1994, all of the outstanding shares of common stock of Cyanamid were
acquired by American Home Products Corporation ("American Home Products").
Cyanamid is now a wholly owned subsidiary of American Home Products; as a
result, American Home Products now holds a majority interest in the Successor.
The consolidated financial statements for the year ended December 31, 1992 and
the period January 1, 1993 to June 1, 1993 are those of the Predecessor. The
consolidated financial statements as of December 31, 1994 and 1993, and for the
period June 2, 1993 to December 31, 1993 are those of the Successor.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
CASH EQUIVALENTS
Cash equivalents consist principally of deposits in money market accounts
available on demand or securities with purchased maturities of 90 days or less.
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale consist primarily of U.S. Government securities,
all of which mature within three years. The amortized cost of securities
available-for-sale approximated market value at December 31, 1993. Effective
January 1, 1994, the Successor adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Statement No. 115 requires the classification of certain
investments in debt and equity securities as either held-to-maturity securities,
trading securities or available-for-sale securities. All of the Successor's
investments subject to the provisions of Statement No. 115 are considered
available-for-sale, and such securities are stated at fair value, with the
unrealized gains and losses included in accumulated deficit on the Successor's
balance sheet. Cost of securities is calculated using the specific-
identification method.
31
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INVENTORIES
Inventories are stated at the lower of cost, using a weighted-average method, or
market. The components of inventories at December 31, 1994 and 1993 are as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Raw materials $ 1,600 $ 1,031
Work in process 6,253 3,752
Finished goods 3,872 8,404
--------- ---------
$ 11,725 $ 13,187
--------- ---------
--------- ---------
</TABLE>
DEPRECIATION AND AMORTIZATION
Depreciation of buildings and equipment is calculated using the straight-line
method over the estimated useful lives of the related assets. Leasehold
improvements and equipment under capitalized leases are amortized over the
lesser of the estimated useful life or the term of the lease. The costs of
acquiring leasehold interests are amortized over the remaining term of the
lease.
PROPERTY HELD FOR FUTURE DEVELOPMENT
The Company owns certain properties intended for the possible future expansion
of its manufacturing facilities which are recorded at cost.
INVESTMENT IN AFFILIATE
The Company owns a 29% equity interest in Targeted Genetics Corporation ("TGC"),
a biotechnology company engaged in developing human gene therapy products for
the treatment of acquired and inherited diseases. The Company records its share
of the net losses of TGC to the extent its cash investment exceeds its interest
in the net tangible assets of TGC. Losses of $974,000 and $886,000 were
recorded for the year ended December 31, 1994 and the period June 2, 1993 to
December 31, 1993, respectively. No losses were recorded for the period January
1, 1993 to June 1, 1993, or for the year ended December 31, 1992. The market
value of the Successor's investment in TGC at December 31, 1994 is $13,719,000.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill recorded pursuant to the Merger is being amortized using the straight-
line method over a 10-year period. Accumulated amortization at December 31,
1994 and 1993 totaled $3,208,000 and $1,146,000, respectively.
Intangible product rights recorded pursuant to the Merger are amortized using
the straight-line method over their estimated useful lives ranging from 11 to 15
years. Accumulated amortization at December 31, 1994 and 1993 totaled
$1,230,000 and $453,000, respectively.
The Company seeks patent protection on processes and products in various
countries. Patent application costs are capitalized and amortized over their
estimated useful lives, not exceeding 17 years, on a straight-line basis from
the date the related patents are issued. Accumulated amortization at December
31, 1994 and 1993 totaled $1,697,000 and 1,315,000, respectively.
REVENUES
Product sales are recognized when product is shipped. The Company performs
ongoing credit evaluations of its customers and does not require collateral.
Product sales are recorded net of reserves for estimated chargebacks, returns,
discounts and medicaid rebates. The Company maintains reserves at a level which
management believes is sufficient to cover estimated future requirements.
Allowances for discounts, returns and bad debts, which are netted against
accounts receivable, totaled $6,536,000 and $6,934,000 at December 31, 1994 and
1993, respectively. Reserves for chargebacks and medicaid rebates are included
in accounts payable and totaled $5,822,000 and $6,572,000 at December 31, 1994
and 1993, respectively.
Revenues received under royalty and licensing agreements are recognized based on
the terms of the underlying contractual agreements.
32
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." Statement 109
requires the recognition of deferred tax assets and liabilities based on
differences between financial reporting and tax bases of assets and liabilities
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
NET LOSS PER COMMON SHARE
Net loss per common share is calculated by dividing net loss by the weighted
average number of common shares and, if dilutive, common stock equivalents
outstanding during the period.
NOTE 3. SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale consist of the following at December 31, 1994 (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Government and agency securities $ 10,049 $ -- $ (247) $ 9,802
Collateralized mortgage obligations 118 -- (1) 117
-------- ------- ------- --------
Total $ 10,167 $ -- $ (248) $ 9,919
-------- ------- ------- --------
-------- ------- ------- --------
</TABLE>
The gross realized gains and losses on sales and maturities of available-for-
sale securities totaled $5,000 and $4,000, respectively, for the year ended
December 31, 1994. The net adjustment for unrealized losses on available-for-
sale securities is included as a component of shareholder's equity and totaled
$248,000 for the year ended December 31, 1994.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following at December 31,
1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Land $ 2,140 $ 2,140
Buildings and improvements 49,304 48,213
Equipment 39,752 36,365
Leasehold improvements 18,902 18,794
Construction-in-progress -- 1,018
--------- ---------
110,098 106,530
Less accumulated depreciation and amortization (13,775) (6,035)
--------- ---------
Net property, plant and equipment $ 96,323 $ 100,495
--------- ---------
--------- ---------
</TABLE>
Equipment, principally laboratory and office equipment, includes $3,542,000 and
$7,043,000 at December 31, 1994 and 1993, respectively, under capitalized lease
arrangements. Related accumulated amortization was $2,953,000 and $4,412,000 at
December 31, 1994 and 1993, respectively. The leases contain purchase options
at the end of the lease terms.
Interest costs of $14,000, and $453,000 for the periods June 2, 1993 to December
31, 1993, and January 1, 1993 to June 1, 1993, respectively, were capitalized
and added to the cost of property, plant and equipment. No interest was
capitalized during the year ended December 31, 1994.
33
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. LONG-TERM DEBT AND OTHER OBLIGATIONS
Long-term debt and other obligations consist of the following at December 31,
1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ----------
<S> <C> <C>
Variable rate construction loan,
due in quarterly installments of $1.2 million from 1992 through
1994 and a final payment of $10.6 million due March 31,1995 $ 10,600 $ 15,400
Capitalized lease obligations 724 2,336
Deferred state sales tax on manufacturing
facility, due in annual installments from 1996 to 2000 3,442 3,448
Termination benefits payable to former officers 1,396 1,649
Other 449 617
---------- ----------
16,611 23,450
Less current portion 11,595 6,914
---------- ----------
$ 5,016 $ 16,536
---------- ----------
---------- ----------
</TABLE>
The interest rate on the construction loan is based on the LIBOR, prime or CD
rate, at the Company's option, with an average interest rate of 6.0%, 4.9% and
4.7% for the year ended December 31, 1994 and the periods June 2, 1993 to
December 31, 1993, and January 1, 1993 to June 1, 1993, respectively. The loan
is secured by land, buildings and equipment. In addition, the lender holds as
collateral marketable securities with an aggregate cost of approximately $10
million.
In connection with the Merger, termination benefits were awarded to the former
Chief Executive Officer ("CEO") and an officer who retired from the Predecessor.
Benefits are payable to the CEO over approximately 20 years in varying amounts
and have been discounted using a rate of 7%.
Scheduled annual maturities of long-term debt and other obligations in 1996 and
the three subsequent years are as follows: $566,000, $540,000, $714,000 and
$888,000, respectively.
Interest paid on all borrowings, in excess of amounts capitalized, was
$2,515,000, $1,021,000, and $159,000 for the year ended December 31, 1994 and
the periods June 2, 1993 to December 31, 1993, and January 1, 1993 to June 1,
1993, respectively. All interest incurred during 1992 was capitalized.
NOTE 6. FAIR VALUES OF FINANCIAL INSTRUMENTS
At December 31, 1994 and 1993, the Company had several categories of financial
instruments. With the exception of the deferred state sales tax, the balance
sheet carrying value for all categories of financial instruments approximate
fair value at December 31, 1994 and December 31, 1993. The fair value of the
deferred state sales tax on the Company's manufacturing facility was estimated
by discounting the future cash flows using the Company's current estimated
incremental borrowing rate for similar types of borrowing arrangements. At
December 31, 1994 and 1993, the fair value of the deferred state sales tax was
$2,423,000 and $2,348,000 compared to a balance sheet carrying value of
$3,442,000 and $3,448,000, respectively.
NOTE 7. SHAREHOLDERS' EQUITY
COMMON STOCK WARRANTS
In connection with the Receptech Corporation ("Receptech") units offering (see
Note 12), the Predecessor issued 2,290,000 common stock warrants in exchange for
the right to acquire all of the outstanding common stock of Receptech. At
December 31, 1994 and 1993, the remaining unexercised warrants totaled 155,945
and 885,637, respectively. Each warrant entitles the holder to receive the
Merger consideration of $21 in cash and one share of common stock of the
Successor after payment of the exercise price of $20.35. The excess of the
Merger consideration over the exercise price for all unexercised warrants at
June 1, 1993, totaling $1,369,000, was accrued by the Successor and is reflected
in shareholders' equity. The warrants will expire on January 31, 1995.
34
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. SHAREHOLDERS' EQUITY, CONTINUED
STOCK OPTIONS
Prior to the Merger, Merger Subsidiary adopted the 1993 Stock Option Plan (the
"Plan") which provides for the issuance of incentive and non-qualified stock
options to employees and officers. There have been 1,225,000 shares of common
stock reserved for the plan. Options are granted by a committee, appointed by
the Successor's Board of Directors, which consists of two or more members of the
Board of Directors. Under policy of the Successor, options are not granted at
less than the fair market value of the Successor's common stock at the date of
grant. Each outstanding option has a term of ten years from the date of grant
and becomes exercisable at the rate of 20% per year beginning one year from the
date of grant.
Information with respect to the Plan follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Shares Subject
to Option Price per Share
-------------- ----------------
<S> <C> <C>
Balance at December 31, 1993 838 $ 17.50 - 31.50
Granted 179 11.75 - 18.88
Canceled (186) 13.13 - 31.50
-------- -------------
Balance at December 31, 1994 831 $ 11.75 - 31.50
-------- -------------
-------- -------------
Options exercisable at December 31, 1994 144
--------
--------
Shares available for future grants at December 31, 1994 394
--------
--------
</TABLE>
Pursuant to the Merger, immediately prior to the Effective Time, holders of
stock options were given the right to exercise all options, whether or not the
vesting requirements for exercise were met. All options relating to the
Predecessor's stock option plans were either exercised or canceled in 1993.
Accordingly, there were no outstanding options relating to the Predecessor's
stock option plans at December 31, 1994 or 1993.
In December 1992, the Predecessor accepted notes from employees totaling
$5,899,000 in payment of stock option exercise prices and income tax withholding
with respect to the gain on such exercises. At December 31, 1992, the
outstanding loan balance of $5,899,000 was reflected as a reduction of
shareholders' equity. All such loans were repaid by December 31, 1993.
GUARANTY PAYMENTS RECEIVABLE FROM CYANAMID
Under the terms of the Amended and Restated Governance Agreement, Cyanamid has
agreed to make certain payments or contribute products to the Successor if
revenues from the Lederle Oncology Products do not achieve certain levels
("Expected Revenues") through December 31, 1997. The revenue shortfall
obligation is limited to a maximum amount in each year ("Maximum Guaranty
Obligation"). Such payments are treated as additional contributions to the
capital of the Successor.
Cyanamid's Maximum Guaranty Obligation and the Expected Revenues for the years
ending December 31, 1995 through December 31, 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
Maximum
Guaranty Expected
Year Ending December 31, Obligation Revenues
- ------------------------ ---------- ---------
<S> <C> <C>
1995 $ 45,300 $ 168,600
1996 56,000 190,500
1997 60,000 216,500
</TABLE>
The Successor recorded a receivable from Cyanamid of $35,768,000 and $7,373,000
for the revenue shortfall related to the Lederle Oncology Products for the year
ended December 31, 1994 and the period June 2, 1993 to December 31, 1993.
35
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INCOME TAXES
The Successor's deferred tax assets consist primarily of the benefit to be
derived from unused net operating tax loss carryforwards of approximately $194
million and carryforwards of approximately $9 million for research and
experimental credits at December 31, 1994. The carryforwards expire from 1995
through 2009. Due to the uncertainty regarding the Successor's ability to
generate taxable income in the future to realize the benefit from its net
deferred tax assets at December 31, 1994 and 1993, a valuation allowance of
approximately $75 million and $58 million, respectively, has been recognized for
financial reporting purposes to offset the excess of the Successor's deferred
tax assets over its deferred tax liabilities. This represents an increase in
the valuation allowance of $17 million for the year ended December 31, 1994, $8
million for the period January 1, 1993 to June 1, 1993 and $12 million for the
period June 2, 1993 to December 31, 1993. In the event the Successor is able to
utilize its net operating tax loss carryforwards, the carryforwards would be
used to first reduce the unamortized balance of goodwill, followed by the
unamortized balance of intangible product rights and, lastly, federal income tax
expense.
The significant components of the Successor's deferred tax assets and
liabilities at December 31, 1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
------------- ---------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 67,933 $ 53,258
Research and experimental credits 9,564 7,269
In-process research and development 1,818 1,497
Accounts receivable allowances 2,288 1,485
Reserve for litigation settlement -- 1,558
Other 2,296 1,686
------------- ----------------
Total deferred tax assets 83,899 66,753
Valuation allowance for deferred tax assets (75,227) (58,422)
------------- ----------------
Net deferred tax assets 8,672 8,331
Deferred tax liabilities:
Tax over book depreciation 3,575 1,730
Purchase accounting adjustments 3,783 4,801
Other 1,314 1,800
------------- ----------------
Total deferred tax liabilities 8,672 8,331
------------- ----------------
$ -- $ --
------------- ----------------
------------- ----------------
</TABLE>
The provision for income taxes consist of the following (in thousands):
<TABLE>
<CAPTION>
Period
Year Ended June 2, 1993 to
December 31, December 31,
1994 1993
------------- ----------------
<S> <C> <C>
Foreign $ 1,616 $ 1,085
State 342 --
------------- ----------------
$ 1,958 $ 1,085
------------- ----------------
------------- ----------------
</TABLE>
The entire provision for the period is current. Income taxes paid during the
year ended December 31, 1994 totaled $1,347,000 and no income taxes were paid
during the period June 2, 1993 to December 31, 1993. For the period January 1,
1993 to June 1, 1993 and for the year ended December 31, 1992, the Predecessor
was in a net operating loss position for domestic federal income tax purposes
and was not subject to foreign income taxes.
36
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INCOME TAXES, CONTINUED
Reconciliation of the U.S. federal tax rate to the Successor's effective tax
rate is as follows:
<TABLE>
<CAPTION>
Period
Year Ended June 2, 1993 to
December 31, December 31,
1994 1993
-------------- ---------------
<S> <C> <C>
U.S. federal statutory tax rate (35.0)% (35.0)%
In-process research and development - 33.2
Non-deductible merger expense (4.1) -
Non-deductible amortization of goodwill 2.3 0.1
Other 0.2 0.4
Increase in valuation reserve 50.5 1.3
Foreign taxes 5.2 0.3
State taxes 1.1 -
Foreign income subject to different rates (6.5) -
Tax benefit from research and development credit (7.4) -
-------------- --------------
Effective tax rate 6.3% 0.3%
-------------- --------------
-------------- --------------
</TABLE>
NOTE 9. EMPLOYEE BENEFITS
The Successor has a defined contribution plan covering all full-time salaried
employees. The plan is a salary deferral arrangement pursuant to Internal
Revenue Code section 401(k) and is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"). The Successor matches 100% of
the first 2% of employee's deferred salary and 50% of the next 4% of employee's
deferred salary. Employees with five or more years of service receive a match
of 100% of the first 2% of deferred salary and 75% of the next 4% of deferred
salary. The matching contributions to the plan were $1,656,000, $773,000,
$408,000 and $401,000 for the year ended December 31, 1994, the period June 2,
1993 to December 31, 1993, the period January 1, 1993 to December 31, 1993 and
the year ended December 31, 1992, respectively.
NOTE 10. RELATED PARTY TRANSACTIONS
On June 1, 1993, the Predecessor merged with a subsidiary of Cyanamid. In
November 1994, all of the outstanding shares of common stock of Cyanamid were
acquired by American Home Products. Cyanamid, its parent and subsidiaries are
related parties of the Successor as a result of the Merger. Immediately prior
to the Effective Time of the Merger, the Predecessor entered into a number of
agreements with Cyanamid and its subsidiaries. The Successor assumed the rights
and obligations of the Predecessor under these agreements and has subsequently
entered into a loan agreement with a wholly owned subsidiary of Cyanamid.
Significant transactions under these agreements are summarized below.
RESEARCH AND DEVELOPMENT AGREEMENT
The Predecessor and Cyanamid entered into a research and development agreement
under which the parties cooperate to research, develop and commercialize new
products. Under the terms of the research and development agreement, the
Predecessor agreed to support Cyanamid's worldwide oncology research and
development programs by paying certain amounts to Cyanamid. For the year ended
December 31, 1994 and the period June 2, 1993 to December 31, 1993, the
Successor paid $15,300,000 and $17,799,000, respectively, to Cyanamid under the
research and development agreement, which represented the entire 1994 and 1993
obligations. For the years 1995 through 1997, the Successor's estimated funding
obligation under the research and development agreement are $15,800,000,
$26,100,000 and $38,300,000, respectively, which represents 25%, 37.5% and 50%
of Cyanamid's forecasted research and development budget for each respective
year. For years after 1997, the Successor is obligated to contribute 50% of the
budgeted cost of Cyanamid's oncology research and development programs.
Cyanamid also agreed to support development of tumor necrosis factor receptor at
a cost of $4,000,000 per year for the years 1994 through 1997. Cyanamid's
entire 1994 obligation was received during the year.
37
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. RELATED PARTY TRANSACTIONS, CONTINUED
ONCOLOGY PRODUCT LICENSE AGREEMENT
The Predecessor and Cyanamid entered into an oncology product license agreement
under which the Predecessor granted to Cyanamid an exclusive license to
manufacture in North America certain oncology products for ultimate sale by
Cyanamid and its sub-licensees outside North America. Cyanamid agreed to pay
the Predecessor a royalty equal to 5% of the net sales of the oncology products
sold under this agreement. The Successor recognized revenue under this
agreement of $2,571,000 and $650,000 for the year ended December 31, 1994 and
the period June 2, 1993 to December 31, 1993, of which $800,000 and $650,000 was
receivable at December 31, 1994 and 1993, respectively.
NEW ONCOLOGY PRODUCT LICENSE AGREEMENT
The Predecessor and Cyanamid entered into a New Oncology Product license
agreement under which the Predecessor granted to Cyanamid a co-exclusive license
to make, have made, use and sell outside North America new oncology products
resulting from the research and development efforts of the Successor ("New
Oncology Products"). Cyanamid agreed to pay a royalty equal to 5% of the net
sales of the New Oncology Products sold under this agreement. In the event that
a New Oncology Product is to be manufactured by the Successor for Cyanamid or by
Cyanamid for the Successor, the manufacturing party will supply such product at
a price that will reimburse the manufacturing party for its manufacturing,
process development and overhead costs allocable to such product, plus a
reasonable profit. The Successor recognized revenue under this agreement of
$327,000 for the year ended December 31, 1994, all of which is receivable at
December 31, 1994.
UNITED STATES SERVICES AGREEMENT
The Predecessor and Cyanamid entered into a services agreement under which
Cyanamid agreed to provide certain ongoing services, including, among other
things, marketing, customer service, distribution, and credit and collections
related to the Lederle Oncology Products. The Successor incurred costs under
this agreement totaling $6,759,000 and $5,937,000 for the year ended December
31, 1994 and the period June 2, 1993 to December 31, 1993, respectively, of
which $563,000 was payable at December 31, 1994. The entire 1993 obligation was
paid during the period June 2, 1993 to December 31, 1993. Cyanamid also
incurred certain additional expenses not included in the service fees for which
the Successor agreed to directly reimburse Cyanamid. These expenses totaled
$893,000 and $1,341,000 for the year ended December 31, 1994 and the period June
2, 1993 to December 31, 1993, of which $1,705,000 and $1,132,000 was payable at
December 31, 1994 and 1993, respectively. The Successor has the right to
designate which services it will continue to purchase from Cyanamid under the
services agreement upon a one-year notice to Cyanamid. During the period
between notification and termination of any existing services, the Successor
will be obligated to continue to purchase the services.
SUPPLY AGREEMENT, TOLL MANUFACTURING AGREEMENT AND METHOTREXATE DISTRIBUTORSHIP
AGREEMENT
The Predecessor and Cyanamid entered into a supply agreement and toll
manufacturing agreement under which Cyanamid and LPI agreed to manufacture and
supply the reasonable commercial requirements of certain oncology products at a
price equal to 125% of Cyanamid's or its subsidiaries' manufacturing costs. The
Predecessor also entered into a methotrexate distributorship agreement whereby
LPI agreed to supply methotrexate at certain established prices which are
adjusted annually. The Successor and its subsidiaries purchased $10,062,000 and
$11,822,000 of inventory from Cyanamid and its subsidiaries under these
agreements during the year ended December 31, 1994 and the period June 2, 1993
to December 31, 1993, of which $1,426,000 and $1,419,000 was payable at December
31, 1994 and 1993, respectively. In addition, Cyanamid billed the Successor
$677,000 and $578,000 for other expenses, of which $83,000 and $474,000 was
payable at December 31, 1994 and 1993, respectively.
DISTRIBUTORSHIP AGREEMENT FOR CANADA
The Predecessor and Cyanamid Canada, Inc. ("Cyanamid Canada"), a wholly owned
subsidiary of Cyanamid, entered into a distributorship agreement under which the
Predecessor appointed Cyanamid Canada distributor in Canada of certain oncology
products. The Predecessor agreed to supply the oncology products to Cyanamid
Canada at certain established prices which are subject to annual adjustment.
The Successor sold $1,894,000 and $1,642,000 of inventory to Cyanamid Canada
during the year ended December 31, 1994 and the period June 2, 1993 to December
31, 1993, of which $265,000 and $1,642,000 was receivable at December 31, 1994
and 1993, respectively.
38
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. RELATED PARTY TRANSACTIONS, CONTINUED
TRADEMARK LICENSE AGREEMENT
The Predecessor and Cyanamid entered into a trademark license agreement under
which Cyanamid granted to the Predecessor the right to use certain trademarks
relating to oncology products. The Predecessor agreed to pay Cyanamid a royalty
of 2% of net sales of the products sold under these trademarks. The royalty
incurred by the Successor for the year ended December 31, 1994 and the period
June 2, 1993 to December 31, 1993 totaled $1,702,000 and $889,000, of which
$509,000 and $374,000 was payable at December 31, 1994 and 1993, respectively.
GOVERNANCE AGREEMENT
Under the terms of the governance agreement, Cyanamid agreed to make certain
payments or contribute products to the Successor if revenues from the Lederle
Oncology Products do not achieve certain established levels through December 31,
1997 (see Note 7). At December 31, 1994 and December 31, 1993 the Successor had
recorded a receivable from Cyanamid of $35,768,000 and $7,373,000 related to the
revenue shortfall for the year ended December 31, 1994 and the period June 2,
1993 to December 31, 1993, respectively.
LOAN AGREEMENT
The Successor and a subsidiary of Cyanamid entered into a loan agreement whereby
the subsidiary agreed to provide to the Successor a $50 million line of credit,
limited to 110% of the revenue guaranty receivable, which expires March 31,
1996. As of December 31, 1994, the Successor had borrowed $34,000,000 under the
agreement. Interest accrues at LIBOR plus 1% and is payable upon maturity of
individual borrowings under the loan. For the year ended December 31, 1994 and
the period June 2, 1993 to December 31, 1993, the Successor recorded interest
expense of $1,143,000 and $50,000 related to the loan, of which $39,000 and
$17,000 was payable at December 31, 1994 and 1993, respectively.
NOTE 11. BRISTOL-MYERS SQUIBB AGREEMENT
The Predecessor and Bristol-Myers Squibb Company ("BMS") entered into a product
exchange agreement in 1992. Pursuant to the agreement, the Predecessor licensed
exclusive foreign marketing rights to PIXY321, to BMS in exchange for exclusive
U.S. marketing rights to HYDREA and RUBEX (collectively, "the BMS Products").
BMS had the right to terminate the agreement at any time through December 31,
1993, and in the event of a change in control of the Predecessor. Under this
clause, in December 1993, BMS notified the Successor that it was exercising its
right to terminate the agreement, returning all rights in PIXY321 to the
Successor, and retaining all rights to the BMS Products. Under the terms of the
Immunex New Oncology Product License Agreement between the Predecessor and
Cyanamid, the foreign marketing rights to PIXY321 were subsequently licensed to
Cyanamid.
In order to provide assurance to BMS in the case of certain events adversely
affecting the value of the PIXY321 rights, the Predecessor agreed to provide,
through the issuance of common stock, up to $50 million of additional
consideration for the BMS products upon the occurrence of certain adverse
triggering events. In 1992, the Predecessor began reserving for the contingency
that part or all of the $50 million of additional consideration could be payable
to BMS in the future upon occurrence of a triggering event. The Predecessor
recorded the charge against cost of sales calculated over the expected 15-year
period during which revenue was to be generated from selling the BMS products.
A non-cash charge of $1.6 million, $1.1 million and $2.7 million was recorded
for the periods June 2, 1993 to December 31, 1993, January 1, 1993 to June 1,
1993 and the year ended December 31, 1992, respectively. Upon termination of
the agreement in December 1993, the reserve, totaling $5.4 million, was reversed
and included in other income.
39
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. RECEPTECH CORPORATION
In 1989, Receptech was formed to accelerate the development of soluble cytokine
receptor products (the "Products") licensed to Receptech by the Predecessor. At
the time of the Receptech units offering, in exchange for warrants to purchase
2,290,000 shares of the Predecessor's common stock, the Predecessor received an
option to purchase all of the outstanding Receptech common stock at specified
prices. Under a contract with Receptech, the Predecessor conducted research,
development and the initial phases of clinical testing of the Products. The
Predecessor was reimbursed for its direct and indirect costs associated with the
research and development of the products plus a general and administrative
factor and a 10% fee. In 1992 the Predecessor recognized revenue under the
contract of $4,110,000 relating to expenses totaling $4,460,000.
In December 1992, the Predecessor exercised its option to purchase all
outstanding shares of Receptech common stock. Payment of $26 per share was made
to Receptech Shareholders in February 1993 for a total cost to the Predecessor
of $59,774,000. The transaction was recorded in 1992 using the purchase method.
Accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values. The Predecessor
expensed the amount applicable to in-process research and development in 1992 as
a one-time charge of $58,717,000.
NOTE 13. COMMITMENTS AND CONTINGENCIES
The Successor leases office and laboratory facilities under certain
noncancelable operating leases which expire through August 2000. These leases
provide the Successor with options to renew the leases at fair market rentals
through August 2015. A summary of minimum rental commitments under
noncancelable operating and capital leases at December 31, 1994 follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OPERATING CAPITAL
- ----------------------- --------- --------
<S> <C> <C>
1995 $ 2,761 $ 766
1996 2,798 -
1997 2,807 -
1998 2,283 -
1999 2,108 -
Thereafter 1,369 -
-------- --------
Total minimum lease payments $ 14,126 766
--------
--------
Less amount representing interest 42
--------
Present value of minimum capital lease payments $ 724
--------
--------
</TABLE>
Rental expense on operating leases was $2,572,000, $1,122,000, $1,001,000 and
$2,253,000 for the year ended December 31, 1994, the periods June 2, 1993 to
December 31, 1993, January 1, 1993 to June 1, 1993, and the year ended December
31, 1992, respectively.
In September 1993, Cistron Biotechnology Inc. ("Cistron") filed suit against
Immunex asserting that Immunex misappropriated information regarding
Interleukin-1 beta ("IL-1 beta") and that such information was used by Immunex
in patent applications relating to IL-1 beta. Immunex filed a complaint seeking
a declaratory judgment that Cistron's claims are preempted by patent law, barred
by a judgment in a patent interference decided by the United States Patent and
Trademark Office and time-barred by the statute of limitations and doctrine of
laches. In June 1994, the Court entered an order finding that issues of fact
existed concerning the applicability of the statute of limitations and laches to
Cistron's claims and, accordingly, denied Immunex's motion on the time bar
issues. A trial has been scheduled for 1995. The Company intends to vigorously
defend the allegations of the suit. The potential liability, if any, is not
determinable at this time; however, it is not expected the suit will have a
material adverse impact on the financial condition of the Company.
40
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. COMMITMENTS AND CONTINGENCIES, CONTINUED
The outcomes of certain unresolved patent situations could have a material
adverse impact on the Successor's future product sales. The Successor is a
party to a patent interference proceeding directed to human GM-CSF DNAs. If a
patent were to be granted to one of the other parties to the proceeding, the
Successor might be sued for patent infringement in a lawsuit seeking damages,
royalties, or an injunction barring the Successor from making, using or selling
LEUKINE- (Sargramostim). PIXY321 is a protein under development that is
designed to combine the effects of GM-CSF and Interleukin-3 ("IL-3") in a single
molecule. A competitor holds patents covering recombinant DNA technologies
related to IL-3. This competitor, or a competitor holding a GM-CSF DNA patent,
could claim that PIXY321 infringes either or both such patents. The outcome of
patent litigation, if any, involving PIXY321 cannot be predicted. If the
Successor were blocked from manufacturing or selling PIXY321 or otherwise unable
to resolve such litigation on reasonable economic terms, the Successor's
prospects may be materially adversely affected.
In accordance with a 1992 settlement agreement with Hoechst Roussel
Pharmaceuticals, Inc. ("HRPI"), a payment of $2.0 million will be made to HRPI
if the Successor receives an expanded label indication for LEUKINE for treatment
of prophylaxis of chemotherapy-induced neutropenia.
The Successor has entered into two separate agreements to fund third-party
research and development. Under one agreement, the Successor has agreed to fund
research in 1995 and 1996 totaling $1.0 million annually. Under the second
agreement, the Successor has committed to fund research estimated at $0.9
million, $0.8 million and $0.3 million in 1995, 1996 and 1997, respectively.
Funding beyond 1997 is dependent upon several factors, the status of which are
reviewed and determined annually.
Various license agreements exist which require the Successor to pay royalties
based on a percentage of sales of products manufactured using licensed
technology or sold under license. Expenses incurred under these agreements are
included in cost of product sales and totaled $6,194,000, $3,307,000, $1,751,000
and $1,725,000 for the year ended December 31, 1994, the period June 2, 1993 to
December 31, 1993, the period January 1, 1993 to June 1, 1993 and the year ended
December 31, 1992, respectively.
NOTE 14. BUSINESS COMBINATION
The Merger was accounted for by the Successor using the purchase method of
accounting. Accordingly, assets and liabilities acquired from the Predecessor
were recorded at historical cost adjusted by the amount of excess purchase price
(53.5% of the excess of the aggregated market value of the Predecessor's common
stock outstanding at the Effective Time, on a fully diluted basis, over the
shareholders' equity of the Predecessor). Excess purchase price was allocated
to the Predecessor's assets and liabilities acquired based on estimated fair
market values at the Effective Time.
The allocation of excess purchase price was as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Inventories $ 892
Property, plant and equipment 5,296
Property held for future development or sale 535
Investment in affiliate 1,391
Intangible assets 31,049
In-process research and development 346,359
Liabilities assumed (2,073)
---------
Total $ 383,449
---------
---------
</TABLE>
Excess purchase price allocated to in-process research and development was
expensed by the Successor, as required under generally accepted accounting
principles, which resulted in a significant non-cash charge against earnings of
$346.4 million for the period June 2, 1993 to December 31, 1993.
Employee stock options outstanding immediately prior to the Merger were eligible
to be exercised within 60 days after the Effective Time using a cashless method
of exercise whereby the employee tendered the number of option shares necessary
to satisfy the exercise price. Such exercises resulted in a one-time, non-cash
charge to the Predecessor's earnings of $25.6 million during the period January
1, 1993 to June 1, 1993.
The Predecessor incurred certain expenses related to the Merger totaling $14.8
million which were expensed during the period January 1, 1993, to June 1, 1993.
41
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial results for the year ended December 31, 1994 and the periods
June 2, 1993 to December 31, 1993 and January 1, 1993 to June 1, 1993 are as
follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
SUCCESSOR
------------------------------------------------------------------------
Quarter Ended
1994 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total revenues $ 39,533 $ 34,015 $ 35,103 $ 35,681
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Operating expenses $ 45,920 $ 44,802 $ 42,286 $ 40,454
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss $ (8,397) $ (11,713) $ (7,645) $ (5,349)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per share $ (0.22) $ (0.30) $ (0.20) $ (0.14)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------- --------------------------------------------------
Period Period
Quarter Ended April 1, to June 2, to Quarter Ended
1993 March 31 June 1 June 30 September 30 December 31
- ---- ------------- -------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 15,694 $ 11,862 $ 15,252 $ 37,702 $ 42,356
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Operating expenses $ 26,547 $ 66,754 $ 361,888 $ 47,108 $ 51,765
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net loss $ (9,549) $ (54,618) $(346,426) $ (9,231) $ (10,478)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net loss per share $ (0.63) $ (3.55) $ (9.59) $ (0.24) $ (0.27)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The total of quarterly net loss per share amounts does not equal the annual
amounts due to changes in the number of shares used to calculate per share
amounts.
42
<PAGE>
Report of Ernst and Young LLP, Independent Auditors
Board of Directors
Immunex Corporation
We have audited the accompanying consolidated balance sheets of Immunex
Corporation (Successor, see Note 1) as of December 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the year ended December 31, 1994 and the period June 2, 1993 through
December 31, 1993, and the related consolidated statements of operations,
shareholders' equity, and cash flows of Immunex Corporation (Predecessor, see
Note 1) for the period January 1, 1993 through June 1, 1993 and for the year
ended December 31, 1992. Our audits also include the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Immunex
Corporation (Successor) as of December 31, 1994 and 1993, and the consolidated
results of its operations and its cash flows for the year ended December 31,
1994 and for the period June 2, 1993 through December 31, 1993, and the
consolidated results of operations and cash flows of Immunex Corporation
(Predecessor) for the period January 1, 1993 through June 1, 1993 and for the
year ended December 31, 1992, in conformity with generally accepted accounting
principles. Also, in our opinion the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Ernst & Young LLP
Seattle, Washington
January 20, 1995
43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the
section labeled "Election of Directors" and "Executive Officers" in the
Company's definitive Proxy Statement for the annual meeting to be held on April
26, 1995.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
section labeled "Executive Compensation" in the Company's definitive Proxy
Statement for the annual meeting to be held on April 26, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
sections labeled "Principal Holders of Voting Securities" in the Company's
definitive Proxy Statement for the annual meeting to be held on April 26, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
sections labeled "Relationship with American Cyanamid" in the Company's
definitive Proxy Statement for the annual meeting to be held on April 26, 1995.
44
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. FINANCIAL STATEMENTS. The following Financial Statements are
included in Part II, Item 8:
Page in
Form 10-K
----------
Consolidated Balance Sheets at December 31, 1994 and
1993. 27
Consolidated Statements of Operations for the year ended
December 31, 1994, the periods June 2, 1993 to December 31,
1993 and January 1, 1993 to June 1, 1993 and for the year
ended December 31, 1992. 28
Consolidated Statements of Shareholders' Equity for the year
ended December 31, 1994, the periods June 2, 1993 to
December 31,1993 and January 1, 1993 to June 1, 1993 and for
the year ended December 31, 1992. 29
Consolidated Statements of Cash Flows for the year ended
December 31, 1994, the periods June 2, 1993 to December 31,
1993 and January 1, 1993 to June 1, 1993 and for the year
ended December 31, 1992. 30
Notes to Consolidated Financial Statements for the year
ended December 31, 1994, the periods June 2, 1993 to
December 31, 1993 and January 1, 1993 to June 1, 1993 and
for the year ended December 31, 1992. 31-42
Report of Ernst and Young LLP, Independent Auditors. 43
2. FINANCIAL STATEMENT SCHEDULE. The following schedule supporting the
foregoing Financial Statements for the year ended December 31, 1994,
the periods June 2, 1993 to December 31, 1993 and January 1, 1993 to
June 1, 1993 and for the year ended December 31, 1992 is filed as
part of this Form 10-K:
Page in
Form 10-K
---------
II - Valuation and Qualifying Accounts 50
All other schedules are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
45
<PAGE>
3. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C> <C>
3.1 Certificate of Incorporation, as filed with the Secretary
of State of Washington on April 14. 1994. 51-57
3.2 Amended and Restated Bylaws. (Exhibit 3.4) (G)
4.1 Warrant Agreement, dated as of November 16, 1989 between the
Company and Manufacturers Hanover Trust Company of California.
(Exhibit 4.5) (C)
10.1 Real Estate Purchase and Sale Agreement by and between
Cornerstone-Columbia Development Company ("CCDC") and the Company
dated November 12, 1986; Master Lease, dated as of August 20, 1981
between OTR,an Ohio General Partnership, and CCDC; Assignment of
Master Lease between CCDC and the Company dated December 17, 1986;
Consent to Assignment of Master Lease from OTR to CCDC, the
Company and Weyerhaeuser Real Estate Company, dated
December 8, 1986. (Exhibit 10.22) (A)
10.2 Amendment to Master Lease dated May 1, 1994, between the
Company and Watumull Enterprises, LTD. 58-61
10.3 Amended and Restated Lease Agreement dated December 21,
1994, between the Company and the Central Life
Assurance Company. 62-90
10.4 Form of Indemnification Agreement, together with schedule of
actual agreements. (Exhibit 10.3) (F)
**10.5 Form of Employment Agreement, together with schedule of
actual agreements. (Exhibit 10.3) (G)
10.6 Loan Agreement, dated August 23, 1991, between the Company,
Immunex Manufacturing Corporation and U.S. Bank of
Washington, N.A. (Exhibit 10.12) (F)
10.7 Amended and Restated Agreement and Plan of Merger, dated as
of December 15, 1992, among the Company , American Cyanamid
Company, Lederle Parenterals, Inc. and Lederle Oncology
Corporations. (Exhibit 2.1) (G)
10.8 Amended and Restated Governance Agreement, dated as of
December 15, 1992, among the Company, American Cyanamid
Company and Lederle Oncology Corporation. (Exhibit 2.2) (G)
*10.9 Settlement Agreement, dated as of July 22, 1992, among
the Company, Hoechst-Roussel Pharmaceuticals Inc. and
Behringwerke AG. (F)
10.10 First Amendment to Loan Agreement, dated as of November 4,
1992, between the Company, Immunex Manufacturing Corporation
and U.S. Bank of Washington, NA. (Exhibit 10.14) (F)
10.11 Waiver of Covenant to Loan Agreement, dated as of January 15,
1993, between the Company, Immunex Manufacturing Corporation
and U.S. Bank of Washington, NA. (Exhibit 10.15) (F)
10.12 Research and Development Agreement between the Company and
American Cyanamid Company Dated June 1, 1993. (Exhibit 10.1) (H)
</TABLE>
46
<PAGE>
<TABLE>
<S> <C> <C>
10.13 Oncology Product License Agreement between the Company and
American Cyanamid Company dated as of June 1, 1993.
Exhibit 10.2 (H)
10.14 Immunex New Oncology Product License Agreement between the
Company and American Cyanamid Company dated as of June 1, 1993.
(Exhibit 10.3) (H)
*10.15 United States Service Agreement between the Company and
American Cyanamid Company dated as of June 1, 1993.
(Exhibit 10.4) (H)
10.16 United States Royalty-Bearing Trademark License Agreement
between the Company and American Cyanamid Company dated as
of June 1, 1993. (Exhibit 10.5) (H)
*10.17 Toll Manufacturing Agreement between Immunex Carolina
Corporation, a wholly owned subsidiary of the Company, and
Lederle Parenterals, Inc. dated as of June 1, 1993.
(Exhibit 10.6) (H)
*10.18 Supply Agreement between the Company and American Cyanamid
Company dated as of June 1, 1993. (Exhibit 10.7) (H)
**10.19 Separation Agreement between the Company and Stephen A.
Duzan dated as of May 26, 1993. (Exhibit 10.8) (H)
10.20 Loan Agreement between the Company and Cyanamid Agricultural
de Puerto Rico, Inc. dated as of September 30, 1993. (I)
10.21 Amended 1993 Stock Option Plan (Exhibit 4.1) (J)
10.22 Director Stock Option Plan (Exhibit 4.1) (K)
10.23 Second Amendment to Loan Agreement between the Company and
Cyanamid Agriculture de Puerto Rico, Inc. dated as of
November 18, 1994. 91-92
10.24 Agreement between the Company and American Home Products
dated as of September 23, 1994. 93-96
21.1 Subsidiaries of the Registrant. 97
23.1 Consent of Independent Auditors. 98
24.1 Power of Attorney. 99-105
27.1 Financial Data Schedule 106
- ---------------------------------
<FN>
* Confidential treatment granted as to certain portions.
** Executive compensation plan or arrangement.
(A) Incorporated by reference to designated exhibit included with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1986.
(B) Incorporated by reference to designated exhibit included with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988.
(C) Incorporated by reference to designated exhibit included with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989.
(D) Incorporated by reference to designated exhibit included with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990.
47
<PAGE>
(E) Incorporated by reference to designated exhibit included with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991.
(F) Incorporated by reference to designated exhibit included with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
(G) Incorporated by reference to designated exhibit included in the
Registration Statement on Form S-4 (SEC File No. 33-60254) filed by
Lederle Oncology Corporation March 18, 1993.
(H) Incorporated by reference to designated exhibit included with the
Company Current Report on Form 8-K dated June 4, 1993.
(I) Incorporated by reference to designated exhibit included with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993
(J) Incorporated by reference to designated exhibit included in the
Registration Statement on Form S-8 (SEC File No. 33-70370) filed by
Immunex Corporation on October 13, 1993.
(K) Incorporated by reference to designated exhibit included in the
Registration Statement on Form S-8 (SEC File No. 33-78694) filed by
Immunex Corporation on May 6, 1994.
</TABLE>
(b) REPORTS ON FORM 8-K.
Not applicable.
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
IMMUNEX CORPORATION
- -------------------
REGISTRANT
By: /s/ Douglas G. Sourthern March 16, 1995
------------------------------
Douglas G. Southern
Senior Vice President, Treasurer and
Chief Financial Officer
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:
/s/ Edward V. Fritzky March 16, 1995
------------------------------
Edward V. Fritzky
Chief Executive Officer, Chairman of the Board
and Director
(Principal Executive Officer)
Michael L. Kranda* March 16, 1995
------------------------------
Michael L. Kranda
President, Chief Operating Officer and Director
Steven Gillis* March 16, 1995
------------------------------
Steven Gillis
Director
/s/ Douglas G. Southern March 16, 1995
------------------------------
Douglas G. Southern
Senior Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Joseph J. Carr* March 16, 1995
------------------------------
Joseph J. Carr
Director
Kirby L. Cramer* March 16, 1995
------------------------------
Kirby L. Cramer
Director
Robert A. Essner* March 16, 1995
------------------------------
Robert A. Essner
Director
John E. Lyons* March 16, 1995
------------------------------
John E. Lyons
Director
Edith W. Martin* March 16, 1995
------------------------------
Edith W. Martin
Director
*By: /s/ Douglas G. Sourthern March 16, 1995
------------------------------
Douglas G. Southern
Attorney-in-Fact
49
<PAGE>
SCHEDULE II
IMMUNEX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Year ended December 31, 1992, the periods January 1, 1993
to June 1, 1993 and June 2, 1993 to December 31, 1993,
and the year ended December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Charged to Balance at
Beginning of Period Product Sales Deductions End of Period
------------------- -------------------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1992:
Reserve for discounts, returns
and bad debts $ 957 $ 4,841 $ 3,923 $ 1,875
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
For the Period January 1, 1993 to June 1, 1993:
Reserve for discounts, returns
and bad debts $ 1,875 $ 2,235 $ 1,140 $ 2,970
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
For the Period June 2, 1993 to December 31, 1993:
Reserve for discounts, returns
and bad debts $ 2,970 $ 6,537 $ 2,573 $ 6,934
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Reserve for chargebacks and
Medicaid rebates $ 0 $ 26,071 $ 19,499 $ 6,572
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Year ended December 31, 1994:
Reserve for discounts, returns
and bad debts $ 6,934 $ 11,215 $ 11,613 $ 6,536
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Reserve for chargebacks and
Medicaid rebates $ 6,572 $ 39,583 $ 40,333 $ 5,822
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
50
<PAGE>
Exhibit 3.1
- -------------------------------------------------------------------------------
STATE OF WASHINGTON SECRETARY OF STATE
- -------------------------------------------------------------------------------
I, RALPH MUNRO, Secretary of State of the State of Washington and custodian
of its seal, hereby issue this
CERTIFICATE OF INCORPORATION
to
IMMUNEX WASHINGTON CORPORATION
a Washington Profit corporation. Articles of Incorporation were filed for
record in this office on the date indicated below:
U.B.I 601 539 097 Date: April 14 1994
Given under my hand and the seal of the State
of Washington, at Olympia, the State Capitol
/s/Ralph Munro
--------------------------------------------
Ralph Munro, Secretary of State
51
<PAGE>
ARTICLES OF INCORPORATION
OF
IMMUNEX WASHINGTON CORPORATION
ARTICLE 1. NAME
The name of this corporation is Immunex Washington Corporation.
ARTICLE 2. SHARES
2.1 AUTHORIZED CAPITAL
The total number of shares which the corporation is authorized to issue
is 105,000,000, consisting of 100,000,000 shares of Common Stock having a par
value of $.01 per share and 5,000,000 shares of Preferred Stock having a par
value of $.01 per share. The Common Stock is subject to the rights and
preferences of the Preferred Stock as hereinafter set forth.
2.2 ISSUANCE OF PREFERRED STOCK IN SERIES
The Preferred Stock may be issued from time to time in one or more series
in any manner permitted by law and the provisions of these Articles of
Incorporation of the corporation, as determined from time to time by the Board
of Directors and stated in the resolution or resolutions providing for the
issuance thereof, prior to the issuance of any shares thereof. The Board of
Directors shall have the authority to fix and determine and to amend, subject to
the provisions hereof, the designation, preferences, limitations and relative
rights of the shares of any series that is wholly unissued or to be established.
Unless otherwise specifically provided in the resolution establishing any
series, the Board of Directors shall further have the authority, after the
issuance of shares of a series whose number it has designated, to amend the
resolution establishing such series to decrease the number of shares of that
series, but not below the number of shares of such series then outstanding.
2.3 DIVIDENDS
The holders of shares of the Preferred Stock shall be entitled to receive
dividends, out of the funds of the corporation legally available therefor, at
the rate and at the time or times, whether cumulative or noncumulative, as may
be provided by the Board of Directors in designating a particular series of
Preferred Stock. If such dividends on the Preferred Stock shall be cumulative,
then if dividends shall not have been paid, the deficiency shall be fully paid
or the dividends declared and set apart for payment at such rate, but without
interest on cumulative dividends, before any dividends on the Common Stock shall
be paid or declared and set apart for payment. The holders of the Preferred
Stock shall not be entitled to receive any dividends thereon other than the
dividends referred to in this section.
2.4 REDEMPTION
The Preferred Stock may be redeemable at such price, in such amount, and
at such time or times as may be provided by the Board of Directors in
designating a particular series of
52
<PAGE>
Preferred Stock. In any event, such Preferred Stock may be repurchased by the
corporation to the extent legally permissible.
2.5 LIQUIDATION
In the event of any liquidation, dissolution, or winding up of the
affairs of the corporation, whether voluntary or involuntary, then, before any
distribution shall be made to the holders of the Common Stock, the holders of
the Preferred Stock at the time outstanding shall be entitled to be paid the
preferential amount or amounts per share as may be provided by the Board of
Directors in designating a particular series of Preferred Stock and dividends
accrued thereon to the date of such payment. The holders of the Preferred Stock
shall not be entitled to receive any distributive amounts upon the liquidation,
dissolution, or winding up of the affairs of e corporation other than the
distributive amounts referred to in this section, unless otherwise provided by
the Board of Directors in designating a particular series of Preferred Stock.
2.6 CONVERSION
Shares of Preferred Stock may be convertible into Common Stock of the
corporation upon such terms and conditions, at such rate and subject to such
adjustments as may be provided by the Board of Directors in designating a
particular series of Preferred Stock.
2.7 VOTING RIGHTS
Holders of Preferred Stock shall have such voting rights as may be
provided by the Board of Directors in designating a particular series of
Preferred Stock.
ARTICLE 3. REGISTERED OFFICE AND AGENT
The name of the initial registered agent of this corporation and the
address of its initial registered office are as follows:
Scott G. Hallquist
51 University Street
Seattle, WA 98101
ARTICLE 4. PREEMPTIVE RIGHTS
No preemptive rights shall exist with respect to shares of stock or
securities convertible into shares of stock of this corporation.
ARTICLE 5. CUMULATIVE VOTING
The right to cumulate votes in the election of Directors shall not exist
with respect to shares of stock of this corporation.
53
<PAGE>
ARTICLE 6. DIRECTORS
6.1 NUMBER AND TERM OF DIRECTORS
The number of Directors of this corporation shall be determined in the
manner provided by the Bylaws and may be increased or decreased from time to
time in the manner provided therein, PROVIDED, HOWEVER, that the number of
directors shall not be reduced so as to shorten the term of any director at the
time in office. Directors need not be shareholders. Unless a director dies,
resigns, or is removed, he shall hold office until the later of the next annual
meeting of shareholders or until his successor is elected and qualified,
whichever is later.
6.2 REMOVAL OF DIRECTORS
Subject to the terms of the Amended and Restated Governance Agreement,
dated as of December 15, 1992, among Immunex Corporation, Lederle Oncology
Corporation and American Cyanamid Company ("Cyanamid), as it may be amended or
restated from time to time (the "Governance Agreement"), one or more members of
the Board of Directors (including the entire Board) may be removed, with or
without cause, by the written consent of the holders of record of a majority of
the outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class (the "Voting Stock").
6.3 VACANCIES
Any vacancy occurring on the Board of Directors may be filled, subject to
the terms of the Governance Agreement, by the affirmative vote of a majority of
the remaining directors, though less than a quorum. A director elected to fill a
vacancy shall be elected for the unexpired term of his or her predecessor in
office. Any directorship to be filled by reason of an increase in the number of
directors may be filled by the Board, subject to the Governance Agreement, for a
term of office continuing only until the next election of directors by the
shareholders.
ARTICLE 7. BYLAWS
All of the powers of this corporation, insofar as the same may be
lawfully vested by these Articles of Incorporation in the Board of Directors,
are hereby conferred upon the Board of Directors of this corporation. In
furtherance and not in limitation of that power, the Board of Directors, subject
to the Governance Agreement, shall have the power to adopt, amend or repeal the
Bylaws of this corporation, subject to the power of the shareholders to amend or
repeal such Bylaws. The shareholders shall also have the power to amend or
repeal the Bylaws of this corporation and to adopt new Bylaws. No action may be
taken or effected by written consent of shareholders in lieu of a meeting.
ARTICLE 8. SPECIAL SHAREHOLDER MEETINGS
Special meetings of the shareholders of the Corporation for any purpose
or purposes may be called at any time by the Board of Directors, the Chairman of
the Board of Directors, or the President of the Corporation. Further, a special
meeting of the shareholders shall be held if the holders of not less than 40% of
all the votes entitled to be cast on any issue proposed to be considered at such
special meeting have dated, signed and delivered to the Secretary one or more
written demands for such meeting, describing the purpose or purposes for which
it is to be held.
54
<PAGE>
ARTICLE 9. MERGERS, SHARE EXCHANGES, AND OTHER TRANSACTIONS
Subject to the Governance Agreement, a merger, share exchange, sale of
substantially all of the Corporation's assets, or dissolution must be approved
by the affirmative vote of a majority of the Corporation's outstanding shares
entitled to vote, or if separate voting by voting groups is required then by not
less than a majority of all the votes entitled to be cast by that voting group.
ARTICLE 10 AMENDMENTS TO ARTICLES OF INCORPORATION
Subject to the Governance Agreement and except as otherwise provided herein,
this corporation reserves the right to amend or repeal by the affirmative vote
of the holders of a majority of the outstanding Voting Stock, any of the
provisions contained in these Articles of Incorporation in any manner now or
hereafter permitted by law, and the rights of the shareholders of this
corporation are granted subject to this reservation.
ARTICLE 11. LIMITATION OF DIRECTOR LIABILITY
To the full extent that the Washington Business Corporation Act (the "Act"), as
it exists on the date hereof or may hereafter be amended, permits the limitation
or elimination of the liability of Directors, a Director of this corporation
shall not be liable to this corporation or its shareholders for monetary damages
for conduct as a Director. Any amendments to or repeal of this Article 11 shall
not adversely affect any right or protection of a Director of this corporation
for or with respect to any acts or omissions of such Director occurring prior to
such amendment or repeal. Notwithstanding any other provisions of law, these
Articles of Incorporation (except as hereinafter provided) or the Bylaws of this
corporation, the affirmative vote of the holders of not less than 80% of the
Voting Stock shall be required to alter, amend or repeal, or to adopt any
provisions inconsistent with, this Article 11 or any provision hereof.
ARTICLE 12 INDEMNIFICATION OF DIRECTORS AND OFFICERS
This corporation shall indemnify its Directors and Officers to the full extent
not prohibited by applicable law now or hereafter in force against liability
arising out of a proceeding to which such individual was made a party because
the individual is or was a Director or an Officer. However, such indemnity shall
not apply on account of:
(a) acts or omissions of a Director of Officer finally adjudged to be
intentional misconduct or a knowing violation of law;
(b) conduct of a Director or Officer finally adjudged to be in violation
of Section 23B.08.310 of the Act relating to distributions by this
corporation; or
(c) any transaction with respect to which it was finally adjudged that
such Director or Officer personally received a benefit in money,
property, or services to which the Director or Officer was not legally
entitled.
Subject to the foregoing, it is specifically intended that proceedings covered
by indemnification shall include proceedings brought by this corporation
(including derivative actions), proceedings by government entities and
governmental officials or other third party actions.
55
<PAGE>
ARTICLE 13. RESOLUTION OF CONFLICTING TERMS
Notwithstanding any other provision of these Articles of Incorporation,
any conflict between (a) any action taken by this corporation or the Board of
Directors, or any provision of these Articles of Incorporation or the Bylaws of
this corporation, as each may be amended and/or restated from time to time, on
the one hand, and (b) the terms of the Governance Agreement on the other, shall
be resolved in favor of the terms of the Governance Agreement unless otherwise
agreed to in writing by Cyanamid. Any amendment or repeal of this Article 13
shall require the affirmative vote of the holders of more than 709-O of the
common stock on a fully diluted basis.
ARTICLE 14. ELECTION TO NOT BE COVERED BY STATUTE
This corporation elects not to be covered by the provisions of Section
23B. 17.020 of the Act.
ARTICLE 15. INCORPORATOR
The name and address of the incorporator are as follows:
Stephen M. Graham
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Dated: April 13 1994.
/s/ Stephen M. Graham
----------------------------------------
Stephen M. Graham, Incorporator
56
<PAGE>
CONSENT TO APPOINTMENT AS REGISTERED AGENT
SCOTT G. Hallquist hereby consents to serve as registered agent in the
State of Washington for the following corporation: Immunex Washington
Corporation. Scott G. Hallquist understands that as agent for the corporation,
it will be his responsibility to accept service of process in the name of the
corporation, to forward all mail and license renewals to the appropriate
officer(s) of the corporation, and to notify the office of the Secretary of
State immediately of his resignation or of any changes in the address of the
registered office of the corporation for which he is agent.
/s/Scott G. Hallquist
-------------------------------------
Scott G. Hallquist
Scott G. Hallquist
51 University Street
Seattle, Washington 98101
(Name and Address of Registered Agent)
57
<PAGE>
Exhibit 10.2
AMENDMENT TO MASTER LEASE
THIS AMENDMENT TO MASTER LEASE ("Amendment") is made effective as of May 1,
1994, by and between WATUMULL ENTERPRISES, LTD., a Hawaii corporation
("Lessor"), and IMMUNEX CORPORATION, a Delaware corporation ("Tenant").
R E C I T A L S
A. Lessor's predecessor in interest, OTR, an Ohio general partnership
("OTR"), as landlord, and Tenant's predecessor in interest, CORNERSTONE
DEVELOPMENT COMPANY, a Washington corporation, as tenant, entered into a Master
Lease dated August 20, 1981 with respect to which a Short Form Lease and
supplement thereto were recorded under Auditor's File Nos. 8108200503 and
8512241168 in the Department of Records and Elections, King County, Washington
("Master Lease"). The tenant's interest under the Master Lease was assigned to
Tenant by an Assignment of Master Lease dated December 17, 1986, that was
recorded under Auditor's File No. 8612241292 in the Department of Records and
Elections, King County, Washington.
B. The Master Lease covers the land and building the legal description of
which is as follows:
The Easterly 134 feet of Lots 1 and 2, Block 180, Seattle Tide Lands,
in King County, Washington State.
C. Lessor and Tenant now desire to amend the Master Lease as set forth in
this Amendment.
AGREEMENT
NOW, THEREFORE, for valuable consideration, receipt and sufficiency of
which are hereby acknowledged, Lessor and Tenant agree as follows:
1. DEFINITIONS. All initially capitalized terms that are not defined in
this Amendment shall have the meanings given them in the Master Lease.
2. TERM. Pursuant to Section 4 of the Master Lease, the term of the
Master Lease is hereby extended by a period of 5 years, commencing on August 20,
1995 and expiring on August 19, 2000 ("First Renewal Term").
3. BASIC RENT. Amending Section 2 of the Master Lease, commencing on May
1, 1994 and during the remainder of the Fixed
Term and the First Renewal Term, the Basic Rent shall be $100,062.80 per month
and shall not be subject to increase; provided that, pursuant to Section 4.2 of
the Master Lease, the Basic Rent payable during any Renewal Terms after the
First Renewal Term shall be determined by adding $105,948.84 to the Basic Rent
that would have been payable under the Master Lease without regard to the
reduction set forth in this Amendment.
58
<PAGE>
4. RENT CREDIT. Tenant shall be entitled to a rent credit equal to
$374,17S.67 as follows: Lessor shall credit S53,453.67 against each of Tenant's
Basic Rent payments for the months of May, June, July, August, September,
October and November 1994, so that the Basic Rent payments for those months will
equal $46,609.13.
5. SIGNING BONUS. Within 5 business days after the effective date of this
Amendment, Lessor shall pay Tenant $396,500 in cash as a signing bonus.
6. ROOF REPAIR. Tenant shall repair the roof of the Building, at Tenant's
sole cost and expense. The roof repair shall (a) be performed to a first class
standard, (b) commence as soon as reasonably possible, and (c) be completed
within 9 months after the effective date of this Amendment. Tenant shall make
all arrangements for repairing the roof.
7. ASSIGNMENT: SUBLETTING. Amending Section 21 of the Master Lease, the
following new Section 21.2 shall be added:
21.2 Lessor shall not unreasonably withhold or delay its consent to a
proposed assignment or subletting. Lessor may reasonably consider the
following criteria in determining whether to grant or deny consent:
(i) the credit rating of the proposed assignee or subtenant; (ii) the
similarity of the proposed use of the Property (or portion thereof) to
the use by Tenant; and (iii) the nature, quality, and character of the
proposed assignee or sublessee.
8. SAFETY RULES. Tenant represents and warrants to Lessor that all activities
on the Property either do not present an unreasonable risk of harm to Tenant's
employees or third parties or do not present such a risk to those parties when
appropriate safety rules are followed. Tenant represents and warrants to Lessor
that Tenant has adopted and will continuously enforce during the term of the
Master Lease, as it may be extended, all safety rules necessary to prevent
Tenant's employees or third parties from being subjected to an unreasonable risk
of harm. This Section 8 is intended to satisfy any obligation of Lessor to
prevent harm to third parties imposed by FROBIA V. GORDON, 69 Wn.App. 570
(1993).
9. EFFECTIVENESS OF LEASE. Except as set forth in this Amendment, all
provisions of the Master Lease are hereby affirmed, and shall continue in full
force and effect.
LESSOR: TENANT:
WATUMULL ENTERPRISES, LTD. IMMUNEX CORPORATION
By: /s/Rajan Watumall By: /s/Edward V. Fritzky
----------------------- ----------------------------
Name: Rajan Watumall Name: Edward V. Fritzky
--------------------- --------------------------
Title: President Title: Chairman and CEO
-------------------- -------------------------
59
<PAGE>
LESSOR ACKNOWLEDGMENT
STATE OF HAWAII )
) SS:
COUNTY OF HONOLULU )
On this 5TH day of MAY, 1994, before me, the undersigned, a Notary Public
in and for the State of HAWAII, duly commissioned and sworn, personally appeared
Rajan Watumull, to me known to be the person who signed as President of WATUMULL
ENTERPRISES, LTD., the corporation that executed the within and foregoing
instrument, and acknowledged said instrument to be the free and voluntary act
and deed of said corporation for the/uses and purposes therein mentioned, and on
oath stated that he was duly elected and qualified and acting as said officer of
the corporation, that Ryan Watumull was authorized to execute said instrument
and that the seal affixed, if any, is the corporate seal of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day
and year first above written.
/s/ Stephanie L. Belaski
----------------------------------
Printed Name: Stephanie L. Belaski
---------------------
NOTARY PUBLIC in and for the State of Hawaii
residing at Honolulu
My Commission Expires: 4/24/96
-------
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TENENT ACKNOWLEDGMENT
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this 3RD day of MAY, 1994, before me, the undersigned, a Notary Public in a
for the State of WASHINGTON, duly commissioned and sworn, personally appeared
EDWARD V. FRITZKY to be known to be the person who signed as CHAIRMAN AND CEO of
IMMUNEX CORPORATION, the corporation that executed the within and foregoing
instrument, and acknowledged said instrument to be the free and voluntary act
and deed of said corporation for the uses and purposes therein mentioned, and on
oath stated that he was duly elected, qualified and acting as said officer of
the corporation, that he was authorized to execute said instrument and that the
seal affixed, if any, is the corporate seal of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day and
year first above written.
/s/Laura M. Mulholland
---------------------------------------
Printed Name: Laura M. Mulholland
--------------------------
NOTARY PUBLIC in and for the State of
Washington residing at Edmonds
My Commission Expires: 2/9/98
--------
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Exhibit 10.3
AMENDED AND RESTATED LEASE AGREEMENT
DATED DECEMBER 21, 1994
BETWEEN
CENTRAL LIFE ASSURANCE COMPANY, LANDLORD,
AND
IMMUNEX CORPORATION, TENANT
THIS AMENDED AND RESTATED LEASE AGREEMENT ("Lease") is made this 21st day
of December, 1994, by and between Central Life Assurance Company, an Iowa mutual
life assurance company ("Landlord"), and Immunex Corporation, a Washington
corporation ("Tenant"). Landlord and Tenant agree as follows:
BASIC DEFINITIONS AND LEASE PROVISIONS; EXHIBITS; EXISTING LEASE
BASIC TERMS. As used in this Lease, the following terms shall have
the following meanings, and the parties agree to the following basic terms and
provisions:
PROPERTY. The "Property" shall mean (a) the building known as
the 1201 Western Avenue Building, Seattle, Washington ("Building"), (b) the land
upon which the Building is situated, as more particularly described in EXHIBIT 1
("Land"), and (c) related areas, facilities, equipment, improvements and
property in the Building and on the Land.
OFFICE COMPLEX; RETAIL COMPLEX; COMPLEX; LOBBY.
OFFICE COMPLEX. "Office Complex" shall mean that portion
of the Building leased or available for lease for office uses, and consisting of
83,612 rentable square feet of space.
RETAIL COMPLEX. "Retail Complex" shall mean that portion
of the Building leased or available for lease for retail uses and consisting of
13,005 rentable square feet of space.
COMPLEX. "Complex" shall mean the Office Complex and
Retail Complex collectively, which consists of 96,617 rentable square feet of
space.
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LOBBY. "Lobby" shall mean the first floor lobby of the
Office Complex. The rentable area of the Lobby shall not be included for
purposes of calculating Base Rent or Additional Charges hereunder.
RENTABLE SQUARE FEET. Wherever "rentable square feet" or
"rentable area" is referred to in this Lease, it shall mean net rentable square
feet or net rentable square foot area as defined by the Building Owners and
Managers Association International in its "Standard Method for Measuring Floor
Area in Office Buildings."
PREMISES. The "Premises" shall mean the space leased by Tenant
hereunder, which shall consist of (a) 83,612 rentable square feet of office
space located on the second through seventh floors of the Building ("Office
Premises"), (b) 2,843 rentable square feet of retail space located on the first
floor of the Building ("Retail Premises"), and (c) the Lobby, as shown on the
floor plans of the Building attached as EXHIBIT 2.
COMMENCEMENT DATE. "Commencement Date" shall mean January 1,
1995.
EXPIRATION DATE. "Expiration Date" shall mean the later of
(a) August 31, 2000, when the initial Lease Term shall expire, or (b) the date
the last Extended Term expires.
BASE RENT; RENT CREDIT.
"Base Rent" shall mean the monthly base rent payable by
Tenant hereunder, which shall be $75,648.12 per month ($10.50 per rentable
square foot per year; $907,777.50 per year total).
RENT CREDIT. Tenant shall be entitled to a rent credit in
the amount of $49,049.19. Tenant shall be entitled to credit 1/3 of such amount
against its Rent payment for each of the months of January, February and March,
1995.
PERMITTED USES. "Permitted Uses" shall mean the following:
(a) With respect to the Office Premises, general office and
ancillary purposes;
(b) With respect to the Retail Premises, retail, restaurant and
ancillary purposes.
ALTERATION ALLOWANCE. "Alteration Allowance" shall mean the
tenant improvement allowance to which Tenant is entitled hereunder, which shall
equal $1,037,460 for the Premises. If Tenant leases Additional Space hereunder,
Tenant shall be entitled to increase the Alteration Allowance by an amount equal
to $2.00 per rentable square foot of Additional Space leased by Tenant hereunder
multiplied by the number of years remaining in the Term at the time Tenant
leases such Additional Space ("Additional Alteration Allowance").
TENANT'S PERCENTAGE OF OFFICE COMPLEX; TENANT'S PERCENTAGE OF
RETAIL COMPLEX; TENANT'S PERCENTAGE OF COMPLEX.
OFFICE COMPLEX. "Tenant's Percentage of Office Complex"
shall be 100%, which is equal to a fraction, the numerator of which is the
number of rentable square feet of space that comprises the Office Premises, and
the denominator of which is the number of rentable square feet of
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space that comprises the Office Complex. If a portion of the Property is
damaged or condemned, or Tenant leases any Additional Space hereunder, or any
other event occurs that alters the rentable area of the Office Premises or
Office Complex, Landlord shall adjust Tenant's Percentage of Office Complex in
accordance with the preceding formula.
RETAIL COMPLEX. "Tenant's Percentage of Retail Complex"
shall be 21.86%, which is equal to a fraction, the numerator of which is the
number of rentable square feet of space that comprises the Retail Premises, and
the denominator of which is the number of rentable square feet of space that
comprises the Retail Complex. If a portion of the Property is damaged or
condemned, or Tenant leases any Additional Space hereunder, or any other event
occurs that alters the rentable area of the Retail Premises or Retail Complex,
Landlord shall adjust Tenant's Percentage of Retail Complex in accordance with
the preceding formula.
COMPLEX. "Tenant's Percentage of Complex" shall be
89.48%, which is equal to a fraction, the numerator of which is the number of
rentable square feet of space that comprises the Office Premises and Retail
Premises, collectively, and the denominator of which is the number of rentable
square feet of space that comprises the Complex. If a portion of the Property
is damaged or condemned, or Tenant leases any Additional Space hereunder, or any
other event occurs that alters the rentable area of the Office Premises, Rental
Premises, or Complex, Landlord shall adjust Tenant's Percentage of Complex in
accordance with the preceding formula.
MINIMUM LIABILITY INSURANCE LIMITS.
(a) $2,000,000 per occurrence; and
(b) $2,000,000 aggregate bodily injury; and (c) $1,000,000
property damage; or
(c) $1,000,000 combined single limit.
NOTICE ADDRESSES.
(a) Landlord:
Central Life Assurance Company
6000 Westown Parkway
Suite 200W
West Des Moines, Iowa 50266
Attention: Diane Davidson
Phone: (515) 221-6000
Fax: (515) 221-6013
(b) Tenant:
Immunex Corporation
51 University Street
Seattle, Washington 98101
Attention: Susan K. Erb
Phone: (206) 587-0430
Fax: (206) 587-0606
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BROKER:
David Alexander Company
1001 4th Avenue Plaza, Suite 3125
Seattle, Washington 98154-1106
Phone: (206) 628-0150
Fax: (206) 628-0318
EXHIBITS. The following exhibits are made a part of this Lease:
EXHIBIT 1 Legal Description of Land
EXHIBIT 2 Floor Plan of Premises
EXHIBIT 3 Assignment and Assumption Agreement
EXHIBIT 4 Operating Expense Statement
EXISTING LEASE. Landlord and Tenant acknowledge that Landlord's
predecessor in interest to the Property, Cornerstone-TPI Limited Partnership, a
Washington general partnership ("C-TPI"), as landlord, and Tenant, as tenant,
entered into an Office Lease Agreement dated July 29, 1988, and amendments
thereto (collectively, "Existing Lease"), pursuant to which Tenant now occupies
the Premises, and that C-TPI and Cornerstone Columbia Development Company, a
Washington general partnership, entered into two Parking Leases dated June 5,
1991, and amendments thereto (collectively "Parking Leases"), pursuant to which
Tenant is entitled to parking privileges in the Watermark Tower Garage, located
at 1100 Western Avenue, Seattle, Washington, and the Hillclimb Court Garage,
located at 1440 Western Avenue/1420 Alaskan Way, Seattle, Washington
("Garages"). As a part of Landlord's acquisition of title to the Property, C-
TPI assigned all of its interests in and rights under the Existing Lease and
Parking Leases to Landlord and Landlord assumed all of C-TPI's obligations under
the Existing Lease and Parking Leases pursuant to Warranty Assignment of Leases
in Lieu of Foreclosure between C-TPI, as assignor, and Landlord, as assignee,
dated December 20, 1994, a copy of which is attached hereto as EXHIBIT 3. As of
the Commencement Date, this Lease shall supersede the Existing Lease in its
entirety (except to the extent that any claims under the Existing Lease may have
accrued prior to the Commencement Date). This Lease shall not, however, affect
the rights or obligations of Landlord under the Parking Leases in any way.
Landlord shall enforce all of its rights and perform all of its obligations
under the Parking Leases and enforce all of Tenant's rights under the Parking
Leases until the Parking Leases expire in accordance with their terms.
Notwithstanding anything in the Parking Leases or this Lease to the contrary,
Tenant shall pay directly to the operator of the Garages the monthly fees for
the parking spaces leased by Tenant pursuant to the Parking Leases.
LEASE OF PREMISES; RIGHT OF FIRST REFUSAL
LEASE OF PREMISES. On and subject to the terms, covenants and
conditions set forth in this Lease, Landlord hereby leases the Premises to
Tenant and Tenant hereby leases the Premises from Landlord.
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RIGHT OF FIRST REFUSAL. During the Lease Term and any Extended
Terms, Tenant shall have a continuing right of first refusal to lease such
additional space on any and all floors of the Building as may from time to time
become available for lease ("Additional Space") as follows: NOTICES. Landlord
shall notify Tenant in writing of Landlord's intention to lease any Additional
Space. METHOD OF EXERCISING RIGHT. If Tenant desires to exercise its first
right of refusal, Tenant shall notify Landlord in writing of its intent to lease
the available Additional Space within 10 business days after receiving
Landlord's written notice. Tenant shall not have the right to elect to lease
less than all the Additional Space offered by Landlord. METHOD OF
INCORPORATING SPACE. If Tenant exercises its right of first refusal, Landlord
and Tenant shall execute an amendment to this Lease delineating the Additional
Space. The Base Rent for the Additional Space shall be calculated at the same
rental rate as is then in effect for the Premises, as set forth in
Section 1.1.7.1 or 3.2.2 (as the case may be). The Additional Space shall be
leased for a term that commences on the date that Tenant's initial Alterations
to the Additional Space are substantially completed, but no later than 90 days
from the date Landlord delivers possession of the Additional Space to Tenant,
and expires upon the Expiration Date. The Additional Space shall be leased to
Tenant subject to all other terms and conditions set forth in this Lease.
COMMENCEMENT AND EXPIRATION DATES; OPTION TO EXTEND
COMMENCEMENT AND EXPIRATION DATES. The term of this Lease ("Lease
Term") shall commence on the Commencement Date and expire on the Expiration
Date.
OPTION TO EXTEND. Tenant shall have the option to extend the
initial Lease Term on all of the terms and conditions set forth in this Lease,
except for Base Rent, for 3 additional terms of 5 years each. (Each additional
term with respect to which Tenant exercises its option hereunder is referred to
as an "Extended Term", and each Extended Term shall be included in the meaning
of "Lease Term.") In order to exercise its option to extend the Lease Term,
Tenant shall give Landlord written notice of its election to do so ("Option
Notice") not less than 6 months before the then-scheduled Expiration Date of the
Lease Term, and the Extended Term shall commence on the day after such
Expiration Date.
BASE RENT FOR EXTENDED TERMS. The Base Rent for each Extended
Term shall be equal to the greater of (a) the Market Rent that is in effect on
the date such Extended Term commences, and (b) the Base Rent set forth in
Section 1.1.7.1.
DETERMINATION OF MARKET RENT. "Market Rent" shall mean the
rent paid under leases that are comparable to this Lease for space that is
comparable to the Premises for a term that is comparable to the Lease Term by
tenants in buildings within the central business district of Seattle, Washington
that are comparable to the Building. Market Rent shall be determined as
follows: The parties shall have 30 days after Landlord receives the Option
Notice in which to agree upon the Market Rent. If the parties are unable to
agree upon the Market Rent within such 30-day period, the Market Rent shall be
determined by arbitration, initiated by either Landlord or Tenant, and conducted
in Seattle, Washington by a 3-member panel, composed of licensed real estate
brokers doing business in Seattle and having not less than 10 years' active
experience as real estate brokers in Seattle, in accordance with the rules of
the American Arbitration Association then obtaining. The determination by the
arbitrators shall be conclusive and binding on Landlord and Tenant. Upon
determination of the Base Rent for the Extended Term, Landlord and Tenant shall
execute, acknowledge and deliver to each other an agreement specifying the
amount of the Base Rent for such Extended Term. However, the failure of either
party to do so shall not affect the validity or binding nature of such
determination.
RENT
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DEFINITIONS. For purposes of this Lease, the following terms shall
have the following meanings:
(a) "Additional Charges" shall mean all charges and other
amounts provided for in this Lease, except for Base Rent.
(b) "Rent" shall mean: (i) Base Rent; and (ii) Additional
Charges.
METHOD OF PAYMENT. Tenant shall pay the Base Rent to Landlord,
without demand, in advance, on or before the first day of each calendar month
during the Lease Term. Tenant shall pay all Additional Charges to Landlord as
and when due. If Tenant's obligation to pay Base Rent commences on other than
the first day of a calendar month or this Lease expires or terminates on other
than the last day of a calendar month, the Base Rent for such month shall be
prorated on a daily basis, based upon the actual number of days in the month.
INTEREST AND LATE CHARGES. If any payment of Rent is not received
by Landlord within 5 business days after written notice that it is overdue
(a) Tenant shall pay Landlord a late payment charge equal to 1% of the overdue
amount and (b) the overdue amount shall bear interest at an annual rate equal to
2% plus the prime rate of interest published or announced from time to time by
the Seattle-First National Bank, Head Office, Seattle, Washington, or its
successor, changing as the prime rate changes, from the date Tenant receives
such notice until the date Tenant makes such payment. If the maximum annual
rate of interest permitted by Applicable Law is less than the rate of interest
provided for herein, then all past due payments of Rent shall bear interest at
the maximum rate permitted by Applicable Law. The provisions of this
Section 4.3 shall not relieve Tenant of the obligation to pay Rent when due.
DEPOSIT.
Tenant shall have no obligation to make a security deposit under this
Lease.
OPERATING EXPENSES
OPERATING EXPENSES. For purposes of this Lease, "Operating
Expenses" shall mean all reasonable and customary (in the central business
district of Seattle, Washington) costs and expenses paid or incurred by Landlord
or on Landlord's behalf that Landlord reasonably determines are necessary or
appropriate for the efficient operation, maintenance and repair of the Property,
including, without limitation, the following:
(a) salaries, wages, medical, surgical, union and general
welfare benefits (including, without limitation, group life insurance) and
pension payments for employees of Landlord engaged in the operation, maintenance
and repair of the Property;
(b) payroll taxes, and the cost of worker's compensation
insurance and uniforms for employees of Landlord engaged in the operation,
maintenance and repair of the Property;
(c) the cost of all charges for electricity, heat, ventilation,
air conditioning, water and other utilities furnished to the Property, together
with any taxes on such utilities;
(d) the cost of all charges of insurance, including rent loss
insurance, casualty, liability, fire with extended coverage endorsement and
fidelity insurance, with regard to the Property;
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(e) the cost or rental of all supplies for the operation,
maintenance and repair of the Property, including without limitation, cleaning
supplies, light bulbs, tubes and ballasts, materials and equipment, and sales
and other taxes thereon;
(f) the cost of hand tools and other movable equipment used in
the operation, maintenance and repair of the Property, amortized over the useful
life of such hand tools and movable equipment (as reasonably estimated by
Landlord);
(g) the cost of all charges for window and other cleaning
services for the Building;
(h) charges of independent contractors performing repairs or
services to the Property;
(i) the cost of noncapital repairs of and replacements in
connection with the Building, to the extent such cost is not paid directly or
reimbursed by any tenants of the Property (including Tenant);
(j) the cost of alterations and improvements to the Building
required by Applicable Laws or insurance bodies;
(k) reasonable and customary (in the central business district
of Seattle, Washington) management fees paid to a third party in connection with
the Property;
(l) the cost of any capital improvement or repair to the
Building, provided that (i) such improvement or repair is made for the purpose
of reducing the expenses that otherwise would be included in Operating Expenses,
or is necessary to maintain the Building in accordance with the first sentence
of Section 9.1, (ii) Landlord has obtained Tenant's prior written consent to
such improvement or repair (which consent shall not be unreasonably withheld or
delayed), and (iii) the cost of such improvement may, under generally accepted
accounting principles, be amortized over a period of years, in which case a
proportionate part of such cost shall be included each year in Operating
Expenses over the useful life (as reasonably estimated by Landlord) of such
repair or replacement;
(m) reasonable legal and accounting fees incurred in connection
with the operation, maintenance and management of the Property; and
(n) the cost of providing elevator service to the Building.
Operating Expenses shall not include the following:
(i) depreciation or amortization of property (except as provided
above in this Section 6);
(ii) interest on and amortization of debts;
(iii) leasehold improvements made for new tenants of the
Property;
(iv) leasing commissions, attorneys' fees, costs, disbursements
and other expenses (including advertising expenses) incurred in connection with
leasing, renovating, or improving space for tenants or other occupants of the
Building (including Tenant) or incurred in connection with disputes or
litigation relating to the Property;
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(v) refinancing costs;
(vi) the cost of any work or services performed for any tenants
of the Building, whether at the expense of Landlord or such tenants, to the
extent that such work or services are in excess of the work or services that
Landlord, at its expense, is required to furnish to Tenant under this Lease;
(vii) the cost of any electricity furnished to any space leased
to tenants of the Building that is in excess of the electricity to be provided
by Landlord under this Lease;
(viii) the cost of any repair or replacement, other than one
described in Sections 6(i) and 6(l) above;
(ix) Real Property Taxes or business and occupation taxes;
(x) damages payable to any tenant of the Property due to
violation by Landlord of any of the terms and conditions of any lease of space
in the Building (including this Lease);
(xi) penalties resulting from the violation by Landlord of any
Applicable Laws;
(xii) repairs occasioned by fire, windstorm or other casualty or
Condemnation, to the extent such repairs are paid for by insurance proceeds;
(xiii) salaries and benefits for executives above the grade of
superintendent, including any directors, officers or general partners of
Landlord; and
(xiv) the cost of janitorial services provided to Tenant or any
other tenant.
ALLOCATION OF OPERATING EXPENSES. Landlord shall allocate 86.50% of
Operating Expenses to the Office Complex and 13.50% of Operating Expenses to the
Retail Complex, except that 100% of Operating Expenses attributable to
electricity, window washing, elevator maintenance and repairs and supplies for
maintenance and repairs provided solely to the Office Complex shall be allocated
to the Office Complex.
TENANT'S SHARE OF OPERATING EXPENSES. For purposes of this Lease,
"Operating Year" shall mean a calendar year (beginning on January l and ending
December 31). "Tenant's Share of Operating Expenses for the Office Premises"
for each Operating Year during the Lease Term shall be equal to the Operating
Expenses for the Office Complex for such Operating Year, multiplied by Tenant's
Percentage of Office Complex. "Tenant's Share of Operating Expenses for the
Retail Premises" for each Operating Year during the Lease Term shall be equal to
the Operating Expenses for the Retail Complex for such Operating Year,
multiplied by Tenant's Percentage of Retail Complex. (The aggregate of such
amounts shall be referred to as "Tenant's Share of Operating Expenses".)
ESTIMATED OPERATING EXPENSES. At least 10 days prior to the
commencement of each Operating Year during the Lease Term, Landlord shall
furnish Tenant with a written statement setting forth (a) the estimated
Operating Expenses for the next Operating Year, (b) Tenant's Share of the
estimated Operating Expenses for such Operating Year, and (c) the calculation of
each of the foregoing. In addition to Base Rent, Tenant shall pay to Landlord
on the first day of each month of each Operating Year during the Lease Term, as
Additional Charges, an amount equal to 1/12th of the amount of Tenant's
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Share of estimated Operating Expenses for such Operating Year, as shown in
Landlord's written statement.
ANNUAL ADJUSTMENT. Within 90 days after the end of each Operating
Year during the Lease Term, Landlord shall furnish Tenant with a written
statement setting forth (a) the actual Operating Expenses for the preceding
Operating Year, (b) Tenant's Share of actual Operating Expenses for such
Operating Year, and (c) the calculation of each of the foregoing. If Tenant's
Share of actual Operating Expenses for such Operating Year is greater than
Tenant's Share of estimated Operating Expenses for such Operating Year, Tenant
shall pay the difference to Landlord as Additional Charges within 30 days after
Tenant receives Landlord's statement. If Tenant's Share of actual Operating
Expenses for such Operating Year is less than Tenant's Share of estimated
Operating Expenses for such Operating Year, Landlord shall refund the difference
to Tenant together with Landlord's statement, and if Landlord fails to do so,
Tenant shall be entitled to credit the amount thereof against Tenant's next Rent
payment hereunder.
TENANT EXAMINATION. Landlord's statements relating to Operating
Expenses shall be itemized and contain sufficient detail to enable Tenant to
verify the calculation of Tenant's Share of Operating Expenses. Attached as
Exhibit 4 is an example of a statement, the form of which is acceptable to
Tenant. Tenant, upon reasonable notice and during business hours, may examine
Landlord's books and records in connection with Operating Expenses (including,
without limitation, any invoices, receipts, cancelled checks, vouchers and other
instruments) no more than once in each Operating Year. The cost of any audit of
Landlord's books and records relating to Operating Expenses shall be paid by
Tenant unless the audit shows that Landlord has overstated or understated
Operating Expenses by more than 5%, in which case Landlord shall pay such cost.
DISPUTES. Each statement given by Landlord pursuant to this
Section 6 shall be conclusive and binding upon Tenant, unless within 30 days
after receiving such statement, Tenant shall notify Landlord that it disputes
the correctness of such statement and specify the particular respects in which
such statement is incorrect. Pending the determination of any dispute, Tenant
shall pay Additional Charges in accordance with the Operating Statement, without
prejudice to Tenant's position. Any such dispute shall be resolved by
arbitration in Seattle, Washington by 3 arbitrators, each of whom shall have at
least 10 years' experience in the supervision of the operation and management of
first class office/ retail buildings in the central business district of
Seattle, Washington, that are comparable to the Building and in accordance with
the Commercial Arbitration Rules of the American Arbitration Association and the
provisions of this Lease, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction. Within 30 days
after the resolution of such dispute, Landlord shall refund any overage found by
the arbitrators to have been paid to it by Tenant. Landlord and Tenant shall
each pay 50% of the costs of such arbitration.
PRORATION OF OPERATING EXPENSES. If Tenant's obligation to pay
Operating Expenses commences on other than the first day of an Operating Year or
expires on other than the last day of an Operating Year, Operating Expenses for
such Operating Year shall be prorated on a daily basis, based on the actual
number of days in such Operating Year.
TAXES PAYABLE BY TENANT
PERSONAL PROPERTY TAXES. At least 10 days prior to delinquency,
Tenant shall pay all personal property taxes with respect to Tenant's personal
property located in the Premises or on the Property, including Alterations that
are paid for by Tenant and Tenant's equipment, furniture, furnishings and trade
fixtures (collectively, "Tenant's Personal Property"). At Landlord's request,
Tenant shall provide written proof of such payment.
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REAL PROPERTY TAXES.
REAL PROPERTY TAXES. For purposes of this Lease, "Real
Property Taxes" shall mean all real property taxes, assessments and charges
levied by any governmental authority upon or with respect to the Property or
Landlord's interest therein. Real Property Taxes shall not include any local,
state or federal income, franchise, business and occupation or transfer taxes of
Landlord or any penalty assessed against Landlord for failure to pay Real
Property Taxes in accordance with Applicable Law.
TENANT'S SHARE OF REAL PROPERTY TAXES. For purposes of this
Lease, "Tax Year" shall mean a calendar year (beginning on January 1 and ending
December 31). Tenant's Share of Real Property Taxes for each Tax Year during
the Lease Term shall be equal to the Real Property Taxes for the Property for
such Tax Year, multiplied by Tenant's Percentage of Complex.
STATEMENT OF REAL PROPERTY TAXES. At least 10 days prior to
the commencement of each Tax Year during the Lease Term, Landlord shall furnish
Tenant with a written statement setting forth (a) the Real Property Taxes for
the next Tax Year, (b) Tenant's Share of Real Property Taxes for such Tax Year,
and (c) the calculation of each of the foregoing. In addition to Base Rent,
Tenant shall pay to Landlord on the first day of each month of each Tax Year
during the Lease Term, as Additional Charges, an amount equal to 1/12th of the
amount of Tenant's Share of Real Property Taxes for such Tax Year, as shown in
Landlord's written statement. If prior to the commencement of any Tax Year,
Landlord has not received notice of the Real Property Taxes for such Tax Year
from the taxing authority, Landlord shall refrain from providing Tenant with a
Real Property Tax statement for such Tax Year until Landlord has received such
notice from the taxing authority. In such case, Tenant's monthly Real Property
Tax payments for such Tax Year shall be equal to those payable during the
preceding Tax Year until the first day of the first calendar month following the
date that Tenant receives Landlord's statement, when Tenant shall commence to
make payments in accordance with such statement. If such statement indicates
that Tenant's previous monthly payments for such Tax Year were less than the
monthly payments actually due for such Tax Year, Tenant shall pay the difference
to Landlord as Additional Charges within 30 days after Tenant receives
Landlord's statement. If such statement indicates that Tenant's previous
monthly payments for such Tax Year were greater than the monthly payments
actually due for such Tax Year, Landlord shall refund the difference to Tenant
together with Landlord's statement, and if Landlord fails to do so, Tenant shall
be entitled to credit the amount thereof against Tenant's next Rent payment
hereunder.
TENANT EXAMINATION. Landlord's statements relating to Real
Property Taxes shall contain sufficient detail to enable Tenant to verify the
calculation of Tenant's Share of Real Property Taxes and shall be accompanied by
the applicable Real Property Tax bills for the Property.
PRORATION OF REAL PROPERTY TAXES. If Tenant's obligation to
pay Real Property Taxes commences on other than the first day of an Tax Year or
expires on other than the last day of an Tax Year, Real Property Taxes for such
Tax Year shall be prorated on a daily basis, based on the actual number of days
in such Tax Year.
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REFUNDS. If, after Tenant shall have made a payment of
Additional Charges under this Section 7, Landlord shall receive a refund of any
portion of the Real Property Taxes payable during any Tax Year on which such
payment of Additional Charges shall have been based, as a result of a reduction
of such Real Property Taxes by final determination of legal proceedings,
settlement or otherwise, Landlord shall within 10 days after receiving the
refund pay to Tenant Tenant's Share of the Real Property Tax refund. Tenant
shall have the right to contest, at its own cost and expense, any Real Property
Taxes assessed against the Property during the Lease Term. In such event, the
payment thereof may be deferred during the pendency of such contest, if
diligently prosecuted, but in no event shall Tenant allow a lien for unpaid
taxes that it is contesting to attach to the Property. Landlord shall join at
Tenant's request in any such contest to the extent such joinder is a
prerequisite to such prosecution under Applicable Law.
TENANT'S USE AND CARE OF PREMISES
PERMITTED USE. The Premises shall be used and occupied by Tenant
only for the Permitted Uses, and for no other uses without the prior written
consent of Landlord, which shall not be unreasonably withheld or delayed.
INSURANCE. Tenant shall not do, bring, keep or permit anything to
be done, brought, or kept in the Premises or on the Property that will cause the
cancellation of any of Landlord's insurance policies covering the Premises or
the Property or any of the contents thereof. If any insurance premium is
increased solely as a result of Tenant's use or activity in the Premises or on
the Property, Tenant shall pay the increase within 10 business days after
receipt of Landlord's invoice therefor.
DISTURBANCE OF OTHER OCCUPANTS. Tenant shall conduct its business
and control its agents, employees, contractors and invitees in such a manner as
not to obstruct or unreasonably interfere with the rights of other tenants or
occupants of the Building or injure, annoy or disturb them. Tenant shall not
use or allow the Premises to be used for any improper, unlawful or objectionable
purpose, nor shall Tenant cause or permit any nuisance in, on or about the
Premises or the Property.
CARE OF PREMISES. Tenant shall take good care of the Premises.
Tenant shall not commit or suffer to be committed any waste, damage or injury to
the Premises or the Property.
COMPLIANCE WITH LAWS. Tenant shall not use the Premises or permit
anything to be done in the Premises that will in any way conflict with any
constitution, statute, ordinance, resolution, regulation, rule, administrative
order, judicial decision or other requirement of any municipal, county, state,
federal, or other governmental agency or authority having jurisdiction over the
parties, the Premises or the Property in effect now or at any time during the
Lease Term, including, without limitation, any regulation or order of a quasi-
official entity or body such as a board of fire examiners, underwriters or
public utility (collectively "Applicable Laws"). Tenant shall at its sole cost
and expense promptly comply with all Applicable Laws relating to or affecting
the condition, use or occupancy of the Premises, except that Tenant shall not be
required to make any repairs, alterations or additions to the roof, foundations,
bearing walls or other structural parts of the Building that are required by
Applicable Law (collectively "Structural Alterations"). Landlord shall make or
cause to be made all Structural Alterations, except that if any Structural
Alterations are required as a result of Tenant's particular and specific use of
the Premises at the time, Tenant shall pay all costs and expenses incurred by
Landlord in making such Structural Alterations within 30 days after receiving
Landlord's invoice therefor, provided that Landlord provides Tenant with paid
receipts evidencing such costs and expenses.
TENANT'S UTILITIES. Tenant shall pay during the Lease Term all
utility bills for services separately metered or billed to the Premises as they
become due and payable.
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SERVICES AND UTILITIES PROVIDED BY LANDLORD
MAINTENANCE. Landlord shall maintain or cause to be maintained in
good order and condition, consistent with first-class office/retail buildings in
the central business district of Seattle, Washington, the Property, including
the Premises, the central heating, ventilation and air conditioning ("HVAC"),
water, sewer, fire protection, mechanical and electrical distribution systems
and equipment serving the Property and the roof, foundations, bearing walls and
other structural parts of the Building. If any maintenance or repairs are
required because of the negligence of Tenant or its agents, employees,
contractors or invitees, all costs and expenses incurred by Landlord in
connection with such maintenance or repairs shall be paid by Tenant within 30
days after receiving Landlord's invoice therefor, provided that Landlord
provides Tenant with paid receipts evidencing such costs and expenses. Any
injury to or interference with Tenant's business arising from any repairs,
maintenance, alterations or improvements in or to any portion of the Property,
including the Premises, or in or to the fixtures, appurtenances and equipment
therein shall not be deemed to be an eviction of Tenant or relieve Tenant of any
of its obligations hereunder, provided that such repairs, maintenance,
alterations and improvements shall be accomplished with as little inconvenience
to Tenant as possible.
OTHER SERVICES AND UTILITIES.
JANITORIAL SERVICES. Notwithstanding anything in Section 9.1
to the contrary, Tenant shall furnish to the Premises, at Tenant's sole cost and
expense, janitorial services that are consistent (in both frequency and quality)
with janitorial services customarily provided to tenants in office/retail
buildings in the central business district of Seattle, Washington, that are
comparable to the Building. Such janitorial services shall include toilet room
supply services and interior window washing services at reasonable intervals.
Landlord shall furnish to the Office Complex exterior window washing services
that are consistent with those services customarily provided to tenants in first
class office buildings in the central business district of Seattle, Washington.
HVAC. Landlord shall provide or cause to be provided to the
Premises HVAC services from 6 a.m. to 10 p.m. on Monday through Friday, from
6 a.m. to 6 p.m. on Saturday and upon request on Sunday. Such services shall be
consistent with the services typically provided to tenants of first class
office/retail buildings in the central business district of Seattle, Washington.
ELECTRICITY. Landlord shall furnish or caused to be furnished
to the Premises 24 hours per day, 365 days per year, electricity for lighting
and the operation of typical office machinery (including, without limitation,
computers, facsimile machines and photocopiers) and water.
ELEVATOR SERVICE. Landlord shall furnish nonattended automatic
elevator service within the Office Complex 24 hours a day, seven days a week.
ACCESS TO PREMISES. Tenant shall have access to the Premises
24 hours per day, 365 days per year via Tenant's security access system.
Landlord shall provide all of Tenant's employees with door keys at no additional
cost to Tenant.
FAILURE OR INTERRUPTION OF SERVICES. Landlord shall not be in
default hereunder and shall not be liable for any damage directly or indirectly
resulting from, nor shall Tenant be relieved of any of its obligations hereunder
by reason of any of the following:
(a) The installation, use or interruption of use of any
equipment for furnishing any utilities or services;
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(b) The failure to perform or furnish, or the delay in
performing or furnishing, any maintenance, repair, utility or service if such
failure or delay is caused by acts of God, the elements, labor disturbances of
any character or any other conditions beyond the reasonable control of Landlord
(except financial inability); or
(c) The limitation, curtailment, rationing or restriction of the
use of water, electricity, gas or any other form of energy or any other service
or utility serving the Premises or the Property by any national, state, or local
government agencies or utility suppliers in reducing energy or other resource
consumption. Landlord shall be entitled to cooperate voluntarily in a
reasonable manner with such agencies or suppliers.
Notwithstanding anything to the contrary in this Section 9.3, if any
failure or interruption of service occurs by reason of the negligence or wilful
act of Landlord or Landlord's employees, agents or contractors, or conditions
within the reasonable control of Landlord or Landlord's employees, agents or
contractors, and such failure or interruption of service continues unabated for
5 consecutive days, Rent shall be abated from the date of such interruption or
failure in the same proportion as the rentable area that Tenant reasonably
determines is unfit for Permitted Uses bears to the rentable area of the entire
Premises.
IMPROVEMENTS AND ALTERATION TO THE PREMISES
ALTERATIONS. Tenant shall not make any alterations, additions or
improvements in or to the Premises or change locks on doors or change any
plumbing, wiring, or other utility distribution systems within or serving the
Premises (collectively "Alterations") without first obtaining the written
consent of Landlord, except that no such consent shall be required for
decorations or nonstructural Alterations costing less than $10,000 in any one
instance. All Alterations that require Landlord's consent shall be made in
accordance with plans and specifications approved in advance by Landlord.
Landlord's consents and approvals under this Section 10.1 shall not be
unreasonably withheld or delayed. All Alterations shall be made at Tenant's
sole cost and expense and in compliance with all Applicable Laws. If Landlord
approves Tenant's Alterations, Landlord shall at the time of approval identify
any Alterations that Tenant shall be required to remove upon the expiration or
termination of the Lease Term, and Tenant shall remove the same and, at its sole
cost and expense, repair any damage to the Premises caused by such removal.
LANDLORD'S PROPERTY. All Alterations that cannot be removed from
the Premises without material damage to the Premises shall become the property
of Landlord and shall remain on and be surrendered with the Premises upon the
expiration or termination of this Lease, except as otherwise provided in
Section 10.1 above.
ALTERATION ALLOWANCE. Notwithstanding anything in Section 10.1 to
the contrary, Landlord shall provide Tenant with the Alteration Allowance, which
Tenant may apply to the cost of any Alterations (both the cost of materials and
the reasonable cost of labor) made during the Lease Term or any Extended Term.
Tenant shall invoice Landlord on a quarterly basis for all Alterations made by
or for Tenant, and shall include with each invoice paid receipts substantiating
the invoiced amount. Landlord shall pay each invoice hereunder within 30 days
after receiving it until the Alteration Allowance has been fully applied. If
Tenant becomes entitled to an Additional Alteration Allowance, it shall be
invoiced by Tenant and paid by Landlord in the same manner, commencing on the
date that Tenant commences its improvement work in the Additional Premises.
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LIENS
Tenant shall keep the Premises and the Property free and clear from any
liens or lien claims arising out of work performed, materials furnished or
obligations incurred by or on behalf of Tenant. Tenant shall indemnify and hold
Landlord harmless from any liabilities, costs and expenses resulting directly or
indirectly from any such liens or lien claims and from any work performed on or
about the Premises by Tenant, its agents, employees, contractors or
subcontractors. If any lien or lien claim is filed against any part of the
Property by any person claiming by, through or under Tenant, Tenant shall, upon
request of Landlord at Tenant's expense, immediately furnish to Landlord a bond
in form and amount and issued by a surety satisfactory to Landlord indemnifying
Landlord and the Property against all liabilities, costs and expenses, including
reasonable attorneys' fees, that may result therefrom. If such bond has been
furnished to Landlord, Tenant, at its sole cost and expense and after written
notice to Landlord, may contest such lien or lien claim by appropriate
proceedings conducted in good faith and with due diligence.
LIMITATION OF LIABILITY; INDEMNIFICATION; INSURANCE
LIMITATION OF LIABILITY. Landlord shall not be liable or
responsible to Tenant for any loss of or damage to any property or any injury of
any person occasioned by (a) any theft, burglary or act or neglect of any tenant
or occupant of the Building or any other person, (b) any fire or other casualty,
(c) any act of God or public enemy, (d) any injunction, riot, strike,
insurrection, war, court order, requisition or order of governmental body or
authority, or (e) any bursting, rupture, leakage or overflow of any plumbing or
pipes (including, without limitation, water, steam and/or refrigerant lines),
sprinklers, tanks, drains, drinking foundations or washstands, or other similar
cause in, above, upon or about the Premises or the Property unless such loss,
damage or injury is attributable to the negligence, willful misconduct or
default under this Lease by Landlord or its agents, employees, contractors,
subcontractors or invitees.
INDEMNIFICATION. Tenant shall indemnify Landlord and hold it
harmless from and against any and all liability, claims, causes of action,
damages, costs and expenses, including, without limitation, reasonable
attorneys' fees (collectively "Claims"), arising from or in connection with any
(a) act, omission, or neglect of Tenant or its agents, employees, contractors or
invitees, (b) breach or default under this Lease by Tenant, or (c) loss or
damage to property or injury of any person, occurring in or about the Premises.
Tenant's obligations under this Section 12 arising by reason of any events
occurring during the Lease Term shall survive the expiration or termination of
this Lease. The foregoing provisions shall not be construed to make Tenant
responsible for any Claims resulting from any loss or damage to property or
injury to persons caused by the negligence, willful misconduct or default under
this Lease by Landlord, or its agents, employees, contractors, subcontractors or
invitees.
LIABILITY INSURANCE. Tenant at its cost shall obtain and maintain
in full force and effect during the Lease Term policies of comprehensive public
liability insurance with the minimum limits specified in Section 1.1.11. Such
policies shall insure performance by Tenant of Tenant's obligations set forth in
Section 12.2 and shall name Landlord as an additional insured.
PERSONAL PROPERTY INSURANCE. Tenant at its cost shall maintain on
all of Tenant's Personal Property a policy or policies of standard fire and
extended coverage insurance with a vandalism and malicious mischief endorsement
to the extent of replacement value. The proceeds from any such policy shall
belong to and be paid to Tenant and shall be used by Tenant for the repair and
replacement of Tenant's Personal Property.
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POLICY REQUIREMENTS. Each policy of insurance that Tenant is
required to provide under this Lease shall:
(a) Be issued by an insurance company authorized to do business
in the State of Washington that is satisfactory to Landlord; and
(b) Contain an endorsement requiring 30 days' written notice
from the insurance company to both parties and Landlord's mortgagees (if any)
before cancellation or change in the coverage, scope or amount of such policy.
DELIVERY OF POLICIES. Each policy of insurance required under this
Lease, or a certificate of such policy, together with evidence of payment of
premiums, shall be deposited with Landlord on the Commencement Date and
thereafter not less than 5 days before the expiration date of such policy.
LANDLORD'S INSURANCE. Except as otherwise provided in this Lease,
the proceeds of any insurance policies maintained by or for the benefit of the
Landlord shall belong to and be paid over to Landlord. Tenant shall have no
interest in or right to such proceeds and shall make no claim against Landlord
or the insurer for any such proceeds.
WAIVER OF SUBROGATION RIGHTS. Notwithstanding anything in this
Lease to the contrary, Landlord and Tenant each hereby waives any and all rights
of recovery, claims, actions or causes of action against the other and its
agents, officers, directors, shareholders and employees, for loss or damage to
the Premises or Property or any Alterations thereto, or any personal property of
such party therein, that is caused by or results from fire and other perils
insured against under the normal extended coverage clauses of standard fire
insurance policies carried by the parties and in force at the time of damage or
loss. Each party shall cause each insurance policy obtained by it to provide
that the insurance company waives all right to recovery by way of subrogation
against either party in connection with any such loss or damage.
CASUALTY DAMAGE OR DESTRUCTION
OBLIGATION TO REPAIR. Subject to the provisions of Sections 13.2
and 13.3, if the Building is damaged by fire or other casualty, Landlord shall
forthwith repair or cause the same to be repaired.
RIGHT TO TERMINATE. If the Premises are damaged and Landlord
reasonably determines that the repairs cannot be made within 90 days after the
date repair work begins, Landlord shall have the option within 45 days after the
date of such damage either to: (a) notify Tenant of Landlord's intention to
repair such damage and of the period of time that Landlord estimates will be
required to complete the repair and, subject to the provisions of the next
sentence, diligently undertake such repair, in which event this Lease shall
continue in full force and effect subject to the Rent adjustment provisions of
Section 13.3; or (b) notify Tenant of Landlord's election to terminate this
Lease as of the date specified in such notice, which date shall be not less than
30 nor more than 60 days after Tenant receives such notice from Tenant.
Notwithstanding the foregoing, if Landlord's notice states that the repairs
cannot be completed within 90 days after the date such repair work begins,
Tenant shall have the option to terminate this Lease by delivering written
notice thereof to Landlord within 30 days after the date Tenant receives such
notice from Landlord. Such termination shall be effective not less than 30 days
nor more than 60 days after Tenant gives Landlord such notice.
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RENT. Until repairs are completed or until termination of this
Lease is effective, whichever may be the case, Base Rent shall be abated and
calculated by multiplying the full Base Rent hereunder by a fraction, the
numerator of which is the rentable area of the Premises that Landlord reasonably
determines is fit for occupancy and the denominator of which is the rentable
area of the Premises prior to the damage. There shall be no abatement of Base
Rent if the damage was caused solely by the act or omission of Tenant, its
agents, employees, contractors or invitees. If this Lease shall be terminated
as provided in this Section 13, Base Rent (as so abated and adjusted) shall be
prorated to the effective date of termination, and if not paid prior to
termination, Tenant's obligation to pay the same shall survive any termination
of this Lease. Landlord shall refund to Tenant any unearned Rent previously
paid to Landlord.
SCOPE OF REPAIRS. If Landlord is obligated or elects to repair the
Premises or the Property, modifications to conform to then Applicable Laws may
be made. Landlord will not carry insurance of any kind on Tenant's Personal
Property, and shall have no obligation to repair or replace it.
CONDEMNATION
DEFINITIONS.
(a) "Condemnation" means (a) the exercise of any governmental
power of eminent domain, whether by legal proceedings or otherwise, by a
Condemnor and (b) a voluntary sale or transfer to any Condemnor either under
threat of the exercise of the power of eminent domain or while legal proceedings
therefor are pending.
(b) "Condemnor" means any public or quasi-public authority
having the power of Condemnation.
(c) "Date of Taking" means the date the Condemnor has the right
to possession of the Property being taken by Condemnation.
TOTAL TAKING. If all of the Premises or such portions of the
Building as are required for the reasonable use of the Premises are taken by
Condemnation, this Lease shall automatically terminate as of the Date of Taking.
PARTIAL TAKING. If a portion of the Property is taken by
Condemnation (whether or not the Premises are affected) and Landlord reasonably
determines that (a) the remaining portions cannot be economically and
effectively used by it or (b) the Building should be restored in such a way as
to alter the Premises materially, then Landlord shall have the option to
terminate this Lease in accordance with Section 14.5. If a portion of the
Premises is taken by Condemnation, this Lease shall automatically terminate as
to the portion taken as of the Date of Taking. If the portion of the Premises
taken renders the remaining portion untenantable and unusable by Tenant, in
Tenant's reasonable opinion, Tenant shall have the option to terminate this
Lease in accordance with Section 14.5.
RESTORATION AND REPAIR. If a portion of the Premises shall be taken
by Condemnation and neither party elects to terminate this Lease, Landlord shall
repair the damage to the Premises at Landlord's cost and expense. Landlord
shall have no obligation to repair or replace any of Tenant's Personal Property,
and any sums received by Tenant as a result of the taking shall be applied by it
to the restoration and repair of the same.
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EXERCISE OF OPTIONS. If either party elects to exercise its option
to terminate this Lease under this Section 14, it shall do so by giving written
notice of the election to the other party not later than 45 days after the date
the nature and extent of the taking by Condemnation have been finally determined
(whether by issuance of a certificate of public use and necessity or its
equivalent by a court or other tribunal having jurisdiction over the Property or
otherwise), and if such notice is so given, this Lease shall terminate on the
earlier of the date stated in the notice or the Date of Taking.
UNEARNED RENT AND RENT ADJUSTMENT. If this Lease is terminated as
provided in this Section 14, Rent shall be prorated to the effective date of
termination, and Tenant's obligation to pay such prorated Rent shall survive any
termination of this Lease. Landlord shall refund to Tenant any unearned Rent
previously paid to Landlord. If this Lease is not so terminated, Base Rent
shall be reduced in the same proportion as the rentable area of the portion of
the Premises taken or rendered untenantable by such Condemnation bears to the
rentable area of the Premises immediately prior to the taking.
AWARD. All damages, compensation and any other proceeds from or for
the Condemnation of all or any part of the Property, including, without
limitation, any award made for the value of the leasehold estate created by this
Lease ("Landlord's Award") shall belong to and be the property of Landlord, and
Tenant hereby assigns to Landlord any and all claims to the Award.
Notwithstanding the foregoing, Tenant shall be entitled to receive an award
("Tenant's Award") equal to the lesser of (a) the unamortized cost of any
Alterations to the Premises paid for by Tenant that are taken by Condemnation or
(b) the amount by which such Alterations paid for by Tenant have enhanced the
value of the Property taken by Condemnation, subject however to the rights and
claims of the holders of any mortgages or deeds of trust on the property taken
by Condemnation, and provided that Tenant's Award does not decrease the amount
of Landlord's Award. Nothing contained herein shall be construed as precluding
Tenant from asserting any claim for damages that Tenant may have against the
Condemnor for the disruption or relocation of Tenant's business in the Premises
or for damages to any of Tenant's Personal Property.
ASSIGNMENTS AND SUBLEASING
GENERAL. Tenant shall not voluntarily assign, encumber, mortgage,
pledge, hypothecate, or otherwise transfer or dispose of all or any part of its
interest in this Lease or the Premises, or sublease all or any part of the
Premises, or allow any third party (except Tenant's wholly owned subsidiaries)
to occupy or use all or any part of the Premises, without first obtaining
Landlord's written consent, which shall not be unreasonably withheld or delayed.
Any such voluntary assignment, encumbrance, mortgage, pledge, hypothecation,
sublease, occupation or use by any third party, or other transfer or disposition
without Landlord's written consent shall be voidable at Landlord's election.
NOTICE OF PROPOSED ASSIGNMENT OR SUBLEASE. If Tenant wishes to
assign this Lease or sublet the Premises or any part thereof, Tenant shall first
give written notice to Landlord of its intention to do so, which notice shall
contain (a) the name of the proposed assignee or subtenant (each, a
"Transferee") and (b) the nature of the proposed Transferee's business to be
carried on in the Premises.
LANDLORD'S OPTIONS. At any time within 15 days after Landlord's
receipt of Tenant's notice pursuant to Section 15.2, Landlord may by written
notice to Tenant elect to either consent to the proposed assignment or sublease
or disapprove the proposed assignment or sublease.
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LIMITATIONS ON LANDLORD'S OPTION. Notwithstanding the foregoing, in
the event of a proposed assignment or sublease by Tenant, Landlord shall consent
to the proposed assignment or sublease if both of the following conditions are
satisfied:
(a) The use of the Premises by the proposed Transferee will be
substantially the same as Tenant's use of the Premises; and
(b) The proposed Transferee is reputable and of sound financial
condition.
APPROVED ASSIGNMENT OR SUBLEASE. If Landlord consents to any
proposed assignment or sublease:
(a) Tenant may enter into such assignment or sublease, but only
to the Transferee and upon the specific terms and conditions set forth in
Tenant's notice to Landlord regarding the same;
(b) Any assignment or sublease shall be subject to, and in full
compliance with, all of the terms and provisions of this Lease;
(c) No consent by Landlord to any assignment or sublease shall
relieve Tenant of any obligation under this Lease;
(d) Each assignee shall assume all obligations of Tenant under
this Lease shall be and remain jointly and severally liable with Tenant for the
payment of Rent, up to the amount set forth in the assignment agreement and the
performance of all of the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed, and each sublease shall obligate the
subtenant to perform all obligations of Tenant under this Lease with respect to
the portion of the Premises covered by its sublease; and
(e) If the Base Rent payable pursuant to any assignment or
sublease is greater than the Rent (I.E., the Base Rent plus Additional Rent)
then being paid by Tenant to Landlord, Tenant shall pay to Landlord 50% of the
overage, minus any brokerage fees and direct expenses reasonably incurred by
Tenant in preparing the space for the assignee or subtenant.
COSTS PAID BY TENANT. Whether or not Landlord consents to a
proposed assignment or sublease, Tenant shall reimburse Landlord on demand for
any and all costs that may be reasonably incurred by Landlord in connection with
any proposed assignment or sublease including, without limitation, reasonable
costs of investigating the acceptability of the proposed Transferee and
reasonable attorneys' fees.
TRANSFERS OF STOCK OR OTHER ASSETS. If Tenant is a corporation, any
transfer of this Lease by merger, consolidation, liquidation or dissolution or
any change in the ownership of or power to vote a majority of its outstanding
voting stock, whether voluntary, involuntary or by operation of law, shall
constitute a voluntary assignment for purposes of this Section 15. If Tenant is
a partnership, any transfer of this Lease by merger, consolidation, liquidation
or dissolution or any change in the ownership of a majority of the partnership
interests, whether voluntary, involuntary or by operation of law, shall
constitute a voluntary assignment for purposes of this Section 15. If Tenant
consists of more than one person, any transfer, whether voluntary, involuntary
or by operation of law, from one person to the other shall be deemed a voluntary
assignment. Any direct or indirect sale or other transfer of all or a
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substantial part of the assets of Tenant to another person or entity, whether
voluntary, involuntary or by operation of law, shall also constitute a voluntary
assignment for purposes of this Section 15. Landlord hereby consents to the
assignment of Tenant's interest under this Lease to American Home Products
Corporation, a Delaware corporation, or any of its affiliated companies.
INVOLUNTARY TRANSFER
No interest of Tenant in this Lease or the Premises shall be assignable or
transferable by operation of law (including, without limitation, any transfer by
testacy or intestacy). Without limiting the generality of the foregoing, the
occurrence of any of the following events shall constitute an involuntary
assignment:
(a) Tenant becomes bankrupt or insolvent or makes an assignment for
the benefit of creditors, or a proceeding is instituted by or against Tenant
under any insolvency, bankruptcy, reorganization or other debtor relief
proceedings (unless, in the case of an involuntary proceeding against Tenant,
the same is dismissed within 60 days); if Tenant is a partnership or consists of
more than one person or entity, any partner, person or entity becomes bankrupt
or insolvent or makes an assignment for benefit of creditors, or a proceeding is
instituted by or against such partner, person or entity under any insolvency,
bankruptcy, reorganization or other debtor relief proceedings (unless, in the
case of an involuntary proceeding, the same is dismissed within 60 days);
(b) A receiver or trustee is appointed with authority to take
possession of all or substantially all of the Premises, Tenant's interest in
this Lease or Tenant's assets located at the Premises and such receiver or
trustee is not removed within 90 days; or
(c) The attachment, execution or other judicial seizure of all or
substantially all of Tenant's assets located at the Premises, or of any right or
interest of Tenant under this Lease, and the same is not removed or discharged
within 60 days.
QUIET ENJOYMENT
Landlord covenants that it has full right and authority to make this Lease
and that Tenant, upon fully complying with and promptly performing all of the
terms, covenants and conditions of this Lease to be observed and performed by
it, and upon payment of all sums due hereunder as and when due, shall have quiet
and peaceful possession of the Premises for the Lease Term as against any
adverse claim of Landlord or any party claiming under Landlord, subject to the
provisions of this Lease.
ACCESS TO PREMISES
Landlord and its authorized representatives shall have the right to enter
the Premises at reasonable times upon reasonable prior notice to Tenant to
inspect, clean or make repairs, alterations or additions to the Premises or the
Building, render any services to be provided by Landlord hereunder, show the
Premises to prospective tenants or purchasers (during the last 6 months of the
Lease Term only) or for other purposes reasonably deemed necessary or desirable
by Landlord. Any such actions by Landlord shall not be deemed to be an eviction
of Tenant nor relieve Tenant of any of its obligations hereunder, provided the
same shall be accomplished with as little inconvenience to Tenant as possible.
Nothing in this Section 18 shall be deemed to impose any obligation upon
Landlord not expressly stated elsewhere in this Lease.
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SURRENDER OF PREMISES
CONDITION OF PREMISES. Subject to Section 13, upon the expiration
or earlier termination of the Lease Term, Tenant shall surrender the Premises
and any Alterations to the Premises (except those Alterations that Tenant is
required to remove pursuant to Section 10) in the condition that existed on the
Commencement Date, reasonable wear and tear and damage by the elements excepted.
REMOVAL OF TENANT'S PROPERTY. Tenant's Personal Property installed
or located at the Premises shall be and remain the property of Tenant. Upon the
expiration or termination of the Lease Term, Tenant shall at its expense remove
from the Premises all of Tenant's Personal Property and the property of all
persons claiming under Tenant, and shall repair or reimburse Landlord for the
costs of repairing any damage to the Premises or the Property resulting from the
removal of such property. Any such property not so removed by Tenant shall be
deemed abandoned by Tenant, and shall become the property of Landlord to dispose
of as Landlord deems expedient without accounting to Tenant therefor. Tenant
waives all claims against Landlord for any damages resulting from Landlord's
retention or disposition of any such property. Tenant shall be liable to
Landlord for reasonable costs incurred by Landlord for removing, storing and
disposing of any such property.
SURVIVAL OF TENANT'S OBLIGATIONS. Tenant's obligations under this
Section 19 shall survive the expiration or termination of this Lease.
HOLDING OVER
WITH LANDLORD'S WRITTEN CONSENT. If Tenant, with Landlord's written
consent, remains in possession of the Premises after the expiration or
termination of this Lease, such possession by Tenant shall be deemed to be a
month-to-month tenancy terminable as provided by Applicable Law. During such
month-to-month tenancy, Tenant shall pay all Rent provided in this Lease and all
provisions of this Lease shall apply to the month-to-month tenancy, except those
pertaining to the Lease Term and the option to extend described in Section 3.
WITHOUT LANDLORD'S WRITTEN CONSENT. If Tenant, without Landlord's
written consent, remains in possession of the Premises after the expiration or
termination of this Lease, such possession by Tenant shall be deemed to be a
month-to-month tenancy terminable as provided by Applicable Law. During such
month-to-month tenancy, Tenant shall pay all Rent provided in this Lease and all
provisions of this Lease shall apply to the month-to-month tenancy, except those
pertaining to the Lease Term and the option to extend described in Section 3,
and except that, during the period of such holdover, Tenant shall pay Landlord
monthly Base Rent equal to the greater of:
(a) 125% of the monthly Base Rent that Tenant was obligated to
pay for the month immediately before such expiration or termination; or
(b) If Landlord has leased all or a part of the Premises to
other tenants effective upon the expiration or termination of this Lease, the
monthly Base Rent that such other tenants have agreed to pay for the Premises
during the period of such holdover.
In the event of any unauthorized holding over, Tenant shall also indemnify and
hold Landlord harmless from and against all liabilities, losses, claims, causes
of action, damages, costs and expenses (including,
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without limitation, reasonable attorneys' fees) resulting from Tenant's failure
to surrender the Premises, including, without limitation, claims made by
succeeding tenants.
SURVIVAL OF TENANT'S OBLIGATIONS. Tenant's obligations under this
Section 20 shall survive the expiration or termination of this Lease.
ESTOPPEL CERTIFICATES
Tenant shall, upon written request of Landlord, execute, acknowledge and
deliver to Landlord, or its designee, a written certificate of Tenant stating:
(a) that Tenant has accepted the Premises (or, if Tenant has not done so, that
Tenant has not accepted the Premises and specifying the reasons therefor);
(b) the Commencement Date and Expiration Date of this Lease; (c) the amount of
the Rent then being paid under this Lease and the date to which Rent under this
Lease has been paid; (d) that this Lease is in full force and effect and has not
been modified (or, if there have been modifications, that this Lease is in full
force and effect as modified and stating the modifications); (e) whether or not
there are, to Tenant's knowledge, then existing any defaults by the Landlord in
the performance of its obligations under this Lease (and, if so, specifying the
same); (f) whether or not there are then existing any defenses against the
enforcement of any obligations of Tenant under this Lease (and, if so,
specifying the same); (g) the amount of the security and prepaid Rent (if any)
that has been deposited with Landlord; and (h) any other information requested.
Any certificate delivered pursuant to this Section 21 may be relied upon by a
prospective purchaser or a mortgagee of any part of Landlord's interest in the
Property, or an assignee of any mortgage upon any part of the Landlord's
interest in the Property. If Tenant fails to respond within 10 business days
after receipt by Tenant of a written request by Landlord as herein provided,
Tenant shall be deemed to have admitted the accuracy of any information supplied
by Landlord to such prospective purchaser, mortgagee or assignee. If Landlord
requests more than 2 estoppel certificates from Tenant during the Initial Term
or any Extended Term, then, in connection with such additional estoppel
certificates, Landlord shall reimburse Tenant for reasonable attorneys' fees
incurred by Tenant in complying with this Section 21 within 30 days after
receiving an invoice therefor from Tenant.
SUBORDINATION
PRIORITY. Without necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, this Lease
shall be subject and subordinate at all times to the lien of any mortgage or
deed of trust that may now exist or hereafter be executed in any amount for
which all or a portion of the Property or all or a part of Landlord's interest
in the Property is specified as security, and all renewals, modifications,
extensions, substitutions, replacements and/or consolidations thereof.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such liens to this Lease if the mortgagee under
such mortgage or beneficiary under such deed of trust (each, a "Landlord's
Mortgagee") so requires. If any such mortgage or deed of trust is foreclosed or
a conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination of such mortgage or deed of trust, attorn to
and become the tenant of the purchaser or grantee of the Property at the request
of such purchaser or grantee provided, however, that such purchaser or grantee
shall not disaffirm Tenant's rights under the Lease, nor disturb Tenant's quiet
possession of the Premises so long as Tenant is not in default hereunder and
shall agree in writing to perform all of Landlord's obligations under this Lease
accruing after the date of the transfer. Tenant shall, within 10 business days
after Landlord's written demand, execute and deliver any additional documents
evidencing the priority or subordination of this Lease with respect to the lien
of any mortgage or deed of trust.
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MORTGAGEE PROTECTION. Tenant shall give to each Landlord's Mortgagee
a copy of any notice of default that Tenant serves upon Landlord, provided that
Tenant has been notified in writing of the name and address of such Landlord's
Mortgagee, and such Landlord's Mortgagee shall have the right to cure such
default on behalf of Landlord within 30 days after the receipt of such notice.
Tenant shall not invoke any of the remedies that it may have against Landlord
under this Lease until such 30-day period has expired, or, if such default
cannot reasonably be cured within 30 days, until such period as may reasonably
be necessary to complete such cure has expired, provided Landlord's Mortgagee is
proceeding to cure such default with due diligence, or is diligently taking
steps to obtain the right to enter the Premises and cure the default, whichever
is later.
DEFAULT BY TENANT
EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute a default by Tenant under this Lease:
(A) Abandonment of the Premises for 10 consecutive business days
while Tenant is in default (the closure of Tenant's business in the Premises
during holidays observed by Tenant shall not be considered an "abandonment");
(B) Failure by Tenant to make any payment of Rent as and when
due if such failure continues for 5 business days after Tenant has received
written notice from Landlord that Rent is overdue;
(C) Failure by Tenant to perform or observe any of Tenant's
obligations under Sections 12.3 to 12.7 hereof;
(D) At Landlord's election, any assignment, encumbrance,
mortgage, pledge, hypothecation, sublease or other transfer or disposition made
in violation of Section 15 or 16; or
(E) Failure by Tenant to perform or observe any other provision
of this Lease if the failure is not cured within 30 days after written notice
has been given by Landlord to Tenant. If the default is curable but cannot
reasonably be cured within 30 days, Tenant shall not be in default if Tenant
commences to cure the default within such 30-day period and thereafter
diligently prosecutes the same to completion.
Notices given under this Section 23 shall specify the alleged default and the
applicable Lease provisions, and shall demand that Tenant perform the provisions
of the Lease within the applicable period of time.
LANDLORD'S REMEDIES
In the event of a default by Tenant, Landlord shall have one or more of the
following described remedies, in addition to all other rights and remedies now
or hereafter available at law or in equity. Such rights and remedies are in
addition to Landlord's rights to assess and collect interest and late charges,
as provided in Section 4.3:
RIGHT TO REENTER AND RELET. Landlord may continue this Lease in
full force and effect, and Landlord shall have the right to enter the Premises
and remove therefrom all persons and property, to store such property in a
public warehouse or elsewhere at the cost of and for the account of Tenant, and
to sell such property and apply the proceeds therefrom pursuant to Applicable
Laws. Landlord may from
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time to time sublet the Premises or any part thereof for the account of Tenant
for such term or terms (which may extend beyond the Lease Term) and at such rent
and on such other conditions as Landlord in its sole discretion may deem
advisable, with the right to make alterations and repairs to the Premises. Rents
received from such subletting shall be applied in the following order: (a) to
payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord; (b) to the payment of any reasonable costs of such subletting and of
such alterations and repairs; (c) to payment of Rent due and unpaid hereunder;
and (d) to payment of future Rent as the same becomes due hereunder. In no event
shall Tenant be entitled to any excess rent received by Landlord. If the rents
received from such subletting are not sufficient to pay items (a), (b), and (c)
above, Tenant shall pay the deficiency on demand. Landlord may recover sums due
from Tenant under this Section from time to time, on one or more occasions, and
Landlord shall not be obligated to wait until the expiration or termination of
the Lease Term.
RIGHT TO RECEIVER. Landlord may have a receiver appointed for
Tenant, upon application by Landlord, to take possession of the Premises and to
apply any rent collected from the Premises and to exercise all other rights and
remedies granted to Landlord pursuant to Section 24.1 above.
RIGHT TO TERMINATE LEASE. Landlord may terminate this Lease at any
time after such default and may, in addition to any other remedy it may have,
recover from Tenant the amount by which the Rent for the balance of the Lease
Term exceeds the fair market rental value of the Premises for the same period
and all other amounts necessary to compensate Landlord for all damage caused by
Tenant's default. No act by Landlord other than giving notice to Tenant shall
terminate this Lease. Neither acts of maintenance, nor efforts to relet the
Premises nor the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall constitute a termination of this
Lease.
RIGHT TO CURE. Landlord may, at any time after Tenant commits a
default, but shall not be obligated to, cure the default at Tenant's cost. If
Landlord at any time pays any sum in order to cure such default, Tenant shall
reimburse Landlord for the sum paid by Landlord within 5 business days after
written demand by Landlord, provided that Landlord provides Tenant with paid
receipts evidencing such sum.
DEFAULT BY LANDLORD
Subject to the provisions of Section 22.2, failure by Landlord to perform
any of its obligations under this Lease shall constitute a default by Landlord
if the failure is not cured within 30 days after written notice thereof has been
given by Tenant to Landlord. If the default is curable but cannot reasonably be
cured within 30 days, Landlord shall not be in default if Landlord commences to
cure the default within such 30-day period and thereafter diligently prosecutes
the same to completion. Notices given under this Section 25 shall specify the
alleged default and the applicable Lease provisions, and shall demand that
Landlord perform the provisions of this Lease within the applicable period of
time.
ATTORNEYS' FEES
If either party commences an action against the other party arising out of
or in connection with this Lease, the prevailing party shall be entitled to have
and recover from the other party reasonable attorneys' fees and costs.
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CUMULATIVE REMEDIES
All rights and remedies of Landlord and Tenant under this Lease shall be
cumulative and shall not exclude any rights or remedies otherwise available.
WAIVER
NONWAIVER OF DEFAULTS. No delay or omission in the exercise of any
right or remedy of either party upon any default by the other party shall impair
such right or remedy or be construed as a waiver of any default. The receipt
and acceptance by Landlord of delinquent Rent shall not constitute a waiver of
any other default, but shall constitute only a waiver of timely payment for the
particular Rent payment involved.
SURRENDER OF PREMISES. No act or conduct of Landlord, including
acceptance of the keys to the Premises, shall constitute an acceptance of the
surrender of the Premises by Tenant before the Expiration Date. Only notice
from Landlord to Tenant shall constitute acceptance of the surrender of the
Premises and accomplish a termination of the Lease.
CONSENTS AND APPROVALS. Landlord's consent to or approval of any
act by Tenant requiring Landlord's consent or approval shall not be deemed to
waive or render unnecessary Landlord's consent to or approval of any subsequent
act by Tenant. Landlord shall not unreasonably withhold or delay any consent or
approval sought by Tenant hereunder.
WRITTEN WAIVERS. Any waiver by Landlord of any default shall be in
writing and shall not be a waiver of any other default concerning the same or
any other provisions of this Lease.
NOTICES
METHOD. Any notice, demand, request, consent, approval or other
communication under this Lease shall be in writing. Each such communication and
all payments under this Lease shall be personally delivered or sent by U.S.
registered or certified mail, postage prepaid or by a nationally recognized
courier service or by facsimile followed by prompt telephonic confirmation of
receipt (a) to Landlord at Landlord's notice address or facsimile number set
forth in Section 1.1.12(i) hereof; (b) to Tenant, at Tenant's notice address or
facsimile number set forth in Section 1.1.12(ii); (c) to Landlord's Mortgagee at
the notice address or facsimile number set forth in Section 1.1.12(iii); or
(d) to such other persons or at such other addresses as may from time to time be
designated by any such party in writing.
EFFECTIVE DATE. All such communications and payments shall be
effective upon (a) the date of personal delivery, as evidenced by an affidavit
of service, if delivered personally, (b) the date of receipt, as evidenced by
the return receipt, if sent by registered or certified mail, (c) the date of
receipt, as evidenced by a signed receipt, if sent by courier, or (d) the date
of facsimile transmission, as evidenced by prompt telephonic confirmation of
receipt, if sent by facsimile.
MISCELLANEOUS PROVISIONS
TIME OF ESSENCE. Time is of the essence of each provision of this
Lease.
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AUTHORITY. Landlord and Tenant each represents and warrants to the
other that it is duly authorized to execute and deliver this Lease and that this
Lease is valid and enforceable against it in accordance with its terms.
COMMISSIONS. Each party represents to the other that there are no
individuals or entities entitled to brokerage commissions or finder's fees in
connection with this Lease except the broker named in Section 1.1.13 hereof.
Landlord shall pay all commissions and fees that are payable to the broker named
in such Section. If any other claims for brokerage commissions or finder's
fees, or like payments, arise out of or in connection with this Lease, such
claims shall be defended by, and if sustained, paid by, the party whose alleged
actions or commitment form the basis of such claims.
INTERPRETATION AND CONSTRUCTION. This Lease shall be governed by,
and construed and interpreted in accordance with, the laws of the State of
Washington.
INTEGRATED AGREEMENT AND MODIFICATIONS. This Lease contains all
covenants and agreements between Landlord and Tenant relating in any manner to
the rent, use and occupancy of the Premises and all other matters set forth in
this Lease. No prior agreements or understanding pertaining to the same shall
be valid or of any force or effect; and the terms, covenants, conditions and
agreements of this Lease shall not be altered, modified or added to except in
writing signed by Landlord and Tenant.
USE OF DEFINITIONS. The definitions contained in this Lease shall
be used to interpret this Lease.
CAPTIONS. The captions of this Lease shall have no effect on its
interpretation.
SINGULAR AND PLURAL. When required by the context of this Lease,
the singular shall include the plural.
JOINT AND SEVERAL OBLIGATIONS. "Party" shall mean Landlord or
Tenant and if more than one person or entity is Landlord or Tenant, the
obligations imposed on that party shall be joint and several.
SEVERABILITY. The unenforceability, invalidity or illegality of any
provision of this Lease shall not render any other provisions unenforceable,
invalid or illegal.
RECORDATION. This Lease shall not be recorded, except that, at the
request of either party, the parties shall execute a memorandum of this Lease in
recordable form, and shall record the same.
TRANSFER AND ASSIGNMENT OF PREMISES BY LANDLORD. Landlord shall
have the right to transfer and assign, in whole or in part, all of its rights
and obligations hereunder in the Premises and/or the Property. In the event of
any such transfer, Landlord shall be automatically relieved of any and all
obligations and liabilities on the part of Landlord accruing from and after the
effective date of the transfer, provided that Landlord's successor or assignee
assumes all of such obligations and liabilities in writing.
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NAME. Tenant shall not use the name of the Building or the Property
for any purpose other than as an address of the business to be conducted by the
Tenant on the Premises. Landlord shall have the right at any time to change the
name, number or designation by which the Building or Property is known without
liability to Tenant.
LIGHT AND AIR. No diminution of light, air or view by any structure
that may hereafter be erected shall entitle Tenant to any reduction of Rent
under this Lease, result in any liability or obligation of Landlord to Tenant,
or in any way affect this Lease or Tenant's obligations hereunder.
SUCCESSORS AND ASSIGNS. Except as provided in Sections 15 and 16,
all of the terms, conditions, covenants and agreements set forth in this Lease
shall apply to, inure to the benefit of, and be binding upon Landlord, Tenant
and their respective heirs, administrators, executors, successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed as of
the date set forth above.
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LANDLORD: CENTRAL LIFE ASSURANCE COMPANY, AN IOWA MUTUAL LIFE
ASSURANCE COMPANY
By /S/G. Joseph Systa
----------------------------------------------
Its VICE PRESIDENT
TENANT: IMMUNEX CORPORATION, a Washington corporation
By /S/Micheal Kranda
----------------------------------------------
Its President
STATE OF IOWA )
) ss.
COUNTY OF DALLAS )
On this 27TH day of DECEMBER, 1994, before me, a Notary Public in and for
the State of Iowa, personally appeared G. JOSEPH SYSTA, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person who
executed this instrument, on oath stated that HE was authorized to execute the
instrument, and acknowledged it as the VICE PRESIDENT of CENTRAL LIFE
ASSURANCE COMPANY to be the free and voluntary act and deed of said corporation
for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
/S/Beverly L. Hutchens
----------------------------------------------
NOTARY PUBLIC in and for the State of Iowa,
residing at Prairie City, Iowa
----------------------------------
My appointment expires October 14, 1997
-----------------------
Print Name Beverly L. Hutchens
-----------------------------------
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STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 4TH day of JANUARY, 1995, before me, a Notary Public in and for the
State of Washington, personally appeared MICHAEL KRANDA, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person who
executed this instrument, on oath stated that HE was authorized to execute the
instrument, and acknowledged it as the PRESIDENT of IMMUNEX CORPORATION to be
the free and voluntary act and deed of said corporation for the uses and
purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
/S/Laura M. Mulholland
--------------------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at Mercer Island
--------------------------------------
My appointment expires 2/9/98
---------------------------
Print Name Laura M. Mulholland
---------------------------------------
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EXHIBIT 1
LEGAL DESCRIPTION OF LAND
The 1201 Western Building, located at 1201 Western Avenue,
Seattle, Washington 98101, and situated on Lots 3 and 4,
less the westerly sixteen (16) feet thereof, Block 180,
Seattle Tidelands, City of Seattle, County of King, State of
Washington. c
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Exhibit 10.23
AMENDMENT NO. 2 DATED NOVEMBER 18, 1994, TO LOAN AGREEMENT
DATED SEPTEMBER 30, 1993, (THE "LOAN AGREEMENT") BETWEEN
CYANAMID AGRICULTURAL DE PUERTO RICO, INC. ("LENDER") AND
IMMUNEX CORPORATION ("BORROWER")
WHEREAS, the Lender and Borrower desire to amend the Loan Agreement by
increasing the aggregate amount the Borrower can borrow thereunder to
$50,000,000 and further by increasing the term of the Loan Agreement through
March 31, 1996.
NOW, THEREFORE, the Lender and Borrower, in consideration of the mutual
covenants herein contained, do hereby agree as follows:
1. Subsection 1.1 of the Loan Agreement is further amended by
substituting $50,000,000 for $40,000,000 and by replacing December 31, 1994 with
March 31, 1996.
2. The Borrower and Lender agree that the outstanding balance of any
loans granted pursuant to the terms and conditions of the Loan Agreement, as
amended, will not exceed one hundred ten (110%) percent of the revenue guarantee
receivable, determined using the accrual method of accounting, owed to Borrower
by Lender under the terms of the Amended and Restated Governance Agreement
between them dated as of December 15, 1992.
3. Exhibit A of the Loan Agreement, as previously amended, is further
hereby amended by substituting "$50,000,000" for "$40,000,000" in all places
where such figure appears.
4. Paragraph 4.10(b) of the Loan Agreement is amended to include in the
definition of Consolidated Current Assets any revenue guarantee amounts due to
Borrower by Lender, determined using the accrual method of accounting, owed
under the terms of the Amended and Restated Governance Agreement between them
dated as of December 15, 1992.
5. Borrower shall execute a new Note in the form of Exhibit A of the Loan
Agreement (as amended by paragraph 3 above). Such new Note shall reflect all
borrowings and repayments made by Borrower through the date hereof and shall be
maintained in accordance with Section 1.2 of the Loan Agreement. Upon receiving
such new Note, Lender shall return the original Note to Borrower marked
cancelled.
6. Borrower hereby certifies that, after giving effect to this amendment,
(a) no Event of Default or event which, with the giving of notice or the lapse
of time or both, would constitute an Event of Default exists, (b) Borrower has
complied and is in compliance in all material respects with all covenants,
agreements and conditions in each Loan Document and (c), except as previously
disclosed by Borrower in any Securities Exchange Act of 1934 filing, each
representation and warranty contained in each Loan Document is true with the
same effect as though such representation and warranty had been made as of the
date hereof.
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7. Capitalized terms not otherwise defined herein shall have the meaning
set forth in the Loan Agreement.
8. Except as specifically modified hereby the terms and conditions of the
Loan Agreement shall remain unchanged and in full force and effect.
9. This Amendment may be executed in counterparts, each of which when so
executed shall be deemed to be an original and both of which, when taken
together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the Borrower and the Lender has caused this
Amendment to be executed by its duly authorized representatives as of the day
and year first above written.
CYANAMID AGRICULTURAL DE
PUERTO RICO, INC.
By: /s/Terence D. Martin
---------------------------
Name: Terence D. Martin
Title: Treasurer
IMMUNEX CORPORATION
By: Douglas G. Southern
--------------------------
Name: Douglas G. Southern
Title: Sr. Vice President
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Exhibit 10.24
AGREEMENT
AGREEMENT, dated September 23, 1994 (the "Agreement"), between Immunex
Corporation, a Washington corporation ("Immunex"), and American Home Products
Corporation, a Delaware corporation ("AHP").
WHEREAS, Immunex entered into the Amended and Restated Agreement and Plan
of Merger, dated as of December 15, 1992 (the "Immunex Merger Agreement"), with
American Cyanamid Company ("Cyanamid"), Lederle Parenterals, Inc. ("LPI") and
Lederle Oncology Corporation ("LOC") and an Amended and Restated Governance
Agreement, dated as of December 15, 1992 (the "Governance Agreement"), with
Cyanamid and LOC;
WHEREAS, upon consummation of the merger contemplated by the Immunex Merger
Agreement (the "Immunex Merger"), Cyanamid and LPI became the owners of
approximately 53.5% of the issued and outstanding common stock of Immunex (the
"Immunex Common Stock");
WHEREAS, the Governance Agreement was entered into by the parties in
connection with the Immunex Merger Agreement in order to establish certain terms
and conditions concerning (i) the corporate governance of Immunex after the
Immunex Merger and (ii) the acquisition and disposition of securities of Immunex
by Cyanamid;
WHEREAS, the resolutions adopted by the Board of Directors of Immunex in
connection with the Immunex Merger Agreement, and certain related agreements
(each, including the Governance Agreement, a "Subject Agreement") entered into
in connection therewith, include the approval (the "Cyanamid Approval") of the
Immunex Merger and the Subject Agreements, among other things, for purposes of
Chapter 23B.19 of the Washington Business Corporation Act ("Chapter 23B.19");
WHEREAS, AHP has entered into an Agreement and Plan of Merger, dated August
17, 1994 (as the same may be amended, the "AHP Merger Agreement"), with AC
Acquisition Corp. and Cyanamid, pursuant to which AHP proposes to acquire all of
the issued and outstanding capital stock of Cyanamid;
WHEREAS, upon consummation of the tender offer required pursuant to the AHP
Merger Agreement, AHP may be deemed to be the beneficial owner of the shares of
Immunex Common Stock owned by Cyanamid;
WHEREAS, AHP (and its affiliates and associates) and Immunex (and its
subsidiaries) have had and in the future may continue to have significant
business dealings in the ordinary course of business;
WHEREAS, in light of the foregoing and for the avoidance of doubt, AHP has
requested that the Board of Directors of Immunex take action to approve any
beneficial ownership by AHP of the Immunex Common Stock to be owned by AHP by
reason of the consummation of the tender offer pursuant to the AHP Merger
Agreement and to confirm that such approval constitutes effective Board of
Directors approval under Section 23B.19.040(1)(a) of Chapter 23B.19; and
WHEREAS, the Board of Directors of Immunex has, on the terms set forth
below, agreed to take such action.
NOW THEREFORE, in consideration of the foregoing and the other mutual
promises and agreements contained herein, Immunex and AHP hereby agree as
follows:
1. DEFINED TERMS.
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1.1 Capitalized terms used herein and not defined have the meanings
given to such terms in the Governance Agreement.
1.2 "Subject Company" means Cyanamid and any subsidiary of Cyanamid
party to any Subject Agreement.
2. IMMUNEX BOARD APPROVAL. Immunex represents that (a) attached hereto as
Annex A is a true and correct copy of a resolution (the "Resolution") duly
adopted by the Board of Directors at its meeting held on September 16, 1994 in
connection with and in reliance upon the agreements of the parties set forth
herein and (b) such Resolution constitutes effective Board of Directors approval
under Section 23B.19.040(1)(a) of Chapter 23B.19 of any beneficial ownership by
AHP of the Immunex Common Stock to be owned by AHP by reason of the consummation
of the tender offer pursuant to the AHP Merger Agreement.
3. PROTECTION OF SUBJECT AGREEMENTS. During the term of the Governance
Agreement:
3.1 AHP agrees that (a) it will not take action to cause any Subject
Company to violate the obligations of such Subject Company under any Subject
Agreement to which it is a party or by which it is bound and (b) it will not
fail to permit any Subject Company to take such actions as may be required to be
taken by such Subject Company to perform such obligations.
3.2 If AHP causes the separate existence of any Subject Company to
cease (whether by merger, consolidation or other similar business combination
transaction), or causes such Subject Company to transfer all or substantially
all of its assets in one transaction or in a series of related transactions, AHP
will, in connection therewith, make appropriate provision so that any successor
to, or transferee of all or substantially all of the assets of, such Subject
Company that is an affiliate of AHP will be bound by and required to perform the
obligations of such Subject Company under each Subject Agreement to which such
Subject Company is a party or by which it is bound.
3.3 AHP agrees to be bound by the restrictions set forth in Article III
of the Governance Agreement to the extent then applicable to Cyanamid. For this
purpose, references in such Article to Cyanamid shall be deemed to refer to AHP,
MUTATIS MUTANDIS.
3.4 In the event that Cyanamid shall fail, at any time following
completion of the Merger pursuant to the AHP Merger Agreement, to make any
payment required under Section 8.01 of the Governance Agreement when due, AHP
shall cause Cyanamid to make such payment to Immunex within thirty (30) days
following receipt of notice from Immunex that such payment is due but unpaid.
4. AMENDMENTS; WAIVERS. Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by Immunex and AHP, or, in the case of a waiver, by
the party against whom the waiver is to be effective; provided that no such
amendment or waiver by Immunex shall be effective without the approval of a
majority of the Independent Directors.
5. EFFECTIVENESS, TERMINATION. This Agreement will become effective upon
the execution hereof by the parties hereto; provided that if the AHP Merger
Agreement is terminated for any reason without consummation of the tender offer
required pursuant thereto, this Agreement shall be null and void, AB INITIO.
6. COUNTERPARTS. This Agreement may be executed and delivered (including
by way of facsimile transmission) in counterparts, each of which, when executed
and delivered, shall be deemed to be an original and both of which, taken
together, shall constitute one and the same instrument.
94
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
IMMUNEX CORPORATION
/s/Edward V. Fritzky
----------------------------------
Name: Edward V. Fritzky
Title: Chief Executive Officer
AMERICAN HOME PRODUCTS CORPORATION
/s/Louis L. Haynes Jr.
----------------------------------
Name: Louis L. Haynes Jr.
Title: Senior Vice President and General Counsel
95
<PAGE>
ANNEX A
WHEREAS, this corporation entered into the Amended and Restated Agreement
and Plan of Merger, dated as of December 15, 1992 (the "Immunex Merger
Agreement"), with American Cyanamid Company ("Cyanamid"), Lederle Parenterals,
Inc. ("LPI") and Lederle Oncology Corporation ("LOC") and an Amended and
Restated Governance Agreement, dated as of December 15, 1992 (the "Governance
Agreement"), with Cyanamid and LOC;
WHEREAS, upon consummation of the merger contemplated by the Immunex Merger
Agreement (the "Merger"), Cyanamid and LPI became the owners of approximately
53.5% of the issued and outstanding common stock (the "Immunex Common Stock") of
this corporation;
WHEREAS, the Governance Agreement was entered into by the parties in
connection with the Immunex Merger Agreement in order to establish certain terms
and conditions concerning (i) the corporate governance of this corporation after
the Immunex Merger and (ii) the acquisition and disposition of securities of
this corporation by Cyanamid;
WHEREAS, American Home Products Corporation ("AHP") has entered into an
Agreement and Plan of Merger, dated August 17, 1994 (as the same may be amended,
the "AHP Merger Agreement"), with AC Acquisition Corp. and Cyanamid, pursuant to
which AHP proposes to acquire all of the issued and outstanding capital stock of
Cyanamid;
WHEREAS, upon consummation of the tender offer required pursuant to the AHP
Merger Agreement, AHP may be deemed to be the beneficial owner of the shares of
Immunex Common Stock owned by Cyanamid;
WHEREAS, the consummation of the tender offer required pursuant to the AHP
Merger Agreement will not modify Cyanamid's duty to perform its obligations
under the Governance Agreement;
WHEREAS, AHP (and its affiliates and associates) and this corporation (and
its subsidiaries) have had and in the future may continue to have significant
business dealings in the ordinary course of business;
WHEREAS, in light of the foregoing and for the avoidance of doubt, AHP has
requested that this Board of Directors take action to approve any beneficial
ownership by AHP of the Immunex Common Stock to be owned by AHP by reason of the
consummation of the tender offer pursuant to the AHP Merger Agreement and to
confirm that such approval constitutes effective Board of Directors approval
under Section 23B.19.040(1)(a) of Chapter 23B.19 of the Washington Business
Corporation Act ("WBCA").
THEREFORE BE IT RESOLVED, that this Board of Directors hereby approves the
beneficial ownership by AHP of the Immunex Common Stock to be owned by AHP by
reason of the consummation of the tender offer pursuant to the AHP Merger
Agreement and hereby confirms that such approval constitutes effective Board of
Directors approval under Section 23B.19.040(1)(a) of Chapter 23B.19 of the WBCA
subject to due execution and delivery by AHP of the agreement presented to this
meeting and attached hereto.
96
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES:
Immunex Manufacturing Corporation
Incorporated in the State of Washington
51 University Street
Seattle, WA 98101
Receptech Corporation
Incorporated in the State of Washington
51 University Street
Seattle, WA 98101
97
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-70370 and 33-78694) pertaining to the Immunex Corporation
Stock Option Plan and Director Stock Option Plan of our report dated January 20,
1995, with respect to the consolidated financial statements and schedule of
Immunex Corporation included in the Annual Report (Form 10-K) for the year ended
December 31, 1994.
Ernst & Young LLP
Seattle, Washington
March 14, 1995
98
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the individuals whose signatures appear
below, in their capacities as officers and directors of Immunex Corporation (the
"Company"), hereby constitute and appoint Douglas G. Southern their true and
lawful attorney-in-fact, with full power of substitution, to sign on behalf of
the undersigned the Company's Annual Report on Form 10-K for the 1994 fiscal
year pursuant to Section 13 of the Securities and Exchange Act of 1934 and to
file the same, with exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission. Each of the undersigned
does hereby ratify and confirm all that such attorney-in-fact may do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Michael L. Kranda Director MARCH 7, 1995
- -------------------------- ------------------------
(Michael L. Kranda)
Director
- -------------------------- ------------------------
(Steven Gillis)
Director
- -------------------------- ------------------------
(Joseph J. Carr)
Director
- -------------------------- ------------------------
(Kirby L. Cramer)
Director
- -------------------------- ------------------------
(Robert A. Essner)
Director
- -------------------------- ------------------------
(John E. Lyons)
Director
- -------------------------- ------------------------
(Edith W. Martin)
99
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the individuals whose signatures appear
below, in their capacities as officers and directors of Immunex Corporation (the
"Company"), hereby constitute and appoint Douglas G. Southern their true and
lawful attorney-in-fact, with full power of substitution, to sign on behalf of
the undersigned the Company's Annual Report on Form 10-K for the 1994 fiscal
year pursuant to Section 13 of the Securities and Exchange Act of 1934 and to
file the same, with exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission. Each of the undersigned
does hereby ratify and confirm all that such attorney-in-fact may do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
Director
- -------------------------- ------------------------
(Michael L. Kranda)
/s/ Steven Gillis Director March 13, 1995
- -------------------------- ------------------------
(Steven Gillis)
Director
- -------------------------- ------------------------
(Joseph J. Carr)
Director
- -------------------------- ------------------------
(Kirby L. Cramer)
Director
- -------------------------- ------------------------
(Robert A. Essner)
Director
- -------------------------- ------------------------
(John E. Lyons)
Director
- -------------------------- ------------------------
(Edith W. Martin)
100
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the individuals whose signatures appear
below, in their capacities as officers and directors of Immunex Corporation (the
"Company"), hereby constitute and appoint Douglas G. Southern their true and
lawful attorney-in-fact, with full power of substitution, to sign on behalf of
the undersigned the Company's Annual Report on Form 10-K for the 1994 fiscal
year pursuant to Section 13 of the Securities and Exchange Act of 1934 and to
file the same, with exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission. Each of the undersigned
does hereby ratify and confirm all that such attorney-in-fact may do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
Director
- -------------------------- ------------------------
(Michael L. Kranda)
Director
- -------------------------- ------------------------
(Steven Gillis)
/s/ Joseph J. Carr Director March 7, 1995
- -------------------------- ------------------------
(Joseph J. Carr)
Director
- -------------------------- ------------------------
(Kirby L. Cramer)
Director
- -------------------------- ------------------------
(Robert A. Essner)
Director
- -------------------------- ------------------------
(John E. Lyons)
Director
- -------------------------- ------------------------
(Edith W. Martin)
101
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the individuals whose signatures appear
below, in their capacities as officers and directors of Immunex Corporation (the
"Company"), hereby constitute and appoint Douglas G. Southern their true and
lawful attorney-in-fact, with full power of substitution, to sign on behalf of
the undersigned the Company's Annual Report on Form 10-K for the 1994 fiscal
year pursuant to Section 13 of the Securities and Exchange Act of 1934 and to
file the same, with exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission. Each of the undersigned
does hereby ratify and confirm all that such attorney-in-fact may do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
Director
- -------------------------- ------------------------
(Michael L. Kranda)
Director
- -------------------------- ------------------------
(Steven Gillis)
Director
- -------------------------- ------------------------
(Joseph J. Carr)
/s/ Kirby L. Cramer Director March 10, 1995
- -------------------------- ------------------------
(Kirby L. Cramer)
Director
- -------------------------- ------------------------
(Robert A. Essner)
Director
- -------------------------- ------------------------
(John E. Lyons)
Director
- -------------------------- ------------------------
(Edith W. Martin)
102
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the individuals whose signatures appear
below, in their capacities as officers and directors of Immunex Corporation (the
"Company"), hereby constitute and appoint Douglas G. Southern their true and
lawful attorney-in-fact, with full power of substitution, to sign on behalf of
the undersigned the Company's Annual Report on Form 10-K for the 1994 fiscal
year pursuant to Section 13 of the Securities and Exchange Act of 1934 and to
file the same, with exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission. Each of the undersigned
does hereby ratify and confirm all that such attorney-in-fact may do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
Director
- -------------------------- ------------------------
(Michael L. Kranda)
Director
- -------------------------- ------------------------
(Steven Gillis)
Director
- -------------------------- ------------------------
(Joseph J. Carr)
Director
- -------------------------- ------------------------
(Kirby L. Cramer)
/s/ Robert A. Essner Director March 3, 1995
- -------------------------- ------------------------
(Robert A. Essner)
Director
- -------------------------- ------------------------
(John E. Lyons)
Director
- -------------------------- ------------------------
(Edith W. Martin)
103
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the individuals whose signatures appear
below, in their capacities as officers and directors of Immunex Corporation (the
"Company"), hereby constitute and appoint Douglas G. Southern their true and
lawful attorney-in-fact, with full power of substitution, to sign on behalf of
the undersigned the Company's Annual Report on Form 10-K for the 1994 fiscal
year pursuant to Section 13 of the Securities and Exchange Act of 1934 and to
file the same, with exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission. Each of the undersigned
does hereby ratify and confirm all that such attorney-in-fact may do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
Director
- -------------------------- ------------------------
(Michael L. Kranda)
Director
- -------------------------- ------------------------
(Steven Gillis)
Director
- -------------------------- ------------------------
(Joseph J. Carr)
Director
- -------------------------- ------------------------
(Kirby L. Cramer)
Director
- -------------------------- ------------------------
(Robert A. Essner)
/s/ John E. Lyons Director March 4. 1995
- -------------------------- ------------------------
(John E. Lyons)
Director
- -------------------------- ------------------------
(Edith W. Martin)
104
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the individuals whose signatures appear
below, in their capacities as officers and directors of Immunex Corporation (the
"Company"), hereby constitute and appoint Douglas G. Southern their true and
lawful attorney-in-fact, with full power of substitution, to sign on behalf of
the undersigned the Company's Annual Report on Form 10-K for the 1994 fiscal
year pursuant to Section 13 of the Securities and Exchange Act of 1934 and to
file the same, with exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission. Each of the undersigned
does hereby ratify and confirm all that such attorney-in-fact may do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
Director
- -------------------------- ------------------------
(Michael L. Kranda)
Director
- -------------------------- ------------------------
(Steven Gillis)
Director
- -------------------------- ------------------------
(Joseph J. Carr)
Director
- -------------------------- ------------------------
(Kirby L. Cramer)
Director
- -------------------------- ------------------------
(Robert A. Essner)
Director
- -------------------------- ------------------------
(John E. Lyons)
/s/ Edith W. Martin Director March 6. 1995
- -------------------------- ------------------------
(Edith W. Martin)
105
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of December 31, 1994, and the Consolidated
Statement of Operations for the year ended December 31, 1994 and is quilified in
its entirety by reference to such financial statement.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 14,818
<SECURITIES> 9,919
<RECEIVABLES> 15,517
<ALLOWANCES> 173
<INVENTORY> 11,725
<CURRENT-ASSETS> 57,339
<PP&E> 110,098
<DEPRECIATION> 13,775
<TOTAL-ASSETS> 192,665
<CURRENT-LIABILITIES> 41,722
<BONDS> 0
<COMMON> 547,182
0
0
<OTHER-SE> (435,255)
<TOTAL-LIABILITY-AND-EQUITY> 192,665
<SALES> 135,795
<TOTAL-REVENUES> 144,332
<CGS> 28,180
<TOTAL-COSTS> 173,462
<OTHER-EXPENSES> 413
<LOSS-PROVISION> 127
<INTEREST-EXPENSE> 2,528
<INCOME-PRETAX> (31,146)
<INCOME-TAX> 1,958
<INCOME-CONTINUING> (33,104)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,104)
<EPS-PRIMARY> (.85)
<EPS-DILUTED> (.85)
</TABLE>
