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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-12477
AMGEN INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3540776
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Amgen Center Drive, Thousand Oaks, California 91320-1789
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 805-447-1000
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.0001 par value, Common shares purchase rights,
Contractual contingent payment rights
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
The approximate aggregate market value of voting and non-voting stock
held by non-affiliates of the registrant was $13,380,017,000 as of
February 28, 1998 (A)
255,754,703
(Number of shares of common stock outstanding as of February 28, 1998)
Documents incorporated by reference:
Document Form 10-K Parts
Definitive 1998 Proxy Statement, to be filed within
120 days of December 31, 1997 (specified portions) III
(A) Excludes 3,895,561 shares of common stock held by directors and
officers, and any stockholders whose ownership exceeds five percent
of the shares outstanding, at February 28, 1998. Exclusion of
shares held by any person should not be construed to indicate that
such person possesses the power, directly or indirectly, to direct
or cause the direction of the management or policies of the
registrant, or that such person is controlled by or under common
control with the registrant.
PART I
Item 1. BUSINESS
Overview
Amgen Inc. ("Amgen" or the "Company") is a global biotechnology
company that discovers, develops, manufactures and markets human
therapeutics based on advances in cellular and molecular biology.
The Company manufactures and markets three human therapeutic
products, NEUPOGEN(R) (Filgrastim), EPOGEN(R) (Epoetin alfa) and
INFERGEN(R) (Interferon alfacon-1). NEUPOGEN(R) selectively
stimulates the production of neutrophils, one type of white blood
cell. The Company markets NEUPOGEN(R) in the United States, countries
of the European Union ("EU"), Canada and Australia for use in
decreasing the incidence of infection in patients undergoing
myelosuppressive chemotherapy. In addition, NEUPOGEN(R) is marketed
in most of these countries for use in reducing the duration of
neutropenia for patients undergoing myeloablative therapy followed by
bone marrow transplantation, for reducing symptoms in patients with
severe chronic neutropenia and to support peripheral blood progenitor
cell ("PBPC") transplantations. In 1997, regulatory authorities in
Australia and Canada approved NEUPOGEN(R) to treat neutropenia in HIV
patients receiving antiviral and/or other myelosuppressive
medications. EPOGEN(R) stimulates the production of red blood cells
and is marketed by Amgen in the United States for the treatment of
anemia associated with chronic renal failure in patients on dialysis.
INFERGEN(R) is a non-naturally occurring type-1 interferon which
stimulates the immune system to fight viral infections. The Company
began marketing INFERGEN(R) in the United States in October 1997 for
the treatment of chronic hepatitis C viral infection.
The Company focuses its research efforts on secreted protein
therapeutics, neuroscience and cancer therapeutics and its development
efforts on human therapeutics in the areas of hematology, oncology,
infectious disease, neurobiology, endocrinology, and inflammation.
The Company has research facilities in the United States and Canada
and has clinical development staff in the United States, the EU,
Canada, Australia, Japan, Hong Kong and the People's Republic of
China. To augment internal research and development efforts, the
Company has established external research collaborations and has
acquired certain product and technology rights.
Amgen operates commercial manufacturing facilities located in the
United States, Puerto Rico and The Netherlands. A sales and marketing
force is maintained in the United States, the EU, Canada and
Australia. In addition, Amgen has entered into licensing and co-
promotion agreements to market NEUPOGEN(R), EPOGEN(R) and INFERGEN(R)
in certain geographic areas.
The Company was incorporated in California in 1980 and was merged
into a Delaware corporation in 1987. Amgen's principal executive
offices are located at One Amgen Center Drive, Thousand Oaks,
California 91320-1789.
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Products
Recombinant human granulocyte colony-stimulating factor
NEUPOGEN(R) (proper name - Filgrastim) is Amgen's registered
trademark for its recombinant human methionyl granulocyte colony-
stimulating factor ("G-CSF"), a protein that selectively stimulates
production of certain white blood cells known as neutrophils.
Neutrophils are the body's first defense against infection.
Treatments for various diseases and diseases themselves can result in
extremely low numbers of neutrophils, a condition called neutropenia.
Myelosuppressive chemotherapy, one treatment option for individuals
with cancer, targets cell types which grow rapidly, such as tumor
cells, neutrophils and other types of blood cells. Providing
NEUPOGEN(R) as an adjunct to myelosuppressive chemotherapy can reduce
the duration of neutropenia and thereby reduce the potential for
infection.
Severe chronic neutropenia is an example of disease-related
neutropenia. In severe chronic neutropenia, the body fails to
manufacture sufficient neutrophils. Chronic administration of
NEUPOGEN(R) has been shown to reduce the incidence and duration of
neutropenia-related consequences such as fever and infections in
patients with severe chronic neutropenia.
Patients undergoing bone marrow transplantation are treated with
NEUPOGEN(R) to accelerate recovery of neutrophils following
chemotherapy and bone marrow infusion. NEUPOGEN(R) also has been
shown to induce immature blood cells (progenitor cells) to migrate
(mobilize) from the bone marrow into the blood circulatory system.
When these progenitor cells (PBPC) are collected from the blood,
stored and re-infused after high dose chemotherapy (transplanted),
recovery of platelets, red blood cells and neutrophils is accelerated.
PBPC transplantation is becoming an alternative to autologous bone
marrow transplantation for some patients.
In the United States, NEUPOGEN(R) was initially indicated to
decrease the incidence of infection as manifested by febrile
neutropenia for patients with non-myeloid malignancies undergoing
myelosuppressive chemotherapy. Subsequently, the U.S. Food and Drug
Administration ("FDA") approved NEUPOGEN(R) for three additional
indications: (1) to reduce the duration of neutropenia for patients
with non-myeloid malignancies undergoing myeloablative therapy
followed by bone marrow transplantation; (2) to reduce the incidence
and duration of neutropenia-related consequences in symptomatic
patients with congenital neutropenia, cyclic neutropenia or idiopathic
neutropenia (collectively, severe chronic neutropenia); and (3) for
use in mobilization of PBPC for stem cell transplantation. In the EU,
Canada and Australia, NEUPOGEN(R) is marketed for these same four
indications. Also, in 1997, regulatory authorities in Australia and
Canada approved NEUPOGEN(R) to treat neutropenia in HIV patients
receiving antiviral and/or other myelosuppressive medications.
The Company is pursuing additional indications with NEUPOGEN(R).
Clinical trials were completed examining NEUPOGEN(R) as an adjunct to
chemotherapy in patients with acute myelogenous leukemia ("AML").
License applications for approval of this supplemental indication were
submitted to the U.S., EU, Canadian and Australian regulatory
3
authorities in 1996. The Company is in discussions with the FDA
regarding this submission. In addition, a trial for the treatment of
neutropenia in HIV infected patients was completed and a supplemental
licensing application for approval of this indication was submitted to
the FDA in 1996. The FDA has raised concerns about whether this
submission is approvable; the Company is in discussions with the FDA
and cannot predict the outcome of these discussions. Later stage
trials examining NEUPOGEN(R) as an adjunct to dose-intensified
chemotherapy in patients with various tumor types are ongoing. The
Company is also continuing to investigate the potential benefits of
NEUPOGEN(R) for patients in severe pneumonia settings.
In March 1996, NEUPOGEN(R) was approved for use in the United
Kingdom (the "UK") as a supportive therapy to treat neutropenia in
people with advanced HIV infection. The initial submission to the UK
was made as part of the EU mutual recognition procedure that enables
companies to seek approvals in other EU countries. Due to the
completion of a randomized trial in 1996 that served as the basis for
an FDA submission in this indication, the Company intends to
supplement the original filing in Europe by submitting these
additional data. To facilitate this procedure, it was necessary for
the Company to request in February 1997 the withdrawal of the original
approval in the UK.
The Company began selling NEUPOGEN(R) in the United States in
February 1991 pursuant to a licensing agreement with Kirin-Amgen, Inc.
("Kirin-Amgen"), a joint venture between Kirin Brewery Company,
Limited ("Kirin") and Amgen. Kirin markets GRAN(R), its G-CSF
product, in Japan, the People's Republic of China, Taiwan and Korea
under licensing agreements with Kirin-Amgen (see "Joint Ventures and
Business Relationships - Kirin Brewery Company, Limited"). In the EU,
NEUPOGEN(R) is commercialized by Amgen and F. Hoffman-La Roche Ltd
("Roche") under a co-promotion agreement (see "Joint Ventures and
Business Relationships - F. Hoffman-La Roche Ltd"). In geographic
areas of the world other than those above, Roche markets NEUPOGEN(R)
under licenses from Amgen and Kirin-Amgen (see "Joint Ventures and
Business Relationships - Kirin Brewery Company, Limited" and "Joint
Ventures and Business Relationships - F. Hoffman La Roche Ltd").
For the years ended December 31, 1997, 1996 and 1995, sales of
NEUPOGEN(R) accounted for approximately 44%, 45% and 48%,
respectively, of total revenues.
Recombinant human erythropoietin
EPOGEN(R) (proper name - Epoetin alfa) is Amgen's registered
trademark for its recombinant human erythropoietin product, a protein
that stimulates red blood cell production. Red blood cells transport
oxygen to all cells of the body. Without adequate amounts of
erythropoietin, the red blood cell count is reduced, thereby
diminishing the ability of the blood to deliver sufficient amounts of
oxygen to the body, resulting in anemia. People with chronic renal
failure suffer from anemia because they do not produce sufficient
amounts of erythropoietin, which is normally produced in healthy
kidneys. EPOGEN(R) is effective in the treatment of anemia associated
with chronic renal failure for patients on dialysis and is indicated
to elevate or maintain the red blood cell level (as manifested by
4
hematocrit or hemoglobin determinations) and to decrease the need for
blood transfusions in these patients.
In the United States, Amgen was granted rights to market
recombinant human erythropoietin under a licensing agreement with
Kirin-Amgen (see "Joint Ventures and Business Relationships - Kirin
Brewery Company, Limited"). The Company began selling EPOGEN(R) in
1989 when the FDA approved its use in the treatment of anemia
associated with chronic renal failure. In 1994, the FDA cleared a
supplement to the Epoetin alfa product license which included an
expanded target hematocrit range for patients with chronic renal
failure. The target hematocrit, or percentage of red blood cells, was
expanded to a range of 30 to 36 percent from the previously indicated
range of 30 to 33 percent.
The Company has retained exclusive rights to market EPOGEN(R) in
the United States for dialysis patients. Amgen has granted Ortho
Pharmaceutical Corporation, a subsidiary of Johnson & Johnson,
hereafter referred to as "Johnson & Johnson", a license to pursue
commercialization of recombinant human erythropoietin as a human
therapeutic in the United States in all markets other than dialysis
and diagnostics. See Note 1 to the Consolidated Financial Statements,
"Summary of significant accounting policies - Product sales" and Note
4 to the Consolidated Financial Statements, "Contingencies - Johnson &
Johnson arbitrations". In countries other than the United States
(except as described above), the People's Republic of China and Japan,
Johnson & Johnson was granted rights to pursue the commercialization
of erythropoietin as a human therapeutic under a licensing agreement
with Kirin-Amgen. Affiliates of Johnson & Johnson manufacture and
market erythropoietin for treatment of anemia associated with chronic
renal failure under the trademark EPREX(R) in several countries. See
"Joint Ventures and Business Relationships - Johnson & Johnson".
In Japan and the People's Republic of China, Kirin was granted
rights to market recombinant human erythropoietin under a licensing
agreement with Kirin-Amgen (see "Joint Ventures and Business
Relationships - Kirin Brewery Company, Limited"). Kirin markets its
recombinant human erythropoietin product under the trademark ESPO(R).
For the years ended December 31, 1997, 1996 and 1995, sales of
EPOGEN(R) accounted for approximately 48%, 48% and 46%, respectively,
of total revenues.
Other products
INFERGEN(R) (proper name - Interferon alfacon-1) is Amgen's
registered trademark for its recombinant consensus interferon, a non-
naturally occurring protein that combines structural features of many
interferon sub-types. Interferons are natural proteins produced by the
body which stimulate the immune system to fight viral infections.
Hepatitis C viral infection is a potentially deadly disease that, if
not treated, may lead to cirrhosis and hepatocellular carcinoma, or
liver cancer. In October 1997, Amgen received FDA approval and
launched INFERGEN(R) for the 24-week treatment of chronic hepatitis C
virus. The 24-week treatment includes newly diagnosed hepatitis C
virus patients as well as patients whose prior treatment with
interferon failed and are candidates for subsequent treatment.
Results from a 48-week retreatment trial with INFERGEN(R) have been
5
submitted and are under review by the FDA. Retreatment is an
important part of interferon therapy since many hepatitis C virus
patients fail initial treatment with interferon therapies. Amgen also
filed a license application with Canadian regulatory authorities
requesting clearance for marketing INFERGEN(R) for treatment of
hepatitis C virus. In 1996, Amgen licensed to Yamanouchi
Pharmaceutical Co., Ltd. of Tokyo ("Yamanouchi") the rights to
develop, manufacture and commercialize Amgen's consensus interferon
for all indications around the world except in the United States and
Canada. Yamanouchi granted rights to the Company to co-develop and
market Interferon alfacon-1 in Japan, the People's Republic of China,
Hong Kong and Taiwan (see "Joint Ventures and Business Relationships -
Yamanouchi Pharmaceutical Co., Ltd.").
Product Candidates
Hematology/Oncology/Infectious disease
Hematopoietic growth factors are proteins which influence growth,
migration, and maturation of certain types of blood cells. STEMGEN(R)
(proper name - Ancestim), one of the Company's hematopoietic growth
factors, has been shown to influence the production, mobilization, and
maturation of progenitor cells. Human clinical trials have been
completed which investigated the utility of STEMGEN(R) in combination
with NEUPOGEN(R) for improved mobilization of progenitor cells prior
to PBPC transplantation in patients with breast cancer. License
applications for marketing clearance of STEMGEN(R) in this indication
were submitted to the U.S., EU, Canadian and Australian regulatory
authorities in 1997. The Company expects to launch STEMGEN(R) if
approved by regulatory authorities.
The Company is developing a sustained duration version of G-CSF
to provide less frequent, potentially once-per-cycle, dosing and
thereby potentially improve compliance and patient satisfaction. In
1997, Amgen began a human clinical trial of this second generation G-
CSF product; this trial is ongoing.
The Company's novel platelet growth factor, Megakaryocyte Growth
and Development Factor ("MGDF"), another hematopoietic growth factor,
has been shown in preclinical and early clinical research to be a
promising agent for ameliorating the thrombocytopenia caused by
intensive chemotherapy or irradiation. Thrombocytopenia, or severely
depressed platelet numbers, can result in severe internal bleeding. In
1997, Amgen began a phase 3 clinical trial to treat thrombocytopenia
resulting from bone marrow transplant procedures in the breast cancer
treatment setting. In addition, the Company is currently
investigating MGDF in several other cancer-support treatment settings
and in a setting where normal platelet donors receive MGDF before
platelet donation. The Company is collaborating in the development of
MGDF with Kirin (see "Joint Ventures and Business Relationships -
Kirin Brewery Company, Limited"). In 1995, Amgen, Kirin, and Kirin-
Amgen signed agreements with Novo Nordisk A/S and certain of its
subsidiaries (including ZymoGenetics, Inc.) for rights to
thrombopoietin, a protein hormone that stimulates the production of
platelets. The acquisition of these rights complements the
development of MGDF.
6
Another hematopoietic growth factor in development at Amgen is
novel erythropoiesis stimulating protein ("NESP"). Human clinical
trials for NESP in the treatment of anemia in patients with chronic
renal failure began in January 1997 and are currently ongoing. Early
clinical data suggests that NESP may permit less frequent dosing than
Epoetin alfa. The Company has entered into an agreement with Kirin to
jointly develop and market NESP through its joint venture, Kirin-Amgen
(see "Joint Ventures and Business Relationships - Kirin Brewery
Company, Limited" and Note 4 to the Consolidated Financial Statements
- "Contingencies - Johnson & Johnson arbitrations").
Soft tissue growth factors are believed to play a role in
accelerating or improving tissue regeneration and wound healing. In
some cases, these agents may also protect tissues from injuries such
as those associated with irradiation and chemotherapy. Amgen
currently is conducting research on keratinocyte growth factor
("KGF"). Human clinical trials for KGF for the treatment of
mucositis, a side effect often experienced by patients undergoing
radiation therapy and chemotherapy, are ongoing. Mucositis is
characterized as the irritation or ulceration of the lining of the
gastrointestinal tract.
In 1997, Amgen announced that it had ceased active participation
in further device development with AmCell, Inc. ("AmCell"), although
the Company continues to have an interest in cell selection technology
by AmCell and other companies operating in the field. See "Joint
Ventures and Business Relationships - Other business relationships".
Endocrinology/Neurobiology
The Company has discovery programs in endocrinology and
neurological disorders. In the area of endocrinology, the Company is
currently developing leptin. Leptin is the protein produced by the
obesity gene. Leptin is made in fat cells and is believed to help
regulate the amount of fat stored by the body. This protein has been
shown in some preclinical animal models to produce a reduction in body
weight and body fat. In 1995, The Rockefeller University granted to
the Company an exclusive license which allows the Company to develop
products based on the obesity gene. In 1996, Amgen commenced clinical
trials with leptin and in June 1997, announced that early, preliminary
data suggested that there was a dose range at which leptin had an
acceptable safety profile and induced weight loss. Additional studies
will be required before these conclusions can be confirmed. Ongoing
clinical trials are evaluating the effect of leptin in patients with
non-insulin dependent type II diabetes and obesity. To address the
poor solubility of leptin seen at higher doses, Amgen has begun
development of second-generation alternate leptin molecules. In 1998,
a clinical trial with a second-generation leptin molecule commenced.
Additionally, Amgen entered into a license agreement with Progenitor,
Inc. which grants the Company certain exclusive rights for the
development and commercialization of products using Progenitor's
leptin receptor technology.
Another focus of the Company's effort in endocrinology is in the
area of hyperparathyroidism. Primary hyperparathyroidism ("HPT") is a
disorder that causes excessive secretion of parathyroid hormone from
the parathyroid gland, leading to elevated serum calcium, called
hypercalcemia. This disorder currently lacks effective treatment
7
other than surgery. Secondary HPT is commonly seen as a result of
kidney failure, affecting as many as 80 percent of dialysis patients.
Symptoms of hyperparathyroidism include bone loss, muscle weakness,
depression and forgetfulness. The Company has entered into a license
agreement with NPS Pharmaceuticals, Inc. ("NPS") for Amgen to develop
and commercialize NPS's calcimimetic small molecules based on NPS's
proprietary calcium receptor technology for the treatment of HPT. In
1997, Amgen completed a clinical trial in secondary HPT with the
initial calcimimetic product candidate, R-568. As a result of more
favorable metabolic and kinetic profiles, second generation
calcimimetic compounds were screened and evaluated. A clinical trial
in normal volunteers with a second generation calcimimetic compound
began in 1997 and is ongoing.
Neurotrophic factors are proteins which play a role in nerve cell
protection and regeneration and which may therefore be useful in
treating a variety of neurological disorders, including
neurodegenerative diseases of the central and peripheral nervous
systems, nerve injury and trauma. Glial cell-line derived
neurotrophic factor ("GDNF") is in clinical studies for possible use
in the treatment of Parkinson's disease. GDNF was added to the
Company's neurobiology research program through the acquisition of
Synergen, Inc. ("Synergen") (see "Joint Ventures and Business
Relationships - Other business relationships").
Human clinical testing of brain-derived neurotrophic factor
("BDNF"), is currently being conducted in collaboration with Regeneron
Pharmaceuticals, Inc. ("Regeneron") (see "Joint Ventures and Business
Relationships - Regeneron Pharmaceuticals, Inc."). A small, early
stage clinical trial of BDNF investigating intrathecal administration
for amyotrophic lateral sclerosis ("ALS" or Lou Gehrig's disease) is
currently in progress. A Phase 3 clinical trial of BDNF with
subcutaneous delivery for the treatment of ALS did not demonstrate
clinical efficacy in the endpoints measured in patients with this
disease. Regeneron continues to investigate BDNF in ALS patients on
behalf of the collaboration with the Company. On behalf of the
collaboration with the Company, Regeneron will undertake a number of
small clinical studies with Neurotrophin-3 ("NT-3"). During 1997,
Amgen announced the collaboration will not pursue additional trials of
NT-3 in diabetic neuropathy or chemotherapy-induced neuropathy because
initial results were not sufficiently promising.
In 1997, Amgen acquired the rights from Guilford Pharmaceuticals
Inc. ("Guilford") for a novel class of small molecule, orally-active,
neurotrophic agents called FKBP-neuroimmunophilin compounds (see
"Joint Ventures and Business Relationships - Other business
relationships"). The FKBP-neuroimmunophilin compounds are being
developed to promote nerve regeneration and repair in
neurodegenerative disorders. In preclinical models, FKBP-
neuroimmunophilin compounds have been shown to promote recovery in
models of nerve injury and Parkinson's disease.
Inflammation
The inflammatory response is essential for defense against
harmful micro-organisms and for the repair of damaged tissues. The
failure of the body's control mechanisms regulating inflammatory
response occurs in conditions such as rheumatoid arthritis, acute
8
respiratory distress syndrome and asthma. Tumor necrosis factor
binding protein ("TNFbp") and interleukin-1 receptor antagonist ("IL-
1ra") were two product candidates added to the Company's inflammation
research program through the acquisition of Synergen (see "Joint
Ventures and Business Relationships - Other business relationships").
First generation molecules of TNFbp and Il-1ra have been in human
clinical trials. A human clinical trial for TNFbp was completed for
possible use in the treatment of rheumatoid arthritis. Because of
potential issues with immunogenicity, a second generation molecule is
being developed, and the Company does not intend to pursue further
development of the first generation TNFbp. The second generation
molecule of TNFbp, known as soluble tumor necrosis factor receptor 1,
is in preclinical studies. A human clinical trial for IL_1ra in
combination with methotrexate for treatment of rheumatoid arthritis is
ongoing. The Company is developing second generation molecules as a
sustained delivery formulation for IL-1ra, which have demonstrated
some additional benefit in preclinical studies over the first
generation product candidate. The Company is also conducting research
to discover and develop other molecules for the treatment of
inflammatory diseases. In 1997, Amgen announced that it is seeking a
corporate partner for its inflammation research and development
program (see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Financial Outlook").
Joint Ventures and Business Relationships
The Company generally intends to self-market its products. From
time to time it may supplement this effort by using joint ventures and
other business relationships to provide additional marketing and
product development capabilities. The Company also supplements its
internal research and development efforts with acquisitions of product
and technology rights and external research collaborations. Amgen has
established the relationships described below and may establish others
in the future.
F. Hoffman-La Roche Ltd
Amgen and Roche have entered into a long term agreement providing
for the commercialization of NEUPOGEN(R) (Filgrastim) in the EU.
Under this agreement, the companies collaborate in the EU on the
commercialization and further clinical development of the product and
share in related costs and profits from sales. Amgen has recently
assumed from Roche most of the responsibilities for marketing,
promotion, distribution and other key functions relating to product
sales, and the Company is now distributing the product in most EU
countries from its European Logistics Center. Amgen and Roche will
also collaborate on the development of a second generation G-CSF
product for the EU.
Amgen and Roche have also entered into an agreement to
commercialize NEUPOGEN(R) in certain European countries not located
within the EU. Under this agreement, Roche markets NEUPOGEN(R) in
these countries and pays a royalty to Amgen on these sales.
Johnson & Johnson
Amgen granted Johnson & Johnson a license to pursue
commercialization of recombinant human erythropoietin as a human
9
therapeutic in the United States in all markets other than dialysis
and diagnostics. The Company is engaged in arbitration proceedings
regarding this license. For a complete discussion of this matter see
Note 4 to the Consolidated Financial Statements, "Contingencies -
Johnson & Johnson arbitrations". In countries other than the United
States (except as described above), the People's Republic of China and
Japan, Johnson & Johnson was granted rights to pursue the
commercialization of human erythropoietin as a therapeutic under a
licensing agreement with Kirin-Amgen.
Kirin Brewery Company, Limited
The Company has a 50-50 joint venture (Kirin-Amgen) with Kirin.
Kirin-Amgen, which was formed in 1984, develops and commercializes
certain of the Company's and Kirin's technologies which have been
transferred to this joint venture. Kirin-Amgen has given exclusive
licenses to Amgen and Kirin to manufacture and market erythropoietin
in the United States and Japan, respectively. Kirin-Amgen licensed
Johnson & Johnson rights to erythropoietin in certain geographic areas
of the world (see "- Johnson & Johnson"). Kirin-Amgen has also
granted Amgen an exclusive license to manufacture and market G-CSF in
the United States, Europe, Canada, Australia and New Zealand. Kirin-
Amgen has licensed Kirin similar rights with respect to G-CSF in
Japan, Taiwan and Korea. Kirin markets recombinant human granulocyte
colony-stimulating factor and recombinant human erythropoietin in the
People's Republic of China under a separate agreement. Kirin-Amgen
and Roche have entered into an agreement to commercialize NEUPOGEN(R)
in certain territories not covered by the various Amgen/Roche
agreements (see "- F. Hoffman-La Roche Ltd"). Under this agreement,
Roche markets NEUPOGEN(R) in these countries and pays a royalty to
Kirin-Amgen on these sales.
In 1994, Kirin-Amgen licensed to Amgen and Kirin the rights to
develop and market MGDF, and in 1996, to develop and market NESP (see
Note 4 to the Consolidated Financial Statements - "Johnson & Johnson
arbitrations"). Amgen has been granted an exclusive license by Kirin-
Amgen to manufacture and market these two product candidates in the
United States, all European countries, Canada, Australia, Mexico and
New Zealand. In addition, with respect to NESP, Amgen's license
extends to all Central and South American countries. Kirin has been
licensed by Kirin-Amgen with similar rights for these two product
candidates in Japan, the People's Republic of China, Taiwan, Korea and
certain other countries in Southeast Asia.
Pursuant to the terms of agreements entered into with Kirin-
Amgen, the Company conducts certain research and development
activities on behalf of Kirin-Amgen and is paid for such services at
negotiated rates. Included in revenues from corporate partners in the
Company's Consolidated Financial Statements for the years ended
December 31, 1997, 1996 and 1995, are $87.9 million, $79.9 million and
$72.6 million, respectively, related to these agreements.
In connection with its various agreements with Kirin-Amgen, the
Company has been granted sole and exclusive licenses for the
manufacture and sale of certain products in specified geographic areas
of the world. In return for such licenses, the Company paid Kirin-
Amgen stated amounts upon the receipt of the licenses and/or pays
Kirin-Amgen royalties based on sales. During the years ended December
10
31, 1997, 1996 and 1995, Kirin-Amgen earned royalties from Amgen of
$91.4 million, $86.2 million and $74.2 million, respectively, under
such agreements.
Yamanouchi Pharmaceutical Co., Ltd.
In 1996, Amgen licensed to Yamanouchi the rights to develop,
manufacture and commercialize Interferon alfacon-1 for the treatment
of hepatitis C and any additional indications around the world except
in the United States and Canada. Amgen markets Interferon alfacon-1
under the trademark INFERGEN(R) in the United States. Amgen has
earned and will earn additional amounts if certain milestones are
achieved by Yamanouchi and will receive royalties on sales.
Yamanouchi has granted to Amgen K.K., the Company's Japanese
subsidiary, certain co-development and co-promotion/co-marketing
rights in Japan and has granted to Amgen Greater China, Ltd., Amgen's
subsidiary in Hong Kong, certain co-development and co-promotion
rights in the People's Republic of China, Hong Kong and Taiwan.
Regeneron Pharmaceuticals, Inc.
In 1990, the Company entered into a collaboration agreement with
Regeneron to co-develop and commercialize BDNF and NT-3 in the United
States. To facilitate this collaboration, the Company and Regeneron
formed Amgen-Regeneron Partners, a 50-50 partnership. In addition,
Regeneron licensed these potential products to Amgen for development
in certain other countries.
Other business relationships
In 1994, Amgen acquired an equity interest in AmCell, a company
which plans to manufacture cell selection and characterization devices
based on the technology of Miltenyi Biotec GmbH. In 1997, Amgen
ceased active participation in further device development with AmCell.
AmCell has full responsibility for the commercialization of the device
and may be required to make certain royalty payments to Amgen.
In December 1994, the Company acquired Synergen, a biotechnology
company engaged in the discovery and development of protein-based
pharmaceuticals. With the acquisition of Synergen, Amgen principally
added GDNF and Synergen's inflammation program to its product
candidate pipeline.
Synergen Clinical Partners, L.P. ("SCP"), the general partner of
which was a subsidiary of Synergen, was formed to fund development and
commercialization of IL-1ra in certain geographic areas. As a result
of the acquisition of Synergen, the general partner of SCP is a
subsidiary of Amgen. In connection with the settlement of certain
litigation relating to Synergen and SCP, Amgen acquired all the
limited partnership units of SCP and, under the terms of the
settlement, Amgen may be required to pay future additional amounts to
the former limited partners that are members of the plaintiff class,
other members of the plaintiff class and their counsel if the FDA
should grant approval to market IL-1ra (as more specifically defined
in the related settlement agreement) and certain product revenues are
realized. See "Item 3. Legal Proceedings - Synergen ANTRIL(TM)
litigation".
11
In 1997, Amgen and Guilford entered into an agreement granting
Amgen worldwide rights for Guilford's FKBP-neuroimmunophilin
compounds, a novel class of small molecule neurotrophic agents that
may represent a new approach in the treatment of neurodegenerative
disorders. Under the terms of the agreement, Amgen will receive
worldwide rights to FKBP-neuroimmunophilin compounds for all human
therapeutic and diagnostic applications. Amgen will conduct and pay
for all clinical development and manufacturing of products, market
products worldwide and pay royalties to Guilford on such sales. Also,
in connection with this agreement, Amgen made a $20 million equity
investment in Guilford.
In December 1997, Amgen and SangStat entered into a licensing
agreement for the registration, marketing, and distribution of
SangStat's proprietary CYCLOSPORINE product candidate, an
immunosuppressive drug used in transplantation to prevent graft
rejection. Under the terms of the agreement, Amgen will have
exclusive rights to market CYCLOSPORINE, under SangStat's trademark in
Australia, New Zealand, Hong Kong, the People's Republic of China and
Taiwan.
Marketing
In the United States, the Company's sales force markets its
products to physicians and pharmacists primarily in hospitals,
dialysis centers and clinics. The Company has chosen to use major
wholesale distributors of pharmaceutical products as the principal
means of distributing EPOGEN(R) (Epoetin alfa), NEUPOGEN(R)
(Filgrastim), and INFERGEN(R) (Interferon alfacon-1) to clinics,
hospitals and pharmacies. Sales to Bergen Brunswig Corporation and
Cardinal Distribution, two major distributors of these products,
accounted for 24% and 14%, 24% and 14%, and 21% and 15%, respectively,
of total revenues for the years ended December 31, 1997, 1996 and
1995, respectively.
Dialysis providers are primarily reimbursed for EPOGEN(R) by the
federal government through the End Stage Renal Disease Program ("ESRD
Program") of Medicare. The ESRD Program reimburses approved providers
for 80% of allowed dialysis costs; the remainder is paid by other
sources, including Medicaid, private insurance, and to a lesser
extent, state kidney patient programs. The ESRD Program reimbursement
rate is established by Congress and is monitored by the Health Care
Financing Administration ("HCFA"). In 1997, HCFA implemented
reimbursement changes that affected what reimbursement claims would be
paid to dialysis providers by fiscal intermediaries under contract
with HCFA. These changes had an adverse impact on EPOGEN(R) sales.
See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operation - Product
sales - EPOGEN(R) (Epoetin alfa)". In March 1998, HCFA announced the
easing of restrictions on reimbursement that had been implemented in
1997. HCFA issued two revisions to the 1997 policy in a program
memorandum. The first revision provides that, for a month in which
the three month "rolling average" hematocrit exceeds 36.5 percent,
HCFA will pay the lower of 100% of the actual dosage billed for that
month, or 80% of the prior month's allowable EPOGEN(R) dosage. The
second revision reestablishes authorization to make payment for
EPOGEN(R) when a patient's hematocrit exceeds 36 percent when
accompanied by documentation establishing medical necessity. The
12
Company cannot currently predict what effect the changes will have on
EPOGEN(R) sales. As previously announced, in 1997, the Office of the
Inspector General issued a report recommending a 10% reduction in the
Medicare reimbursement rate for EPOGEN(R). The Company believes the
recommendation would primarily affect dialysis providers and that it
is difficult to predict the impact on Amgen. The reimbursement rate
for EPOGEN(R) is subject to yearly review. Changes in coverage and
reimbursement policies could have a material adverse effect on
EPOGEN(R) sales.
NEUPOGEN(R) is reimbursed by both private and public payors, and
changes in coverage and reimbursement policies of these payors could
have a material adverse effect on sales of NEUPOGEN(R).
Except for purchases pursuant to a contract with the Department
of Veterans Affairs, including purchases by Veterans Administration
hospitals and the Department of Defense, the Company does not receive
any payments directly from the federal government, nor does it have
any significant supply contracts with the federal government.
However, the use of NEUPOGEN(R) and EPOGEN(R) by hospitals, clinics,
and physicians may be impacted by the amount and methods of
reimbursement that they receive from the federal government.
In the EU, Amgen and Roche share commercialization
responsibilities for NEUPOGEN(R) under a co-promotion agreement (see
"Joint Ventures and Business Relationships - F. Hoffmann-La Roche
Ltd"). NEUPOGEN(R) is principally distributed to wholesalers and/or
hospitals in all EU countries depending upon the distribution practice
of hospital products in each country. Most patients receiving
NEUPOGEN(R) for approved indications are covered by government health
care programs. The use of NEUPOGEN(R) is affected by EU government
pressures on physician prescribing practices in response to ongoing
government initiatives to reduce health care expenditures, and to a
lesser extent, competition.
In Canada and Australia, NEUPOGEN(R) is marketed by the Company
directly to hospitals, pharmacies and medical practitioners.
Distribution is handled by third party contractors.
INFERGEN(R) reimbursement is through both private and public
sources, with primary reimbursement through private payors. The
current coverage and reimbursement for interferons has evolved with
health care reform and is based upon the payor's experience. Since
INFERGEN(R) is a new type of interferon, private and public payors may
take time to evaluate the clinical efficacy, dosing regimen and cost
of the drug in order to formulate coverage and reimbursement policies.
For payors with formularies, formulary committees may take up to six
months to evaluate new products before formulary acceptance or
approval.
Competition
Competition among biotechnology, pharmaceutical and other
companies that research, develop, manufacture or market
pharmaceuticals is intense and is expected to increase. See "Factors
That May Affect the Company - Competition". Some competitors,
principally large pharmaceutical corporations, have greater clinical,
research, regulatory and marketing resources and experience than the
13
Company. In addition, certain specialized biotechnology firms have
entered into cooperative arrangements with major companies for
development and commercialization of products, creating an additional
source of competition. The Company faces competition with respect to
products which it manufactures and markets from firms in the United
States, countries of the EU, Canada, Australia and elsewhere.
Additionally, some of the Company's competitors, including
biotechnology and pharmaceutical companies, are actively engaged in
the research and development of products in areas where the Company is
also developing product candidates, as more fully discussed below.
The introduction of new products or the development of new
processes by competitors or new information about existing products
may result in product replacements or price reductions, even for
products protected by patents. In addition, the timing of entry of a
new product into the market can be an important factor in determining
the product's eventual success and profitability. Early entry may
have important advantages in gaining product acceptance and market
share. Accordingly, the relative speed with which the Company can
develop products, complete the testing and approval process and supply
commercial quantities of the product to the market is expected to be
important to Amgen's competitive position. Competition among
pharmaceutical products approved for sale also may be based on, among
other things, patent position, product efficacy, safety, reliability,
availability and price.
A significant amount of research and development in biotechnology
is conducted by small biotechnology companies, academic institutions,
governmental agencies and other public and private research
organizations. These entities may seek patent protection and enter
into licensing arrangements to collect royalties for use of technology
they have developed. Amgen also may face competition in its licensing
or acquisition activities from pharmaceutical companies and large
biotechnology companies that also seek to acquire technologies from
these entities. Accordingly, the Company may have difficulty
acquiring technology on acceptable terms. Additionally, the Company
competes with these entities and pharmaceutical and biotechnology
companies with respect to attracting and retaining qualified
scientific and technical personnel.
Any products or technologies that are directly or indirectly
successful in addressing anemia could negatively impact the market for
recombinant human erythropoietin or NESP. Hoechst Marion Roussel is
currently conducting clinical trials on gene-activated erythropoietin
for the treatment of anemia (see "Item 3. Legal Proceedings -
Transkaryotic Therapies and Hoechst litigation").
Similarly, any products or technologies that are directly or
indirectly successful in addressing the causes or incidence of low
levels of neutrophils could negatively impact the market for G-CSF.
These include products that could receive approval for indications
similar to those for which NEUPOGEN(R) (Filgrastim) has been approved,
development of chemotherapy treatments that are less myelosuppressive
than existing treatments and the development of anti-cancer modalities
that reduce the need for myelosuppressive chemotherapy. NEUPOGEN(R)
currently faces market competition from a competing CSF product,
granulocyte macrophage colony-stimulating factor ("GM-CSF") and from
the chemoprotectant, amifostine. Potential future sources of
14
competition include other GM-CSF products, PGG-glucan, FLT-3 ligand,
lisofylline, IL-11, myelopoietin, promegapoietin, and progenipoietin,
among others.
Chugai Pharmaceuticals Co., Ltd. ("Chugai") markets a G-CSF
product in Japan as an adjunct to chemotherapy and as a treatment for
bone marrow transplant patients. In early 1994, Chugai and Rhone-
Poulenc Rorer Inc. began marketing a G-CSF product in certain EU
countries as an adjunct to chemotherapy and as a treatment in bone
marrow transplant settings. Chugai, through its licensee, AMRAD,
markets this G-CSF product in Australia as an adjunct to chemotherapy
and as a treatment for patients receiving bone marrow transplants.
Under an agreement with Amgen, Chugai is precluded from selling its G-
CSF product in the United States, Canada and Mexico.
Immunex Corp. markets two formulations of GM-CSF in the United
States for bone marrow transplant and PBPC transplant patients and as
an adjunct to chemotherapy treatments for acute non-lymphocytic
leukemia ("ANLL") and AML. Immunex Corp. is also pursuing other
indications for its GM-CSF product including use in treating HIV-
infected patients, other infectious diseases and as an adjunct to
chemotherapy outside the limited setting of ANLL. Novartis markets
another GM-CSF product for use in bone marrow transplant patients, as
an adjunct to chemotherapy and as an adjunct to gancyclovir treatment
of HIV-infected patients in the EU and certain other countries. This
GM-CSF product is currently being developed for similar indications in
the United States and Canada.
Other products which address potential markets for G-CSF may be
identified and developed by competitors in the future. Such products
could also present competition in potential markets for STEMGEN(R) and
a sustained duration version of G-CSF. Research and development of
other hematopoietic growth factors, including those that may compete
with MGDF, is being conducted by several companies including
Genentech, Inc. (in collaboration with Pharmacia & Upjohn, Inc.),
Immunex Corp., Novartis, G.D. Searle & Co. (a subsidiary of Monsanto
Company), U.S. Bioscience, Inc. and Genetics Institute, Inc.
Although not approved or promoted for use in the United States,
the Company believes that approximately 10% of its worldwide
NEUPOGEN(R) sales are from off-label use as supportive therapy for
various AIDS-related treatments. Changes in AIDS treatments,
including therapies that may be less myelosuppressive, may affect such
sales.
INFERGEN(R) faces competition from other interferons and related
products, several of which are in development or on the market.
Schering-Plough Corp. and Roche are major suppliers of interferons.
Interferon Sciences, Inc. could be a potential competitor in this
arena. (See "Item 3. Legal Proceedings - INFERGEN(R) litigation").
Many companies are developing products that promote wound
healing, soft tissue regeneration, and chemoprotection. Companies
such as Human Genome Sciences, Inc., Cell Therapeutics, Inc. and
Genetics Institute, Inc. are currently among many companies that are
developing products which could be potential competitors for KGF.
15
Many companies currently market or are believed to be developing
obesity treatments. Potential future competitors of the Company with
respect to leptin include Millennium Pharmaceuticals, Inc. (in
collaboration with Roche), Progenitor, Inc. (a subsidiary of
Interneuron Pharmaceuticals Inc.), Neurogen Inc. (in collaboration
with Pfizer Inc.), Bristol Myers Squibb Company, Novartis, Eli Lilly
and Company and Merck & Co., Inc. Knoll/BASF and Roche launched a new
therapeutic for obesity in 1997.
Calcimimetic small molecules would face competition from a
product currently marketed by Abbott Laboratories which treats
secondary HPT. In addition, other products to treat primary and
secondary HPT are currently being developed by Abbott Laboratories,
Lunar Corporation, GelTex Pharmaceuticals, Inc. and Chugai.
Several companies are developing neurotrophic factors including
Cephalon Inc., Genentech, Inc. and Regeneron.
The Company would face competition from a number of companies in
the inflammation disease arena, particularly for rheumatoid arthritis
treatments. Current anti-arthritic treatments include generic
methotrexate and other products marketed by Sanofi-Winthrop and
Novartis. In addition, a number of companies have cytokine inhibitors
in development including Immunex Corp., Centocor, Inc. and Roche.
Research and Development
The Company's two primary sources of new product candidates are
internal research and development and acquisition and licensing from
third parties. Amgen's internal research capabilities include an
expertise in secreted protein therapeutics whereby cloned genes are
inserted into living cells to investigate therapeutic utility of the
proteins produced. Additionally, the Company has emerging small
molecule capabilities that include combinatorial chemistry and the use
of high throughput screening to potentially develop novel, orally
available therapeutic product candidates. Amgen's capabilities in
these areas complement its human genome program. The Company's human
genome program may yield genes that both lead to the development of
secreted protein therapeutics and provide targets for diseases
requiring orally available small molecules. Research and development
expense, which includes technology license fees paid to third parties,
for the years ended December 31, 1997, 1996 and 1995 were $630.8
million, $528.3 million and $451.7 million, respectively.
Government Regulation
Regulation by governmental authorities in the United States and
other countries is a significant factor in the production and
marketing of the Company's products and its ongoing research and
development activities.
In order to clinically test, manufacture and market products for
therapeutic use, Amgen must satisfy mandatory procedures and safety
standards established by various regulatory bodies. In the United
States, the federal Food, Drug and Cosmetic Act, as amended, and the
regulations promulgated thereunder, and other federal and state
statutes and regulations govern, among other things, the testing,
manufacture, labeling, storage, record keeping, approval, advertising
16
and promotion of the Company's products on a product-by-product basis.
Product development and approval within this regulatory framework take
a number of years and involve the expenditure of substantial
resources. After preclinical manufacturing, laboratory analysis and
testing in animals, an investigational new drug application is filed
with the FDA to begin human testing. A three-phase human clinical
testing program must then be undertaken. In Phase 1, studies are
conducted to determine the safety for administration of the product.
In Phase 2, studies are conducted to assess safety, acceptable dose
and gain preliminary evidence of the efficacy of the product. In
Phase 3, studies are conducted to provide sufficient data for the
statistical proof of safety and efficacy. The time and expense
required to perform this clinical testing can vary and can be
substantial. No action can be taken to market any therapeutic product
in the United States until an appropriate license application has been
approved by the FDA. Even after initial FDA approval has been
obtained, further studies may be required to provide additional data
on safety and would be required to gain clearance for the use of a
product as a treatment for clinical indications other than those
initially approved. In addition, use of products during testing and
after initial marketing could reveal side effects that could delay,
impede or prevent marketing approval, limit uses or expose the Company
to product liability claims.
In addition to regulating clinical testing in humans, the FDA
inspects equipment and facilities used in the manufacturing of such
products prior to providing approval to market a product. If after
receiving clearance from the FDA, a material change is made in
manufacturing equipment, location or process, additional regulatory
review may be required. The Company also must adhere to current Good
Manufacturing Practices and biologics-specific regulations enforced by
the FDA through its facilities inspection program. The FDA conducts
regular, periodic visits to re-inspect equipment and facilities
following the initial approval. If, as a result of these inspections,
the FDA determines that the Company's equipment and facilities do not
comply with applicable FDA regulations, the FDA may impose penalties
on Amgen, including suspending the Company's manufacturing operations.
In the EU countries, Canada and Australia regulatory requirements
and approval processes are substantially similar in principle to those
in the United States. Additionally, in the EU, the registration
procedure for biotechnology products is through a "centralized
procedure". This procedure leads to the granting of a single license
that is valid for the entire EU but requires that all EU countries
approve the submission first.
The Company is also subject to various federal and state laws
pertaining to health care "fraud and abuse", including anti-kickback
laws and false claims laws. Anti-kickback laws make it illegal for a
prescription drug manufacturer to solicit, offer, receive or pay any
remuneration in exchange for, or to induce, the referral of business,
including the purchase or prescription of a particular drug. The
federal government has published regulations that identify "safe
harbors" or exemptions for certain payment arrangements that do not
violate the anti-kickback statutes. The Company seeks to comply with
the safe harbors where possible. Due to the breadth of the statutory
provisions and the absence of guidance in the form of regulations or
court decisions addressing some of the Company's practices, it is
17
possible that the Company's practices might be challenged under anti-
kickback or similar laws. False claims laws prohibit anyone from
knowingly and willingly presenting, or causing to be presented for
payment to third party payors (including Medicare and Medicaid) claims
for reimbursed drugs or services that are false or fraudulent, claims
for items or services not provided as claimed, or claims for medically
unnecessary items or services. Amgen's activities relating to the
sale and marketing of its products may be subject to scrutiny under
these laws. Violations of fraud and abuse laws may be punishable by
criminal and/or civil sanctions, including fines and civil monetary
penalties. The Company believes its sales, marketing and other
activities comply with all such laws although there can be no
assurance that the Company's activities will not be subject to
challenge for the reasons discussed above and due to the broad scope
of these laws and the increasing attention being given to them by law
enforcement authorities.
Since 1991, the Company has participated in the Medicaid rebate
program established by the Omnibus Budget Reconciliation Act of 1990,
and under amendments of that law that became effective in 1993,
participation has included extending comparable discounts under the
Public Health Service ("PHS") pharmaceutical pricing program. Under
the Medicaid rebate program, the Company pays a rebate for each unit
of its product reimbursed by Medicaid. The amount of the rebate for
each product is set by law as a minimum 15.1% of the average
manufacturer price ("AMP") of that product, or if it is greater, the
difference between AMP and the best price available from the Company
to any customer. The rebate amount also includes an inflation
adjustment if AMP increases faster than inflation. The PHS pricing
program extends discounts comparable to the Medicaid rebate to a
variety of community health clinics and other entities that receive
health services grants from the Public Health Service, as well as
hospitals that serve a disproportionate share of poor Medicare and
Medicaid beneficiaries. The rebate amount payable to Medicaid is
recomputed each quarter based on the Company's reports of its current
average manufacturer price and best price for each of its products to
HCFA. The terms of the Company's participation in the program impose
an obligation to correct the prices reported in previous quarters, as
may be necessary. Any such corrections could result in an overage or
underage in the Company's rebate liability for past quarters,
depending on the direction of the correction. In addition to
retroactive rebates (and interest, if any), if the Company were found
to have knowingly submitted false information to the government, in
addition to other penalties available to the government, the statute
provides for civil monetary penalties in the amount of $100,000 per
item of false information.
The Company also makes its products available to authorized users
of the Federal Supply Schedule ("FSS") of the General Services
Administration. Since 1993, as a result of the Veterans Health Care
Act of 1992 (the "VHC Act"), federal law has required that FSS prices
available for purchased by the Veterans Administration, the Department
of Defense, Coast Guard and the Public Health Service (including the
Indian Health Service) be discounted by a minimum of 24 percent off
the average manufacturer price to non-federal customers (the non-
federal average manufacturer price, "non-FAMP"). The Company's
computation and report of non-FAMP is used in establishing the price,
and the accuracy of the reported non-FAMP may be audited by the
18
government under applicable federal procurement laws. Among the
remedies available to the government for infractions of these laws is
recoupment of any overages paid by FSS users during the audited years.
In addition, if the Company were found to have knowingly reported a
false non-FAMP, the VHC Act provides for civil monetary penalties of
$100,000 per item that is incorrect.
Amgen is also subject to regulation under the Occupational Safety
and Health Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other current and potential future
federal, state or local regulations. The Company's research and
development activities involve the controlled use of hazardous
materials, chemicals, biological materials and various radioactive
compounds. The Company believes that its procedures comply with the
standards prescribed by state or federal regulations; however, the
risk of injury or accidental contamination cannot be completely
eliminated. Amgen's research and manufacturing activities also are
conducted in voluntary compliance with the National Institutes of
Health Guidelines for Recombinant DNA Research.
Additionally, the U.S. Foreign Corrupt Practices Act, to which
the Company is also subject, prohibits corporations and individuals
from engaging in certain activities to obtain or retain business or to
influence a person working in an official capacity. It is illegal to
pay, offer to pay, or authorize the payment of anything of value to
any foreign government official, government staff member, political
party or political candidate in an attempt to obtain or retain
business or to otherwise influence a person working in an official
capacity. The Company's present and future business has been and will
continue to be subject to various other laws and regulations.
Patents and Trademarks
Patents are very important to the Company in establishing
proprietary rights to the products it has developed. The patent
positions of pharmaceutical and biotechnology companies, including the
Company, can be uncertain and involve complex legal, scientific and
factual questions. See "Factors That May Affect the Company -
Intellectual property and legal matters".
The Company has filed applications for a number of patents and
has been granted patents relating to its erythropoietin, G-CSF,
consensus interferon and various potential products. In the United
States, the U.S. Patent and Trademark Office (the "USPTO") has issued
to the Company patents relating to erythropoietin that cover DNA and
host cells (issued 1987); processes for making erythropoietin (issued
1995 and 1997); and certain product rights to erythropoietin (issued
1996 and 1997). The last to issue erythropoietin patents expire in
2013; all other patents expire prior to then. The USPTO has also
issued to the Company patents relating to aspects of DNAs, vectors,
cells and processes relating to recombinant G-CSF (issued 1989); other
aspects of DNAs, vectors, cells and processes relating to recombinant
G-CSF (issued 1991); G-CSF polypeptides (issued 1996); and methods of
treatment using G-CSF polypeptides (issued 1996). The last to issue
G-CSF patents expire in 2013; all other patents expire prior to then.
There can be no assurance that Amgen's patents will afford legal
protection against competitors or provide significant proprietary
19
protection or competitive advantage. In addition, there can be no
assurance that Amgen's patents will not be held invalid or
unenforceable by a court, infringed or circumvented by others or that
others will not obtain patents that the Company would need to license
or circumvent. Competitors or potential competitors may have filed
patent applications or received patents, and may obtain additional
patents and proprietary rights relating to proteins, compounds or
processes competitive with those of the Company.
In general, the Company has obtained licenses from various
parties which it deems to be necessary or desirable for the
manufacture, use or sale of its products. These licenses generally
require Amgen to pay royalties to the parties on product sales. In
addition, other companies have filed patent applications or have been
granted patents in areas of interest to the Company. There can be no
assurance any licenses required under such patents will be available
for licenses on acceptable terms or at all. The Company is engaged in
various legal proceedings relating to certain of its patents. See
"Item 3. Legal Proceedings".
Trade secret protection for its unpatented confidential and
proprietary information is important to Amgen. To protect its trade
secrets, the Company generally requires its employees, and material
consultants, scientific advisors or parties to collaboration and
licensing agreements to execute confidentiality agreements upon the
commencement of employment, the consulting relationship or the
collaboration or licensing arrangement with the Company. There can be
no assurance, however, that others will not either develop
independently the same or similar information or obtain access to
Amgen's proprietary information.
The Company has obtained U.S. registration of its EPOGEN(R),
NEUPOGEN(R), INFERGEN(R) and STEMGEN(R) trademarks. In addition,
these trademarks have been registered in several other countries.
Raw Materials
Certain raw materials necessary for the Company's commercial
manufacturing of its products are proprietary products of other
companies, and in some cases, such proprietary products are
specifically cited in the Company's drug application with the FDA such
that they must be obtained from that specific, sole source. The
Company currently attempts to manage the risk associated with such
sole sourced raw materials by active inventory management. Amgen
attempts to remain apprised of the financial condition of its
suppliers, their ability to supply the Company's needs and the market
conditions for these raw materials. Also, certain of the raw
materials required in the commercial manufacturing of the Company's
products are derived from biological sources. Biological sources may
be subject to contamination and/or recall. The Company is
investigating screening procedures with respect to certain biological
sources and alternatives to them. However, a material shortage,
contamination and/or recall could adversely impact or disrupt Amgen's
commercial manufacturing of its products.
20
Human Resources
As of December 31, 1997, the Company had 5,308 employees of which
2,888 were engaged in research and development, 999 were engaged in
sales and marketing and 1,421 were engaged in other areas. There can
be no assurance that the Company will be able to continue attracting
and retaining qualified personnel in sufficient numbers to meet its
needs. None of the Company's employees are covered by a collective
bargaining agreement, and the Company has experienced no work
stoppages. The Company considers its employee relations to be good.
Executive Officers of the Registrant
The executive officers of the Company, their ages as of February
28, 1998 and positions are as follows:
Mr. Gordon M. Binder, age 62, has served as a director of the
Company since October 1988. He joined the Company in 1982 as Vice
President-Finance and was named Senior Vice President-Finance in
February 1986. Mr. Binder was elected Chief Executive Officer in
October 1988 and Chairman of the Board in July 1990.
Mr. Kevin W. Sharer, age 49, has served as a director of the
Company since November 1992. He also has served as President and
Chief Operating Officer since October 1992. Prior to joining the
Company, Mr. Sharer served as President of the Business Markets
Division of MCI Communications Corporation, a telecommunications
company, from April 1989 to October 1992, and served in numerous
executive capacities at General Electric Company from February 1984 to
March 1989. Mr. Sharer also serves as a director of Unocal
Corporation.
Dr. N. Kirby Alton, age 47, became Senior Vice President,
Development, in August 1992, having served as Vice President,
Therapeutic Product Development, Responsible Head, from October 1988
to August 1992. Dr. Alton previously served as Director, Therapeutic
Product Development, from February 1986 to October 1988.
Mr. Robert S. Attiyeh, age 63, has served as Senior Vice
President, Finance and Corporate Development, since joining the
Company in July 1994. Prior to joining the Company, Mr. Attiyeh
served as a director of McKinsey & Company, a consulting firm, in its
Los Angeles, Japan and Scandinavian offices from 1967 to 1994.
Mr. Stanley M. Benson, age 46, has served as Senior Vice
President, Sales and Marketing, since joining the Company in June
1995. Prior to joining the Company, Mr. Benson held a number of
executive management positions at Pfizer Inc., a pharmaceutical
company, from 1987 to 1995.
Ms. Kathryn E. Falberg, age 37, became Vice President, Corporate
Controller and Chief Accounting Officer in June 1997, having served as
Vice President and Treasurer since December 1996, and having served as
Treasurer from January 1995 to December 1996. Prior to joining the
Company, Ms. Falberg had been Vice President, Chief Financial Officer
and Treasurer for Applied Magnetics Corporation, since May 1993 and
had been its Treasurer from 1991 to May 1993.
21
Dr. Dennis M. Fenton, age 46, became Senior Vice President,
Operations, in January 1995, having served as Senior Vice President,
Sales and Marketing, since August 1992, and having served as Vice
President, Process Development, Facilities and Manufacturing Services,
from July 1991 to August 1992. Dr. Fenton previously had served as
Vice President, Pilot Plant Operations and Clinical Manufacturing,
from October 1988 to July 1991, and as Director, Pilot Plant
Operations, from 1985 to October 1988.
Mr. Edward F. Garnett, age 50, became Vice President, Human
Resources, in October 1994, having served as Director, Sales and
Marketing Operations, since March 1994. Previously, Mr. Garnett had
served as Director, Logistics, from April 1990 to March 1994.
Mr. Daryl D. Hill, age 52, became Senior Vice President, Quality
and Compliance, in January 1997, having served as Senior Vice
President, Asia Pacific, from January 1994 to January 1997. Mr. Hill
previously had served as Vice President, Quality Assurance, from
October 1988 to January 1994, and as Director of Quality Assurance
from January 1984 to October 1988.
Dr. George Morstyn, age 47, became Vice President, Clinical
Development and Chief Medical Officer in September 1993, having served
as Vice President, Clinical and Medical Affairs from July 1991 to
September 1993.
Mr. Steven M. Odre, age 48, became Vice President, Intellectual
Property, and Associate General Counsel, in October 1988, having
served as Associate General Counsel since March 1988. From May 1986
to March 1988, he served as Director of Intellectual Property.
Dr. Lawrence M. Souza, age 44, became Senior Vice President,
Research, in May 1997, having served as Vice President, Exploratory
Research, since October 1988. Previously, Dr. Souza had served as
Director, Exploratory Research, from February 1986 to October 1988.
Mr. George A. Vandeman, age 58, has served as Senior Vice
President, General Counsel and Secretary since joining the Company in
June 1995. Prior to joining the Company, Mr. Vandeman was a partner
of Latham & Watkins, an international law firm, from June 1966 to July
1995.
Geographic Area Financial Information
For financial information concerning the geographic areas in
which the Company operates see Note 11 to the Consolidated Financial
Statements.
Factors That May Affect the Company
Amgen operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. The
following discussion highlights some of these risks and others are
discussed elsewhere herein.
22
Product development
The Company intends to continue an aggressive product development
program. Successful product development in the biotechnology industry
is highly uncertain, and only a small minority of research and
development programs ultimately result in the commercialization of a
product. Of the candidates that are selected for product development,
all will not be successfully commercialized. Product candidates that
appear promising in the early phases of development may fail to reach
the market for numerous reasons, including, without limitation,
results indicating lack of effectiveness or harmful side effects in
clinical or preclinical testing, failure to receive necessary
regulatory approvals, uneconomical manufacturing costs, the existence
of third party proprietary rights, failure to be cost effective in
light of existing therapeutics, or other factors. There can be no
assurance that the Company will be able to produce future products
that have commercial potential. Additionally, success in preclinical
and early clinical trials does not ensure that large scale clinical
trials will be successful. For example, the Company has previously
announced product development failures in connection with BDNF (for
subcutaneous injection for ALS), a product candidate that did not
produce acceptable clinical results in a specific indication with a
specific route of administration after a Phase III trial; although
this product candidate had demonstrated acceptable preclinical and
earlier clinical trial results sufficient to warrant advancement to a
later stage clinical trial. Further, clinical results are frequently
susceptible to varying interpretations which may delay, limit or
prevent further clinical development or regulatory approvals. The
length of time necessary to complete clinical trials and receive
approval for product marketing by regulatory authorities varies
significantly by product and indication and is often difficult to
predict. See "- Regulatory approvals".
Regulatory approvals
The Company's research and development, preclinical testing,
clinical trials, facilities, manufacturing, pricing, and sales and
marketing of its products are subject to extensive regulation by
numerous state and federal governmental authorities in the U.S., such
as the FDA, HCFA, as well as by foreign countries, including the EU.
The success of the Company's current products and future product
candidates will depend in part upon obtaining and maintaining
regulatory approval to market products in approved indications. The
regulatory approval process can be both a long and complex process,
both in the U.S. and in foreign countries, including countries in the
EU. Even if regulatory approval is obtained, a marketed product and
its manufacturer are subject to continued review. Later discovery of
previously unknown problems with a product or manufacturer may result
in restrictions on such product or manufacturer, including withdrawal
of the product from the market. Failure to obtain necessary
approvals, or the restriction, suspension or revocation of any
approvals or the failure to comply with regulatory requirements could
have a material adverse effect on the Company.
Reimbursement; Third party payors
In both domestic and foreign markets, sales of the Company's
products are dependent in part on the availability of reimbursement
23
from third party payors such as state and federal governments (for
example, under Medicare and Medicaid programs in the United States)
and private insurance plans. In certain foreign markets, pricing and
profitability of prescription pharmaceuticals are subject to
government controls. In the United States, there have been, and the
Company expects there to continue to be, a number of state and federal
proposals to implement price controls. In addition, an increasing
emphasis on managed care in the United States has and will continue to
increase the pressure on pharmaceutical pricing and usage. Further,
significant uncertainties exist as to the reimbursement status of
newly approved therapeutic products and current reimbursement policies
for existing products may change. Changes in reimbursement or failure
to obtain reimbursement may reduce the demand for, or the price of,
the Company's products which could have a material adverse effect on
the Company including results of operations. For example, patients in
the U.S. receiving EPOGEN(R) in connection with treatment for end
stage renal disease are covered primarily under medical programs
provided by the federal government. Therefore, EPOGEN(R) sales may be
affected by future changes in reimbursement rates or the basis for
reimbursement by the federal government. As the Company previously
announced, in early 1997, HCFA instituted a reimbursement change for
EPOGEN(R) which has adversely affected the Company's EPOGEN(R) sales.
See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations - Product
Sales - EPOGEN(R) (Epoetin alfa)".
Guidelines
In addition to government agencies that promulgate regulations
and guidelines directly applicable to the Company and its products,
professional societies, practice management groups, private
health/science foundations and organizations involved in various
diseases may also publish, from time to time, guidelines or
recommendations to the health care and patient communities. These
organizations may make recommendations that affect the usage of
certain therapies, drugs or procedures, including the Company's
products. Such recommendations may relate to such matters as usage,
dosage, route of administration and use of concomitant therapies.
Recommendations or guidelines that are followed by patients and health
care providers and that result in, among other things, decreased use
of the Company's products could have a material adverse effect on the
Company's results of operations. In addition, the perception that
such recommendations or guidelines will be followed could adversely
affect prevailing market prices for the Company's common stock.
Intellectual property and legal matters
The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and often involve complex legal,
scientific and factual questions. To date, there has emerged no
consistent policy regarding breadth of claims allowed in such
companies' patents. Accordingly, there can be no assurance that
patents and patent applications relating to the Company's products and
technologies will not be challenged, invalidated or circumvented or
will afford protection against competitors with similar products or
technology. Patent disputes are frequent and can preclude
commercialization of products. The Company currently is, and may in
the future be, involved in patent litigation. Such litigation, if
24
decided adversely, could subject the Company to competition and/or
significant liabilities, could require the Company to enter into third
party licenses or could cause the Company to cease using the
technology or product in dispute. In addition, there can be no
assurance that such licenses will be available on terms acceptable to
the Company, or at all.
The Company is currently involved in arbitration proceedings with
Ortho Pharmaceutical Corporation, a subsidiary of Johnson & Johnson
("Johnson & Johnson"), relating to a license granted by the Company to
Johnson & Johnson for sales of Epoetin alfa in the United States for
all human uses except dialysis and diagnostics. See Note 4 to the
Consolidated Financial Statements, "Contingencies - Johnson & Johnson
arbitrations".
Competition
Amgen operates in a highly competitive environment. The Company
competes with pharmaceutical and biotechnology companies, some of
which may have technical or competitive advantages for, among other
things, the development of technologies and processes and the
acquisition of technology from academic institutions, government
agencies and other private and public research organizations. There
can be no assurance that the Company will be able to produce or
acquire rights to products that have commercial potential. Even if
the Company achieves product commercialization, there can be no
assurance that one or more of the Company's competitors will not
achieve product commercialization earlier than the Company, receive
patent protection that dominates or adversely affects the Company's
activities, or have significantly greater marketing capabilities.
Fluctuations in operating results
The Company's operating results may fluctuate from period to
period for a number of reasons. Historically the Company has planned
its operating expenses, many of which are relatively fixed in the
short term, on the basis that revenues will continue to grow.
Accordingly, even a relatively small revenue shortfall may cause a
period's results to be below Company expectations. Such a revenue
shortfall could arise from any number of factors, including, without
limitation, lower than expected demand, changes in wholesaler buying
patterns, changes in product pricing strategies, increased competition
from new and existing products, fluctuations in foreign currency
exchange rates, changes in government or private reimbursement,
transit interruptions, overall economic conditions or natural
disasters (including earthquakes).
Rapid growth
The Company has adopted an aggressive growth plan that includes
substantial and increased investments in research and development and
investments in facilities that will be required to support significant
growth. This plan carries with it a number of risks, including a
higher level of operating expenses and the complexities associated
with managing a larger and faster growing organization.
25
Stock price volatility
The Company's stock price, like that of other biotechnology
companies, is subject to significant volatility. The stock price may
be affected by, among other things, clinical trial results and other
product development related announcements by Amgen or its competitors,
regulatory matters, announcements in the scientific and research
community, intellectual property and legal matters, changes in
reimbursement policies or medical practices or broader industry and
market trends unrelated to the Company's performance. In addition, if
revenues or earnings in any period fail to meet the investment
community's expectations, there could be an immediate adverse impact
on the Company's stock price.
Item 2. PROPERTIES
Amgen's principal executive offices and a majority of its
administrative, manufacturing and research and development facilities
are located in 36 buildings in Thousand Oaks, California. Thirty-one
of the buildings are owned and five are leased. Adjacent to these
buildings are five facilities that are under construction and other
property acquired in anticipation of future expansion. The Thousand
Oaks, California facilities include manufacturing plants licensed by
various regulatory bodies that produce commercial quantities of
Epoetin alfa, NEUPOGEN(R) (Filgrastim) and INFERGEN (Interferon
alfacon-1).
Elsewhere in North America, Amgen owns eight buildings in
Boulder, Colorado housing research facilities and a pilot plant. The
Company also owns a distribution center in Louisville, Kentucky and
leases a research facility and administrative offices in Toronto,
Canada, an administrative office in Washington, D.C. and five regional
sales offices in the U.S. Amgen is building a new EPOGEN(R)
manufacturing plant, utility plant and a research and administrative
facility on a site in Longmont, Colorado. In 1997, the Company
entered into an agreement to acquire approximately 159 acres of
undeveloped land adjacent to this site to accommodate future
expansion. The Company also owns land in Cambridge, Massachusetts
which can accommodate the construction of a research facility.
Outside North America, the Company has a formulation, fill-and-
finish facility in Juncos, Puerto Rico and a European packaging and
distribution center in Breda, The Netherlands which have been licensed
by various regulatory bodies. The Company leases facilities in
thirteen European countries, Australia, Japan, Taiwan, Hong Kong and
the People's Republic of China for administration, marketing and
research and development.
Amgen believes that its current facilities plus anticipated
additions are sufficient to meet its needs for the next several years.
Item 3. LEGAL PROCEEDINGS
Certain of the Company's legal proceedings are discussed below
and in the Note 4 to the Consolidated Financial Statements,
"Contingencies". While it is impossible to predict accurately or to
26
determine the eventual outcome of these matters the Company believes
that the outcome of these proceedings will not have a material adverse
effect on the annual financial statements of the Company.
Elanex Pharmaceuticals litigation
In October 1993, the Company filed a complaint for patent
infringement against defendants Elanex Pharmaceuticals, Inc.
("Elanex"), Laboratorios Elanex De Costa Rica, S.A., Bio Sidus S.A.,
Merckle GmbH, Biosintetica S.A. and other unknown defendants. The
complaint, filed in the United States District Court for the Western
District of Washington in Seattle, seeks injunctive relief and damages
for Elanex's infringement of the Company's patent for DNA sequences
and host cells useful in producing recombinant erythropoietin. The
complaint also alleges that the foreign defendants entered into
agreements with Elanex relating to the production or sale of
recombinant erythropoietin and thereby have induced Elanex's
infringement.
In December 1993, Elanex responded to the complaint denying the
material allegations thereof, and filed a counterclaim seeking a
declaratory judgment that the Company's patent is invalid and that
Elanex's recombinant erythropoietin technology does not infringe any
valid claims of the Company's patent. The counterclaim also seeks an
award of reasonable attorneys' fees and other costs of defense but
does not seek damages against the Company. The case is currently in
discovery. In February 1996, Merckle GmbH was dismissed from the
case.
Biogen litigation
On March 10, 1995, Biogen Inc. ("Biogen"), filed suit in the
United States District Court for the District of Massachusetts
alleging infringement by the Company of certain claims of U.S. Patent
4,874,702 (the "`702 Patent"), relating to vectors for expressing
cloned genes. Biogen alleges that Amgen has infringed its patent by
manufacturing and selling NEUPOGEN(R). On March 28, 1995, Biogen
filed an amended complaint further alleging that the Company is also
infringing the claims of two additional patents allegedly assigned to
Biogen, U.S. Patent 5,401,642 (the "`642 Patent") and U.S. Patent No.
5,401,658 (the "`658 Patent"), relating to vectors, methods for
making vectors and expressing cloned genes. The amended complaint
seeks injunctive relief, unspecified compensatory damages and treble
damages. On April 24, 1995, the Company answered Biogen's amended
complaint, denying its material allegations and pleading
counterclaims for declaratory judgment of non-infringement, patent
invalidity and unenforceability. On January 19, 1996, the Court
decided, upon Biogen's motion to dismiss certain of Amgen's
counterclaims, that it will exert jurisdiction over claims 9 and 17
of the `702 Patent, and dismissed all claims and counterclaims
relating to any other claims of the `702 Patent. Amgen moved for
summary judgment of invalidity of claim 9 of the `702 Patent. On
July 7, 1997, the Company's summary judgment motion was denied. On
August 14, 1997, Amgen filed a Motion for Reconsideration of the
Courts ruling on invalidity of claim 9 of the `702 patent. On
October 20, 1997, the Motion for Reconsideration was also denied.
These denials are not dispositive of the case, and the effect of the
ruling is to reserve certain issues for trial. On October 22, 1997,
27
Amgen moved for summary judgment of invalidity of the certain claims
of the `702 and `658 Patents based on prior public uses of the
claimed subject matter. Amgen concurrently moved for a partial
interpretation of the claims at issue. In addition, on October 24,
1997, Amgen filed a motion for summary judgment of invalidity of
particular claims of the patents-in-suit based on abandonment of the
invention. Amgen also concurrently filed a motion to dismiss the
lawsuit in its entirety based on Biogen's lack of standing to bring
the lawsuit in view of Biogen's lack of ownership of the patents-in-
suit. Both parties have submitted claim construction briefs with the
court. On January 15, 1998, Amgen filed a second motion to dismiss
for lack of subject matter jurisdiction and standing in view of
Biogen's lack of necessary ownership rights in the patents-in-suit.
On March 20, 1998, the court held a claim construction hearing. The
court heard oral argument and took the submission under advisement;
no decision has been issued yet. Discovery in the case is
substantially completed. A trial date has not been set.
In a separate matter, on July 30, 1997, Biogen filed a complaint
in the United States District Court for the District of Massachusetts
in Boston alleging that Amgen infringes claims 9 and 17 of the `702
Patent, and the `642 Patent and `658 Patent by making and using the
claimed subject matter in the United States in the manufacture of
INFERGEN(R), the Company's consensus interferon product. On
September 17, 1997, Amgen responded to the Complaint by filing a
motion to dismiss the case in its entirety due to Biogen's lack of
standing to bring the lawsuit in view of Biogen's lack of ownership
of the patents-in-suit. Amgen also filed a motion for summary
judgment of patent invalidity of particular claims of the patents-in-
suit due to abandonment of the invention. Biogen moved to
consolidate this case with above-described case pertaining to
NEUPOGEN(R); on November 16, 1997 the Court denied Biogen's motion to
consolidate. The Court has ordered the Company to file an answer to
Biogen's complaint but has stayed all discovery in this matter until
certain discovery in the NEUPOGEN(R) matter described above is
completed. The Company has filed a motion to dismiss the complaint
on the grounds that the Court lacks jurisdiction over the matter as
Biogen lacks the necessary ownership rights to afford it standing. A
trial date has not been set.
INFERGEN(R) litigation
On June 15, 1994, Biogen filed suit in the Tokyo District Court
in Japan, against Amgen K.K., a subsidiary of the Company, seeking
injunctive relief for the alleged infringement of two Japanese patents
relating to alpha-interferon by the clinical use of INFERGEN(R), the
Company's consensus interferon product. Amgen K.K. has answered the
complaint and has denied the allegations of infringement. On January
30, 1998, Biogen withdrew its complaint thereby terminating the
action.
On December 20, 1995, Roche Holding A.G., parent corporation of
F. Hoffmann-La Roche and Company, filed suit in the Tokyo District
Court in Japan, against Amgen K.K., a subsidiary of the Company,
seeking injunctive relief for the alleged infringement of a patent
relating to alpha-interferon by the clinical use of INFERGEN(R). The
Company subsequently answered the complaint, denying allegations of
infringement. On February 9, 1998, the Tokyo District Court issued
28
its decision to dismiss the action due to a lack of legal or factual
basis supporting the requested relief.
On December 3, 1996, Schering Corporation filed suit in the U.S.
District Court for the District of Delaware (the "Delaware Court")
against the Company alleging infringement of U.S. Patent No. 4,530,901
(the "`901 Patent") by the manufacture and use of INFERGEN(R). The
complaint seeks unspecified damages and injunctive relief. The
Company filed a motion to dismiss (the "Motion to Dismiss") the action
on January 24, 1997. On January 22, 1997, the Company filed an action
for declaratory relief in the United States District Court for the
Central District of California in Los Angeles naming Biogen Inc. and
Schering Corporation as parties. The action seeks a declaration that
the `901 Patent is not infringed by the Company's use of INFERGEN(R)
and/or that the `901 Patent is invalid. By agreement between the
parties, the Motion to Dismiss was withdrawn and a motion to transfer
the case to California was filed on March 10, 1997. On June 24, 1997,
the Delaware Court denied Amgen's motion to transfer and the case is
now proceeding in Delaware. Pursuant to an agreement between the
parties, Amgen withdrew its complaint filed in California. Biogen has
been added as a plaintiff in the Delaware action. The action is
ongoing and is in the discovery phase.
See, also, "Biogen litigation", above.
Genentech litigation
On October 16, 1996, Genentech, Inc. filed suit in the United
States District Court for the Northern District of California seeking
an unspecified amount of compensatory damages, treble damages and
injunctive relief on its U.S. Patents 4,704,362, 5,221,619 and
4,342,832 ( the "`362, `619 and `832 Patents"), relating to vectors
for expressing cloned genes and the methods for such expression.
Genentech, Inc. alleges that Amgen has infringed its patents by
manufacturing and selling NEUPOGEN(R). On December 2, 1996, Amgen
was served with this lawsuit. On January 21, 1997, the Company
answered the complaint and asserted counterclaims relating to
invalidity and non-infringement of the patents-in-suit. On February
10, 1997, Genentech, Inc. served Amgen with a reply to the
counterclaim and an additional counterclaim asserting U.S. Patent
5,583,013 (the "`013 Patent"), issued December 10, 1996, seeking
relief similar to that sought for the `362, `619 and `832 Patents.
On March 31, 1997, Amgen answered this pleading and asserted
counterclaims relating to invalidity and non-infringement of the `013
Patent. Discovery is currently ongoing. The parties are in the
process of exchanging papers pertaining to interpretation of the
patent claims.
Transkaryotic Therapies and Hoechst litigation
On April 15, 1997, Amgen filed suit in the United States District
Court in Boston Massachusetts against Transkaryotic Therapies Inc.
("TKT") and Hoechst Marion Roussel alleging infringement of several
U.S. patents owned by Amgen that claim an erythropoietin product and
processes for making erythropoietin. The suit seeks an injunction
preventing the defendants from making, importing, using or selling
erythropoietin in the U.S. On July 9, 1997, the Court denied TKT's
motion to dismiss the lawsuit on the pleadings. On January 27, 1998,
29
a hearing was held on the defendants' motion for summary judgment to
dismiss the lawsuit based on the clinical trial exemption; also
pending before the court was Amgen's summary judgment motion for
infringement. The court heard oral argument and took the submission
under advisement; no decision has been issued yet. Discovery in the
case is ongoing.
FoxMeyer Health Corporation
On January 10, 1997, FoxMeyer Health Corporation, now known as
Avatex Corporation ("Avatex"), filed suit (the "FoxMeyer Lawsuit") in
the District Court of Dallas County, Dallas, Texas, alleging that
defendant McKesson Corporation ("McKesson") defrauded Avatex, misused
confidential information received from Avatex about subsidiaries of
Avatex (FoxMeyer Corporation and FoxMeyer Drug Corporation,
collectively the "FoxMeyer Subsidiaries"), and attempted to
monopolize the market for pharmaceutical and health care product
distribution by attempting to injure or destroy the FoxMeyer
Subsidiaries. The Company is named as one of twelve "Manufacturer
Defendants" alleged to have conspired with McKesson Corporation in
doing, among other things, the above and (i) inducing Avatex to
refrain from seeking other suitable purchasers for the FoxMeyer
Subsidiaries and (ii) causing Avatex to believe that McKesson was
serious about purchasing Avatex's assets at fair value, when, in
fact, McKesson was not. The Manufacturer Defendants and McKesson are
also alleged to have intentionally and tortiously interfered with a
number of business expectancies and opportunities. The complaint
seeks from the Manufacturer Defendants and McKesson compensatory
damages of at least $400 million and punitive damages in an
unspecified amount, as well as Avatex's costs and attorney's fees.
The Company has filed an answer denying Avatex's allegations. The
matter has been transferred to the Federal Bankruptcy Court in
Dallas, Texas (the "Texas Bankruptcy Court"). The Manufacturer
Defendants subsequently sought to transfer the matter to the Federal
Bankruptcy Court in Delaware (the "Delaware Bankruptcy Court"), where
the FoxMeyer Subsidiaries' Chapter 7 bankruptcy action is pending.
On August 27, 1997, the Texas Bankruptcy Court denied the motion to
transfer venue to the Delaware Bankruptcy Court, but decided that it
would adhere to any decision made by the Delaware Bankruptcy Court
regarding, among other things, ownership of claims asserted by
Avatex, as described below. McKesson and the Manufacturer Defendants
have intervened in an action brought by the Chapter 7 trustee in the
Delaware Bankruptcy Court that seeks to enjoin the FoxMeyer Lawsuit
and have moved for partial summary judgment in that proceeding,
asserting that Avatex is not the owner of the alleged causes of
action. On November 3, 1997, McKesson and the Manufacturer
Defendants moved for summary judgment in the Delaware Bankruptcy
Court to preclude Avatex and the Chapter 7 trustee from litigating in
Delaware the claims brought in the Texas Bankruptcy Court. This
motion has been fully briefed in the Delaware Bankruptcy Court and is
awaiting decision. On January 9, 1998, the Delaware Bankruptcy Court
judge informed the parties that she will not rule on this pending
summary judgment motion before she retires from the bench and that
the motion will have to be reassigned; since then, an interim judge
has been appointed. To date, no discovery has occurred in either the
Texas Bankruptcy Court adversary proceedings or the Delaware
Bankruptcy Court adversary proceedings.
30
Synergen ANTRIL(TM) litigation
Johnson v. Amgen Boulder Inc. (formerly Synergen Inc.), et al.,
began as two suits filed in February 1995 in the Superior Court for
the State of Washington, King County and in the United States
District Court for the Western District of Washington (the "Court")
related to the development of ANTRIL(TM) (Synergen Inc.'s trade name
for IL-1ra) for the treatment of sepsis in which the plaintiffs seek
rescission of certain payments made to one of the defendants (or
unspecified compensatory damages not less than $52 million) and
treble damages. The two cases were consolidated into one case in
Court and the consolidated case was certified as a class action
lawsuit. Plaintiff, a limited partner of defendant Synergen Clinical
Partners, L.P. (the "Partnership"), represents a class of other
limited partners. The consolidated complaint, and as subsequently
amended, alleges violations of federal and state securities laws,
violations of other federal and state statutes, fraud,
misrepresentation and breach of fiduciary duty. The defendants
include Amgen Boulder Inc., the Partnership, Amgen Boulder
Development Corporation (formerly Synergen Development Corporation)
and certain officers and directors of the former Synergen Inc.
Defendants answered the complaint, as amended, denying plaintiffs'
claims and asserting various affirmative defenses. In August and
September 1996, the parties filed cross motions for summary judgment.
The Court heard arguments on November 1, 1996, but did not rule. On
February 7, 1997, the Court preliminarily approved a settlement
between the class and the defendants. Following an objection to the
settlement by a member of the class, on December 2, 1997, the class
and the defendants entered into a supplement to the settlement. The
settlement, as supplemented, provides that the plaintiff class, which
includes certain of the limited partners of the Partnership, will
receive an initial cash payment of $16.5 million (including up to $3
million as payment to plaintiffs' counsel) in exchange for the
transfer of ownership of their partnership units, dismissal of the
suit with prejudice and the exchange by the parties of mutual
releases. In addition, if the FDA should grant approval to market
IL-1ra (as more specifically defined in the related settlement
agreement) in the U.S., up to an additional $10 million will be
payable to the class (including up to $1 million as payment to
plaintiffs' counsel), and if product revenues for IL-1ra (as more
specifically defined in the related settlement agreement) exceed $650
million by December 31, 2020, up to an additional $55 million will be
payable to the class (including up to $5 million as payment to
plaintiffs' counsel). On January 16, 1998, the Court granted final
approval of the settlement and entered judgment dismissing the
action. That judgment and the settlement have become final.
Johnson & Johnson arbitrations
The Company is engaged in arbitration proceedings with one of its
licensees. See Note 4 to the Consolidated Financial Statements,
"Contingencies - Johnson & Johnson arbitrations".
31
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 last quarter of its fiscal year ended December 31,
1997.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market
under the symbol AMGN. As of March 11, 1998, there were approximately
14,000 holders of record of the Company's common stock. No cash
dividends have been paid on the common stock to date, and the Company
currently intends to retain any earnings for development of the
Company's business and for repurchases of its common stock.
The following table sets forth, for the fiscal periods indicated,
the range of high and low closing sales prices of the common stock as
quoted on The Nasdaq Stock Market for the years 1997 and 1996:
High Low
------- --------
1997
4th Quarter ................. $54-1/8 $45-15/16
3rd Quarter ................. 61-3/4 46-15/16
2nd Quarter ................. 68-3/8 55-7/8
1st Quarter ................. 63 53
1996
4th Quarter ................. $64 $54-3/8
3rd Quarter ................. 63-3/8 51-1/2
2nd Quarter ................. 61 52-3/8
1st Quarter ................. 65-1/2 52-3/4
32
Item 6. SELECTED FINANCIAL DATA
(in million, except per share data)
Years ended December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Consolidated Statement
of Operations Data:
Revenues:
Product sales .......$2,219.8 $2,088.2 $1,818.6 $1,549.6 $1,306.3
Other revenues ...... 181.2 151.6 121.3 98.3 67.5
Total revenues ........ 2,401.0 2,239.8 1,939.9 1,647.9 1,373.8
Research and
development expenses 630.8 528.3 451.7 323.6 255.3
Write-off of in-
process technology
purchased ........... - - - 116.4 -
Marketing and selling
expenses ............ 302.0 310.1 272.9 236.9 214.1
General and admini-
strative expenses ... 181.8 160.5 145.5 122.9 114.3
Legal
assessment(award) ... 157.0 - - - (13.9)
Net income(1) ......... 644.3 679.8 537.7 319.7 383.3
Diluted earnings per
share(1) ............ 2.35 2.42 1.92 1.14 1.33
Cash dividends
declared per share .. - - - - -
At December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Consolidated Balance
Sheet Data:
Total assets ..........$3,110.2 $2,765.6 $2,432.8 $1,994.1 $1,765.5
Long-term debt ........ 229.0 59.0 177.2 183.4 181.2
Stockholders' equity .. 2,139.3 1,906.3 1,671.8 1,274.3 1,172.0
(1) Includes a legal assessment of $157 million, or $.35 per share,
related to arbitration proceedings with Johnson & Johnson in 1997
(see Note 4 to the Consolidated Financial Statements). Also
includes the write-off of in-process technology purchased of
$116.4 million, or $.42 per share, associated with the
acquisition of Synergen in 1994. Also includes an increase to
net income of $8.7 million, or $.03 per share, to reflect the
cumulative effect of a change in accounting principle to adopt
Statement of Financial Accounting Standards No. 109 in 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash provided by operating activities has been and is expected
to continue to be the Company's primary source of funds. In 1997,
33
operations provided $902.9 million of cash compared with $822.6
million in 1996. The Company had cash, cash equivalents and
marketable securities of $1,026.5 million at December 31, 1997,
compared with $1,077 million at December 31, 1996.
Capital expenditures totaled $387.8 million in 1997 compared
with $266.9 million in 1996. The Company anticipates spending
approximately $400 million to $500 million in 1998 on capital
projects and equipment to expand the Company's global operations.
Thereafter, over the next few years, the Company anticipates that
capital expenditures will average in excess of $400 million per
year.
The Company receives cash from the exercise of employee stock
options. In 1997, stock options and their related tax benefits
provided $189 million of cash compared with $162.1 million in 1996.
Proceeds from the exercise of stock options and their related tax
benefits have varied and are expected to continue to vary from
period to period based upon, among other factors, fluctuations in
the market value of the Company's common stock relative to the
exercise price of such options.
The Company has a stock repurchase program primarily to offset
the dilutive effect of its employee stock option and stock purchase
plans. In both 1996 and 1997, shares repurchased exceeded the
number of shares covered by options granted in each of those years.
In 1997, the Company purchased 13.7 million shares of common stock
at a cost of $737.9 million, and in 1996, the Company purchased 7.7
million shares of common stock at a cost of $450 million. In
October 1997, the Board of Directors authorized the Company to
repurchase up to an additional $1 billion of common stock through
December 31, 1998. At December 31, 1997, $712.1 million of this
authorization remained.
To provide for financial flexibility and increased liquidity,
the Company has established several sources of debt financing. In
November 1997, the Company established a $500 million debt shelf
registration statement. In December 1997, pursuant to such
registration statement, the Company issued $100 million of debt
securities that bear interest at a fixed rate of 6.5% and mature in
10 years (the "Notes"). As of December 31, 1997, the Company had
$259 million of unsecured debt securities outstanding. This amount
includes the Notes, $59 million of debt securities that bear
interest at fixed rates averaging 5.8% and mature in one to six
years and $100 million of debt securities that bear interest at a
fixed rate of 8.1% and mature in 2097 which were issued in April
1997. The Company also has a commercial paper program which
provides for short-term borrowings up to an aggregate face amount of
$200 million. The Company has a $150 million revolving line of
credit for borrowings and to support the commercial paper program.
As of December 31, 1997, no amounts were outstanding under either
source.
The primary objectives for the Company's investment portfolio
are liquidity and safety of principal. Investments are made to
achieve the highest rate of return to the Company, consistent with
these two objectives. The Company's investment policy limits
investments to certain types of instruments issued by institutions
34
with investment grade credit ratings and places restrictions on
maturities and concentration by type and issuer. The Company
invests its excess cash in securities with varying maturities to
meet projected cash needs.
The Company believes that existing funds, cash generated from
operations and existing sources of debt financing are adequate to
satisfy its working capital and capital expenditure requirements for
the foreseeable future, as well as to support its stock repurchase
program. However, the Company may raise additional capital from
time to time.
Results of Operations
Product sales
Product sales were $2,219.8 million in 1997, an increase of
$131.6 million or 6% over the prior year. In 1996, product sales
were $2,088.2 million, an increase of $269.6 million or 15% over the
prior year.
NEUPOGEN(R) (Filgrastim)
Worldwide NEUPOGEN(R) sales were $1,055.7 million in 1997, an
increase of $39.4 million or 4% over the prior year. This increase
was primarily due to demand growth and higher prices. Unfavorable
foreign currency effects and European Union ("EU") government
initiatives to lower health care expenditures reduced growth in EU
sales. In addition, the Company believes that the use of protease
inhibitors as a treatment for AIDS has reduced sales of NEUPOGEN(R)
for off-label use as a supportive therapy in this setting.
NEUPOGEN(R) is not approved or promoted for such use, except in
Australia and Canada. In 1996, sales were $1,016.3 million, an
increase of $80.3 million or 9% over the prior year. This increase
was primarily due to growth in demand and a price increase.
Cost containment pressures in the U.S. health care marketplace
have contributed to the slowing of growth in domestic NEUPOGEN(R)
usage over the past several years. These pressures are expected to
continue to influence growth for the foreseeable future. In
addition, quarterly NEUPOGEN(R) sales volume is influenced by a
number of factors including underlying demand and wholesaler
inventory management practices.
The growth of the colony stimulating factor ("CSF") market in
the EU in which NEUPOGEN(R) competes has slowed, principally due to
EU government pressures on physician prescribing practices in
response to on-going government initiatives to reduce health care
expenditures. Additionally, the Company faces competition from
another granulocyte CSF product. Amgen's CSF market share in the EU
has remained relatively constant over the last year, however, the
Company does not expect the competitive intensity to subside in the
near future.
EPOGEN(R) (Epoetin alfa)
EPOGEN(R) sales were $1,160.7 million in 1997, an increase of
$88.8 million or 8% over the prior year. EPOGEN(R) sales during
35
this period benefited from increases in the U.S. dialysis patient
population, but were adversely affected by reimbursement changes
implemented on September 1, 1997 by the Health Care Financing
Administration ("HCFA"). Prior to these changes, fiscal
intermediaries under contract with HCFA were authorized to pay
reimbursement claims for patients whose hematocrits were above 36
percent, the top of the suggested target hematocrit range in the
Company's labeling, if deemed medically justified. Under the new
rules, medical justification is no longer accepted for payment of
claims of hematocrits that exceed 36 percent, and if the current
month's hematocrit is greater than 36 percent and the patient's
hematocrit exceeds 36.5 percent on an historical 90-day "rolling
average" basis, reimbursement for the last 30 days will be denied in
full. Beginning in the second quarter of 1997, the Company has
experienced a decline in the growth rate of EPOGEN(R) sales as
dialysis providers attempt to lower hematocrits by lowering or
withholding EPOGEN(R) doses in order to avoid or minimize claim
denials under the new HCFA policy. The Company anticipates that
dialysis providers will continue to administer lowered doses or
withhold doses to maintain hematocrits at a level which, in their
judgment, is sufficiently low to avoid or minimize claim denials.
It is difficult to predict EPOGEN(R) usage under this reimbursement
policy principally because individual patient hematocrit variability
is high and thus difficult to control or maintain at a desired
level, and the response by dialysis providers has varied.
In 1996, EPOGEN(R) sales were $1,071.9 million, an increase of
$189.3 million or 21% over the prior year. This increase was
primarily due to an increase in the U.S. dialysis patient
population, the administration of higher doses and, to a lesser
extent, increased penetration of the dialysis market.
Other product sales
Sales of INFERGEN(R) (Interferon alfacon-1), the Company's
third product, were $3.4 million in 1997, much of which was to fill
distribution channels. INFERGEN(R) was launched in October 1997 for
the treatment of chronic hepatitis C virus infection. There are
existing treatments for this infection against which INFERGEN(R)
competes, and the Company cannot predict the extent to which it will
penetrate this market.
Cost of sales
Cost of sales as a percentage of product sales was 13.6%, 13.6%
and 15.0% for the years ended December 31, 1997, 1996 and 1995,
respectively. In 1998, cost of sales as a percentage of product
sales is expected to be slightly higher than 1997.
Research and development
In 1997 and 1996, research and development expenses increased
$102.5 million or 19% and $76.6 million or 17%, respectively,
compared with the respective prior years. These increases are
primarily due to higher clinical and preclinical activities,
including staff-related expenses, necessary to support ongoing
product development activities. In 1998, annual research and
development expenses are expected to increase but at a substantially
36
lower rate than 1997. This increase is planned for internal
development of product candidates, and for discovery and licensing
efforts.
Marketing and selling/general and administrative
In 1997, marketing and selling expenses decreased $8.1 million
or 3% from the prior year due to lower European marketing expenses
resulting from the favorable effects of foreign currency exchange
rates and lower expenses related to the Johnson & Johnson
arbitration. These reductions were partially offset by higher
staff-related costs and higher outside marketing expenses. In 1996,
marketing and selling expenses increased $37.2 million or 14% over
the prior year primarily due to market research activities, efforts
to increase the number of patients receiving NEUPOGEN(R) and efforts
to bring more patients receiving EPOGEN(R) within the target
hematocrit range.
In 1997 and 1996, general and administrative expenses increased
$21.3 million or 13% and $15 million or 10%, respectively, compared
with the respective prior years. These increases are primarily due
to higher staff-related expenses and legal fees.
In 1998, marketing and selling expenses combined with general
and administrative expenses are expected to have little growth.
Legal assessment
During the three months ended September 30, 1997, the Company
recorded a pre-tax charge of $157 million relating to a spillover
arbitration award to Johnson & Johnson. See Note 4 to the
Consolidated Financial Statements - "Contingencies - Johnson &
Johnson arbitrations".
Income taxes
The Company's tax rate was 25.2%, 29.4% and 32.3% for the years
ended December 31, 1997, 1996 and 1995, respectively. The decrease
in 1997 is primarily due to the effect of the legal assessment which
reduced pre-tax income without a corresponding reduction in tax
benefits related to Puerto Rico operations and due to higher federal
research and experimentation tax credits resulting from favorable
legislation extending the credit for the entire year as compared
with only six months for 1996. The decrease in 1996 is primarily
the result of a favorable ruling received from the Puerto Rican
government with respect to tollgate taxes applicable to earnings in
Puerto Rico. The 1995 tax rate reflects tax benefits from the sale
of products manufactured in the Puerto Rico fill-and-finish facility
which began in the first quarter of 1995. For 1998, the tax rate is
likely to increase to approximately 30% primarily due to a provision
in the U.S. federal tax law which caps tax benefits associated with
the Company's Puerto Rico operations at the 1995 income level.
Foreign currency transactions
The Company has a program to manage certain portions of its
exposure to fluctuations in foreign currency exchange rates arising
from international operations. The Company generally hedges the
37
receivables and payables with foreign currency forward contracts,
which typically mature within six months. The Company uses foreign
currency option and forward contracts which generally expire within
12 months to hedge certain anticipated foreign currency cash flows.
At December 31, 1997, outstanding foreign currency option and
forward contracts totaled $60.3 million and $69.6 million,
respectively.
Year 2000
The Year 2000 issue results from computer programs that do not
differentiate between the year 1900 and the year 2000 because they
were written using two digits rather than four to define the
applicable year; accordingly, computer systems that have time-
sensitive calculations may not properly recognize the year 2000.
The Company has conducted an initial review of its computer systems,
devices, applications and manufacturing equipment (collectively,
"Computer Systems") to identify those areas that could be affected
by Year 2000 noncompliance. Additionally, the Company has appointed
a program manager for Year 2000 compliance and is presently
assessing in detail the affected Computer Systems and is developing
plans to address the required modifications. The Company presently
intends to utilize internal and external resources to identify,
correct or reprogram and test its Computer Systems for Year 2000
compliance. The total cost associated with Year 2000 compliance is
not known at this time. Although the Company has communicated with
all known suppliers, service providers, distributors, wholesalers
and other entities with which it has a business relationship
(collectively, "Third Party Businesses") regarding compliance with
Year 2000 requirements, the Company has not determined the impact,
if any, on its operations if Third Party Businesses fail to comply
with Year 2000 requirements. While the Company has developed plans
to complete modifications of its business critical Computer Systems
prior to the year 2000, if modifications of such business critical
Computer Systems, or Computer Systems of key Third Party Businesses
are not completed in a timely manner, the Year 2000 issue could have
a material adverse effect on the operations and financial position
of the Company.
Financial Outlook
Future NEUPOGEN(R) (Filgrastim) sales growth is dependent
primarily upon further penetration of existing markets, the timing
and nature of additional indications for which the product may be
approved and the effects of competitive products. Although not
approved or promoted for use in Amgen's domestic or foreign markets,
except for Australia and Canada, the Company believes that
approximately 10% of its worldwide NEUPOGEN(R) sales are from off-
label use as a supportive therapy to various AIDS treatments.
Changes in AIDS therapies, including protease inhibitors that may be
less myelosuppressive, are believed to have adversely affected and
are expected to continue to adversely affect such sales.
NEUPOGEN(R) usage is expected to continue to be affected by cost
containment pressures on health care providers worldwide. In
addition, reported NEUPOGEN(R) sales will continue to be affected by
changes in foreign currency exchange rates and government budgets.
38
The Company anticipates a single digit sales growth rate for
EPOGEN(R) (Epoetin alfa) in 1998. The Company also anticipates
that, without any modifications to the reimbursement changes
implemented by HCFA, additional sales growth due to dose, if any, is
likely to be minimal; however, the Company believes that increases
in the U.S. dialysis patient population will continue to grow
EPOGEN(R) sales in the near term and long term. Patients receiving
treatment for end stage renal disease are covered primarily under
medical programs provided by the federal government. Therefore,
EPOGEN(R) sales may also be affected by future changes in
reimbursement rates or the basis for reimbursement by the federal
government. The previously disclosed report of the Office of the
Inspector General has been issued, recommending a 10% reduction in
the Medicare reimbursement rate for EPOGEN(R). The Company believes
the recommendation would primarily affect dialysis providers and
that it is difficult to predict the impact on Amgen.
INFERGEN(R) (Interferon alfacon-1) was launched in October 1997
for the treatment of chronic hepatitis C virus infection. There are
existing treatments for this infection against which INFERGEN(R)
competes, and the Company cannot predict the extent to which it will
penetrate this market. The Company is presently engaged in certain
litigation related to INFERGEN(R), as described in "Item 3. Legal
Proceedings - INFERGEN(R) litigation".
The Company anticipates a single digit total product sales
growth rate for 1998. Without giving effect to the 1997 legal
assessment, earnings per share in 1998 is expected to grow at a rate
between high single and low double digits. Estimates of future
product sales and earnings per share, however, are necessarily
speculative in nature and are difficult to predict with accuracy.
In October 1997, the Company announced that it is seeking a
corporate partner for its inflammation research and development
program located in Boulder, Colorado, which includes the product
candidates IL-1ra (interleukin-1 receptor antagonist), sTNFr1
(soluble tumor necrosis factor receptor 1) and SLPI (secretory
leukocyte protease inhibitor). However, there can be no assurance
that the Company will be successful in finding an acceptable
corporate partner on acceptable business terms.
Except for the historical information contained herein, the
matters discussed herein are by their nature forward-looking.
Investors are cautioned that forward-looking statements or
projections made by the Company, including those made in this
document, are subject to risks and uncertainties that may cause
actual results to differ materially from those projected. Reference
is made in particular to forward-looking statements regarding
product sales, earnings per share and expenses. Amgen operates in a
rapidly changing environment that involves a number of risks, some
of which are beyond the Company's control. Future operating results
and the Company's stock price may be affected by a number of
factors, including, without limitation: (i) the results of
preclinical and clinical trials; (ii) regulatory approvals of
product candidates, new indications and manufacturing facilities;
(iii) reimbursement for Amgen's products by governments and private
payors; (iv) health care guidelines relating to Amgen's products;
(v) intellectual property matters (patents) and the results of
39
litigation; (vi) competition; (vii) fluctuations in operating
results and (viii) rapid growth of the Company. These factors and
others are discussed herein and in the sections appearing in "Item
1. Business - Factors that May Affect the Company", which sections
are incorporated herein by reference.
Legal Matters
The Company is engaged in arbitration proceedings with one of
its licensees. For a complete discussion of these matters, see Note
4 to the Consolidated Financial Statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest income earned on the Company's investment portfolio is
affected by changes in the general level of U.S. interest rates.
However, changes in interest rates do not affect interest expense
incurred on the Company's short-term and long-term borrowings
because they all bear interest at fixed rates. The following table
provides information about the Company's financial instruments that
are sensitive to changes in interest rates. For the Company's
investment portfolio and debt obligations, the table presents
principal cash flows and related weighted average interest rates by
expected maturity dates. Additionally, the Company has assumed its
available-for-sale debt securities, comprised primarily of corporate
debt instruments and treasury securities, are similar enough to
aggregate those securities for presentation purposes.
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
(Dollars in millions)
Fair
There- Value
1998 1999 2000 2001 2002 after Total 12/31/97
Available-for-
sale debt
securities . $451.5 $268.2 $227.1 $65.2 $5.0 - $1,017.0 $1,029.7
Interest rate 6.5% 7.0% 6.9% 5.7% 6.3% -
Long-term debt
(including
current
portion) ... $30.0 $6.0 - - - $223.0 $259.0 $276.3
Interest rate 5.6% 5.5% - - - 7.3%
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by
reference to the financial statements listed in Item 14(a) of Part IV
of this Form 10-K Annual Report.
40
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FIANCIAL DISCLOSURES
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of the Company is
incorporated by reference to the section entitled "Election of
Directors" in the Company's definitive Proxy Statement with respect to
the Company's 1998 Annual Meeting to be filed with the Securities and
Exchange Commission within 120 days of December 31, 1997 (the "Proxy
Statement"). For information concerning the executive officers of the
Company see "Item 1. Executive Officers of the Registrant".
Item 11. EXECUTIVE COMPENSATION
The section labeled "Executive Compensation" appearing in the
Company's Proxy Statement is incorporated herein by reference, except
for such information as need not be incorporated by reference under
rules promulgated by the Securities Exchange Commission.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGMENT
The section labeled "Security Ownership of Directors and
Executive Officers and Certain Beneficial Owners" appearing in the
Company's Proxy Statement is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section labeled "Certain Transactions" appearing in the
Company's Proxy Statement is incorporated herein by reference.
41
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a)1. Index to Financial Statements
The following Financial Statements are included herein:
Page
Number
Report of Ernst & Young LLP, Independent Auditors .............F-1
Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1997...........F-2
Consolidated Balance Sheets at December 31, 1997 and 1996 .....F-3
Consolidated Statements of Stockholders' Equity for each
of the three years in the period ended December 31, 1997....F-4
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1997.....F-5 - F-6
Notes to Consolidated Financial Statements .............F-7 - F-25
(a)2. Index to Financial Statement Schedules
The following Schedules are filed as part of this Form 10-K
Annual Report:
Page
Number
II Valuation Accounts....................................F-26
All other schedules are omitted because they are not applicable,
or not required, or because the required information is included in
the consolidated statements or notes thereto.
(a)3. Exhibits
Exhibit No. Description
3.1 Restated Certificate of Incorporation as amended. (19)
3.2* Amended and Restated Bylaws.
4.1 Indenture dated January 1, 1992 between the Company and
Citibank N.A., as trustee. (8)
4.2 Forms of Commercial Paper Master Note Certificates. (10)
4.3 First Supplement to Indenture, dated February 26, 1997
between the Company and Citibank N.A., as trustee. (16)
4.4 Officer's Certificate pursuant to Sections 2.1 and 2.3
of the Indenture, as supplemented, establishing a series
of securities "8-1/8% Debentures due April 1, 2097."
(18)
4.5 8-1/8% Debentures due April 1, 2097. (18)
4.6 Form of stock certificate for the common stock, par
value $.0001 of the Company. (19)
4.7 Officer's Certificate pursuant to Sections 2.1 and 2.3
of the Indenture, dated as of January 1, 1992, as
supplemented by the First supplemental Indenture, dated
as of February 26, 1997, each between the Company and
42
Citibank, N.A., as Trustee, establishing a series of
securities entitled "6.50% Notes Due December 1, 2007".
(22)
4.8 6.50% Notes Due December 1, 2007 described in Exhibit
4.7. (22)
10.1*+ Company's Amended and Restated 1991 Equity Incentive
Plan.
10.2+ Company's Amended and Restated 1984 Stock Option Plan.
(14)
10.3 Shareholder's Agreement of Kirin-Amgen, Inc., dated May
11, 1984, between the Company and Kirin Brewery Company,
Limited (with certain confidential information deleted
therefrom). (1)
10.4 Amendment Nos. 1, 2, and 3, dated March 19, 1985, July
29, 1985 and December 19, 1985, respectively, to the
Shareholder's Agreement of Kirin-Amgen, Inc., dated May
11, 1984 (with certain confidential information deleted
therefrom). (3)
10.5 Product License Agreement, dated September 30, 1985, and
Technology License Agreement, dated, September 30, 1985
between the Company and Ortho Pharmaceutical Corporation
(with certain confidential information deleted
therefrom). (2)
10.6 Product License Agreement, dated September 30, 1985, and
Technology License Agreement, dated September 30, 1985
between Kirin-Amgen, Inc. and Ortho Pharmaceutical
Corporation (with certain confidential information
deleted therefrom). (3)
10.7+ Company's Amended and Restated Employee Stock Purchase
Plan. (14)
10.8 Research, Development Technology Disclosure and License
Agreement PPO, dated January 20, 1986, by and between
the Company and Kirin Brewery Co., Ltd. (4)
10.9 Amendment Nos. 4 and 5, dated October 16, 1986
(effective July 1, 1986) and December 6, 1986 (effective
July 1, 1986), respectively, to the Shareholders
Agreement of Kirin-Amgen, Inc. dated May 11, 1984 (with
certain confidential information deleted therefrom). (5)
10.10 Assignment and License Agreement, dated October 16,
1986, between the Company and Kirin-Amgen, Inc. (with
certain confidential information deleted therefrom). (5)
10.11 G-CSF European License Agreement, dated December 30,
1986, between Kirin-Amgen, Inc. and the Company (with
certain confidential information deleted therefrom). (5)
10.12 Research and Development Technology Disclosure and
License Agreement: GM-CSF, dated March 31, 1987, between
Kirin Brewery Company, Limited and the Company (with
certain confidential information deleted therefrom). (5)
10.13+ Company's Amended and Restated 1988 Stock Option Plan.
(14)
10.14+ Company's Amended and Restated Retirement and Savings
Plan. (14)
10.15 Amendment, dated June 30, 1988, to Research,
Development, Technology Disclosure and License
Agreement: GM-CSF dated March 31, 1987, between Kirin
Brewery Company, Limited and the Company. (6)
10.16 Agreement on G-CSF in the EU, dated September 26, 1988,
between Amgen Inc. and F. Hoffmann-La Roche & Co.
43
Limited Company (with certain confidential information
deleted therefrom). (7)
10.17 Supplementary Agreement to Agreement dated January 4,
1989 to Agreement on G-CSF in the EU, dated September
26, 1988, between the Company and F. Hoffmann-La Roche &
Co. Limited Company, (with certain confidential
information deleted therefrom). (7)
10.18 Agreement on G-CSF in Certain European Countries, dated
January 1, 1989, between Amgen Inc. and F. Hoffmann-La
Roche & Co. Limited Company (with certain confidential
information deleted therefrom). (7)
10.19 Partnership Purchase Agreement, dated March 12, 1993,
between the Company, Amgen Clinical Partners, L.P.,
Amgen Development Corporation, the Class A limited
partners and the Class B limited partner. (9)
10.20+ Amgen Supplemental Retirement Plan dated June 1, 1993.
(11)
10.21 Promissory Note of Mr. Kevin W. Sharer, dated June 4,
1993. (11)
10.22+ Amgen Performance Based Management Incentive Plan. (17)
10.23 Credit Agreement, dated as of June 23, 1995, among Amgen
Inc., the Borrowing Subsidiaries named therein, the
Banks named therein, Swiss Bank Corporation and ABN AMRO
Bank N.V., as Issuing Banks, and Swiss Bank Corporation,
as Administrative Agent. (12)
10.24 Promissory Note of Mr. George A. Vandeman, dated
December 15, 1995. (13)
10.25 Promissory Note of Mr. George A. Vandeman, dated
December 15, 1995. (13)
10.26 Promissory Note of Mr. Stan Benson, dated March 19,
1996. (13)
10.27+ Amendment No. 1 to the Company's Amended and Restated
Retirement and Savings Plan. (14)
10.28+ Amendment Number 5 to the Company's Amended and Restated
Retirement and Savings Plan dated January 1, 1993. (17)
10.29+ Amendment Number 2 to the Company's Amended and Restated
Retirement and Savings Plan dated April 1, 1996. (17)
10.30 First Amendment to Credit Agreement, dated as of
December 12, 1996, among Amgen Inc., the Borrowing
Subsidiaries named therein, and Swiss Bank Corporation
as Administrative Agent. (17)
10.31 Fourth Amendment to Rights Agreement, dated February 18,
1997 between Amgen Inc. and American Stock Transfer and
Trust Company, Rights Agent. (15)
10.32 Preferred Share Rights Agreement, dated February 18,
1997, between Amgen Inc. and American Stock Transfer and
Trust Company, Rights Agent. (15)
10.33+ Consulting Agreement, dated November 15, 1996, between
the Company and Daniel Vapnek. (17)
10.34+ Agreement, dated May 30, 1995, between the Company and
George A. Vandeman. (17)
10.35+ First Amendment, effective January 1, 1998, to the
Company's Amended and Restated Employee Stock Purchase
Plan. (20)
10.36+ Third Amendment, effective January 1, 1997, to the
Company's Amended and Restated Retirement and Savings
Plan dated April 1, 1996. (20)
44
10.37 Heads of Agreement dated April 10, 1997, between the
Company and Kirin Amgen, Inc., on the one hand, and F.
Hoffmann-La Roche Ltd, on the other hand (with certain
confidential information deleted therefrom). (20)
10.38 Binding Term Sheet, dated August 20, 1997, between
Guilford Pharmaceuticals Inc. ("Guilford") and GPI NIL
Holdings, Inc., and Amgen Inc. (with certain
confidential information deleted therefrom). (21)
10.39* Promissory Note of Ms. Kathryn E. Falberg, dated April
7, 1995.
10.40* Promissory Note of Mr. Edward F. Garnett, dated July 18,
1997.
10.41*+ Fourth Amendment to the Company's Amended and Restated
Retirement and Savings Plan as amended and restated
effective April 1, 1996.
10.42*+ Fifth Amendment to the Company's Amended and Restated
Retirement and Savings Plan as amended and restated
effective April 1, 1996.
21* Subsidiaries of the Company.
23 Consent of Ernst & Young LLP, Independent Auditors. The
consent set forth as page 49 is incorporated herein by
reference.
24 Power of Attorney. The Power of Attorney set forth on
page 48 is incorporated herein by reference.
27* Financial Data Schedule.
----------------
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
(1) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended March 31, 1984 on June 26, 1984 and incorporated
herein by reference.
(2) Filed as an exhibit to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1985 on November 14, 1985 and
incorporated herein by reference.
(3) Filed as an exhibit to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1985 on February 3, 1986 and
incorporated herein by reference.
(4) Filed as an exhibit to Amendment No. 1 to Form S-1 Registration
Statement (Registration No. 33-3069) on March 11, 1986 and
incorporated herein by reference.
(5) Filed as an exhibit to the Form 10-K Annual Report for the year
ended March 31, 1987 on May 18, 1987 and incorporated herein by
reference.
(6) Filed as an exhibit to Form 8 amending the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988 on August 25, 1988
and incorporated herein by reference.
(7) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended March 31, 1989 on June 28, 1989 and incorporated
herein by reference.
(8) Filed as an exhibit to Form S-3 Registration Statement dated
December 19, 1991 and incorporated herein by reference.
(9) Filed as an exhibit to the Form 8-A dated March 31, 1993 and
incorporated herein by reference.
(10) Filed as an exhibit to the Form 10-Q for the quarter ended March
31, 1993 on May 17, 1993 and incorporated herein by reference.
45
(11) Filed as an exhibit to the Form 10-Q for the quarter ended
September 30, 1993 on November 12, 1993 and incorporated herein
by reference.
(12) Filed as an exhibit to the Form 10-Q for the quarter ended
June 30, 1995 on August 11, 1995 and incorporated herein by
reference.
(13) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1995 on March 29, 1996 and incorporated
herein by reference.
(14) Filed as an exhibit to the Form 10-Q for the quarter ended
September 30, 1996 on November 5, 1996 and incorporated herein
by reference.
(15) Filed as an exhibit to the Form 8-K Current Report dated
February 18, 1997 on February 28, 1997 and incorporated herein
by reference.
(16) Filed as an exhibit to the Form 8-K Current Report dated March
14, 1997 on March 14, 1997 and incorporated herein by reference.
(17) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1996 on March 24, 1997 and incorporated
herein by reference.
(18) Filed as an exhibit to the Form 8-K Current Report dated April
8, 1997 on April 8, 1997 and incorporated herein by reference.
(19) Filed as an exhibit to the Form 10-Q for the quarter ended March
31, 1997 on May 13, 1997 and incorporated herein by reference.
(20) Filed as an exhibit to the Form 10-Q for the quarter ended June
30, 1997 on August 12, 1997 and incorporated herein by
reference.
(21) Filed as exhibit 10.47 to the Guilford Form 8-K Current Report
dated August 20, 1997 on September 4, 1997 and incorporated
herein by reference.
(22) Filed as an exhibit to the Form 8-K Current Report dated and
filed on December 5, 1997 and incorporated herein by reference.
(b) Reports on Form 8-K
The Company filed two Current Reports on Form 8-K during the
three months ended December 31, 1997. The report filed on December 5,
1997 reported under Item 5 that the Company had filed a shelf
registration statement (the "Shelf") related to the issuance of debt
securities, a prospectus supplement had been filed relating to the
issuance of debt securities under the Shelf and an underwriting
agreement had been entered into relating to the sale of these debt
securities. In addition, a list of related exhibits was reported
under Item 7.
The report filed on December 9, 1997 reported under Item 5 that
the Company had filed a prospectus supplement relating to the issuance
of additional debt securities under the Shelf and a distribution
agreement had been entered into relating to the sale of these debt
securities. In addition, a list of related exhibits was reported
under Item 7.
46
SIGNATURES
Pursuant to the requirements 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.
Amgen Inc.
(Registrant)
Date: 3/23/98 By: /s/ ROBERT S. ATTIYEH
Robert S. Attiyeh
Senior Vice President,
Finance and Corporate
Development, and
Chief Financial Officer
47
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Robert S. Attiyeh and
Kathryn E. Falberg, or either of them, his or her attorney-in-fact,
each with the power of substitution, for him or her in any and all
capacities, to sign any amendments to this Report, and to file the
same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or
his or her substitute or substitutes, may do or cause to be done by
virtue hereof.
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/GORDON M. BINDER 3/23/98 /s/FREDERICK W. GLUCK 3/23/98
Gordon M. Binder Frederick W. Gluck
Chairman of the Board, Director
Chief Executive Officer and
Director
(Principal Executive Officer)
/s/FRANKLIN P. JOHNSON, JR.3/23/98
Franklin P. Johnson, Jr.
/s/KEVIN W. SHARER 3/23/98 Director
Kevin W. Sharer
President, Chief Operating
Officer and Director
/s/STEVEN LAZARUS 3/23/98
Steven Lazarus
/s/ROBERT S. ATTIYEH 3/23/98 Director
Robert S. Attiyeh
Senior Vice President,
Finance and Corporate
Development and /s/EDWARD J. LEDDER 3/23/98
Chief Financial Officer Edward J. Ledder
Director
/s/KATHRYN E. FALBERG 3/23/98
Kathryn E. Falberg
Vice President, /s/GILBERT S. OMENN 3/23/98
Corporate Controller and Gilbert S. Omenn
Chief Accounting Officer Director
/s/WILLIAM K. BOWES, JR. 3/23/98 /s/JUDITH C. PELHAM 3/23/98
William K. Bowes, Jr. Judith C. Pelham
Director Director
48
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-5111) pertaining to the 1984 Stock Option
Plan, 1981 Incentive Stock Option Plan and Nonqualified Stock Option
Plan of Amgen Inc., in the Registration Statement (Form S-8 No. 33-
24013) pertaining to the Amended and Restated 1988 Stock Option Plan
of Amgen Inc., in the Registration Statement (Form S-8 No. 33-39183)
pertaining to the Amended and Restated Employee Stock Purchase Plan,
in the Registration Statement (Form S-8 No. 33-39104) pertaining to
the Amended and Restated Amgen Retirement and Savings Plan, in the
Registration Statements (Form S-3/S-8 No. 33-29791 and Form S-8 No.
33-42501) pertaining to the Amended and Restated 1987 Directors' Stock
Option Plan, in the Registration Statement (Form S-8 No.33-42072)
pertaining to the Amgen Inc. Amended and Restated 1991 Equity
Incentive Plan, in the Registration Statement (Form S-8 No. 33-47605)
pertaining to the Retirement and Savings Plan for Amgen Puerto Rico,
Inc., in the Registration Statement (Form S-8 No. 333-44727)
pertaining to the Amgen Inc. 1997 Special Non-Officer Equity Incentive
Plan and in the Registration Statement (Form S-3 No. 333-40405) of
Amgen Inc. and in the related Prospectuses of our report dated January
21, 1998, with respect to the consolidated financial statements and
financial statement schedule of Amgen Inc. included in this Annual
Report (Form 10-K) for the year ended December 31, 1997.
/s/ ERNST & YOUNG LLP
Los Angeles, California
March 23, 1998
49
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders of Amgen Inc.
We have audited the accompanying consolidated balance sheets of
Amgen Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31,
1997. Our audits also included 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Amgen Inc. at December 31, 1997 and 1996 and the
consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997, 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, presents fairly in all material respects the information set
forth therein.
/s/ ERNST & YOUNG LLP
Los Angeles, California
January 21, 1998
F-1
AMGEN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1997, 1996 and 1995
(In millions, except per share data)
1997 1996 1995
-------- -------- --------
Revenues:
Product sales .................. $2,219.8 $2,088.2 $1,818.6
Corporate partner revenues ..... 125.9 109.9 85.2
Royalty income ................. 55.3 41.7 36.1
-------- -------- --------
Total revenues ............... 2,401.0 2,239.8 1,939.9
-------- -------- --------
Operating expenses:
Cost of sales .................. 300.8 283.2 272.9
Research and development ....... 630.8 528.3 451.7
Marketing and selling .......... 302.0 310.1 272.9
General and administrative ..... 181.8 160.5 145.5
Loss of affiliates, net ........ 36.1 52.8 53.3
Legal assessment ............... 157.0 - -
-------- -------- --------
Total operating expenses ..... 1,608.5 1,334.9 1,196.3
-------- -------- --------
Operating income ................. 792.5 904.9 743.6
Other income (expense):
Interest and other income ...... 72.6 63.6 66.1
Interest expense, net .......... (3.7) (6.2) (15.3)
-------- -------- --------
Total other income (expense) . 68.9 57.4 50.8
-------- -------- --------
Income before income taxes ....... 861.4 962.3 794.4
Provision for income taxes ....... 217.1 282.5 256.7
-------- -------- --------
Net income ....................... $ 644.3 $ 679.8 $ 537.7
======== ======== ========
Earnings per share:
Basic .......................... $2.44 $2.57 $2.03
Diluted ........................ $2.35 $2.42 $1.92
Shares used in calculation of
earnings per share:
Basic .......................... 264.1 264.9 265.0
Diluted ........................ 274.6 280.7 280.7
See accompanying notes.
F-2
AMGEN INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(In millions, except per share data)
1997 1996
-------- --------
ASSETS
Current assets:
Cash and cash equivalents ............... $ 239.1 $ 169.3
Marketable securities ................... 787.4 907.7
Trade receivables, net of allowance for
doubtful accounts of $14.2 in 1997 and
$11.8 in 1996 ......................... 269.0 225.4
Inventories ............................. 109.2 97.4
Other current assets .................... 138.8 102.8
-------- --------
Total current assets .................. 1,543.5 1,502.6
Property, plant and equipment at cost, net 1,186.2 910.5
Investments in affiliated companies....... 116.9 109.6
Other assets.............................. 263.6 242.9
-------- --------
$3,110.2 $2,765.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................ $ 103.9 $ 75.0
Accrued liabilities ..................... 608.0 449.7
Current portion of long-term debt ....... 30.0 118.2
-------- --------
Total current liabilities ............. 741.9 642.9
Long-term debt............................ 229.0 59.0
Put warrants.............................. - 157.4
Contingencies
Stockholders' equity:
Preferred stock; $.0001 par value; 5
shares authorized; none issued or
outstanding ........................... - -
Common stock and additional paid-in
capital; $.0001 par value; 750 shares
authorized; outstanding - 258.3 shares
in 1997 and 264.7 shares in 1996 ...... 1,196.1 1,026.9
Retained earnings ....................... 943.2 879.4
-------- --------
Total stockholders' equity .......... 2,139.3 1,906.3
-------- --------
$3,110.2 $2,765.6
======== ========
See accompanying notes.
F-3
AMGEN INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1996 and 1995
(In millions)
Common
stock and
Number additional
of paid-in Retained
shares capital earnings
------ -------- --------
Balance at December 31, 1994 ............ 264.7 $ 719.3 $555.0
Issuance of common stock upon the
exercise of stock options and in
connection with an employee stock
purchase plan ......................... 8.3 102.7 -
Tax benefits related to stock options ... - 42.8 -
Repurchases of common stock ............. (7.3) - (285.7)
Net income .............................. - - 537.7
----- -------- ------
Balance at December 31, 1995 ............ 265.7 864.8 807.0
Issuance of common stock upon the
exercise of stock options and in
connection with an employee stock
purchase plan ......................... 6.7 113.5 -
Tax benefits related to stock options ... - 48.6 -
Reclassification of put warrant
obligation ............................ - - (157.4)
Repurchases of common stock ............. (7.7) - (450.0)
Net income .............................. - - 679.8
----- -------- ------
Balance at December 31, 1996 ............ 264.7 1,026.9 879.4
Issuance of common stock upon the
exercise of stock options and in
connection with an employee stock
purchase plan ......................... 7.3 134.3 -
Tax benefits related to stock options ... - 54.7 -
Reclassification of put warrant
obligation ............................ - - 157.4
Repurchases of common stock ............. (13.7) - (737.9)
Net income .............................. - - 644.3
Cumulative translation adjustment and
other ................................. - (19.8) -
----- -------- ------
Balance at December 31, 1997 ............ 258.3 $1,196.1 $943.2
===== ======== ======
See accompanying notes.
F-4
AMGEN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1996 and 1995
(In millions)
1997 1996 1995
-------- -------- --------
Cash flows from operating
activities:
Net income ........................ $ 644.3 $ 679.8 $ 537.7
Depreciation and amortization ..... 117.1 100.3 84.3
Deferred income taxes ............. (31.4) 25.6 23.9
Loss of affiliates, net ........... 36.1 52.8 53.3
Cash provided by (used in):
Trade receivables, net .......... (43.6) (26.1) (4.6)
Inventories ..................... (11.8) (8.6) 9.2
Other current assets ............ 5.0 (11.8) (8.0)
Accounts payable ................ 28.9 20.6 23.9
Accrued liabilities ............. 158.3 (10.0) 53.5
------- ------- --------
Net cash provided by operating
activities .................. 902.9 822.6 773.2
------- ------- --------
Cash flows from investing
activities:
Purchases of property, plant and
equipment ....................... (387.8) (266.9) (162.7)
Proceeds from maturities of
marketable securities ........... 244.3 168.3 129.6
Proceeds from sales of marketable
securities ...................... 647.1 762.4 1,018.8
Purchases of marketable securities (767.5) (854.8) (1,646.6)
Increase in investments in
affiliated companies ............ (3.3) (14.6) (19.5)
Increase in other assets .......... (35.0) (104.6) (13.7)
------- ------- --------
Net cash used in investing
activities .................. $(302.2) $(310.2) $ (694.1)
------- ------- --------
See accompanying notes.
(Continued on next page)
F-5
AMGEN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31, 1997, 1996 and 1995
(In millions)
1997 1996 1995
-------- -------- --------
Cash flows from financing
activities:
Decrease in commercial paper ...... $ - $ (69.7) $ (30.0)
Repayment of long-term debt ....... (118.2) - (6.2)
Proceeds from issuance of long-
term debt ....................... 200.0 - -
Net proceeds from issuance of
common stock upon the exercise
of stock options and in
connection with an employee
stock purchase plan ............. 134.3 113.5 102.7
Tax benefits related to stock
options ......................... 54.7 48.6 42.8
Repurchases of common stock ....... (737.9) (450.0) (285.7)
Other ............................. (63.8) (52.2) (47.3)
------- ------- --------
Net cash used in financing
activities .................. (530.9) (409.8) (223.7)
------- ------- --------
Increase (decrease) in cash and cash
equivalents ....................... 69.8 102.6 (144.6)
Cash and cash equivalents at
beginning of period ............... 169.3 66.7 211.3
------- ------- --------
Cash and cash equivalents at end of
period ............................ $ 239.1 $ 169.3 $ 66.7
======= ======= ========
See accompanying notes.
F-6
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. Summary of significant accounting policies
Business
Amgen Inc. ("Amgen" or the "Company") is a global biotechnology
company that discovers, develops, manufactures and markets human
therapeutics based on advances in cellular and molecular biology.
Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries as well as affiliated
companies in which the Company has a controlling financial interest
and exercises control over their operations ("majority controlled
affiliates"). All material intercompany transactions and balances
have been eliminated in consolidation. Investments in affiliated
companies which are 50% or less owned and where the Company
exercises significant influence over operations are accounted for
using the equity method. All other equity investments are accounted
for under the cost method. The caption "Loss of affiliates, net"
includes Amgen's equity in the operating results of affiliated
companies and the minority interest others hold in the operating
results of Amgen's majority controlled affiliates.
Available-for-sale securities
The Company considers cash equivalents to be only those
investments which are highly liquid, readily convertible to cash and
which mature within three months from date of purchase.
The Company considers its investment portfolio and cost method
equity investments available-for-sale as defined in Statement of
Financial Accounting Standards ("SFAS") No. 115 and accordingly,
these investments are recorded at fair value (see Note 9). There
were no material unrealized gains or losses nor any material
differences between the estimated fair values and costs of
securities at December 31, 1997 and 1996. There were no material
realized gains and losses for the years ended December 31, 1997,
1996 and 1995. The cost of securities sold is based on the specific
identification method. The fair value of available-for-sale
investments by type of security, contractual maturity and
classification in the balance sheet are as follows (in millions):
F-7
December 31,
1997 1996
-------- --------
Type of security:
Corporate debt securities .................. $ 597.2 $ 656.2
U.S. Treasury securities and obligations of
U.S. government agencies ................. 266.3 209.7
Other interest bearing securities .......... 166.2 222.3
-------- --------
Total debt securities ................... 1,029.7 1,088.2
Equity securities .......................... 97.9 79.3
-------- --------
$1,127.6 $1,167.5
======== ========
Contractual maturity:
Maturing in one year or less ............... $ 453.3 $ 610.8
Maturing after one year through three years 505.4 351.3
Maturing after three years ................. 71.0 126.1
-------- --------
Total debt securities ................... 1,029.7 1,088.2
Equity securities .......................... 97.9 79.3
-------- --------
$1,127.6 $1,167.5
======== ========
Classification in balance sheet:
Cash and cash equivalents .................. $ 239.1 $ 169.3
Marketable securities ...................... 787.4 907.7
Other assets - noncurrent .................. 137.9 119.3
-------- --------
1,164.4 1,196.3
Less cash .................................. (36.8) (28.8)
-------- --------
$1,127.6 $1,167.5
======== ========
The primary objectives for the Company's investment portfolio
are liquidity and safety of principal. Investments are made to
achieve the highest rate of return to the Company, consistent with
these two objectives. The Company's investment policy limits
investments to certain types of instruments issued by institutions
with investment grade credit ratings and places restrictions on
maturities and concentration by type and issuer. The Company
invests its excess cash in securities with varying maturities to
meet projected cash needs.
F-8
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined in a manner which approximates the first-in, first-out
(FIFO) method. Inventories are shown net of applicable reserves and
allowances. Inventories consisted of the following (in millions):
December 31,
1997 1996
------ ------
Raw materials .............. $ 18.7 $15.9
Work in process ............ 53.6 56.2
Finished goods ............. 36.9 25.3
------ -----
$109.2 $97.4
====== =====
Depreciation and amortization
Depreciation of buildings and equipment is provided over their
estimated useful lives on a straight-line basis. Leasehold
improvements are amortized on a straight-line basis over the shorter
of their estimated useful lives or lease terms, including periods
covered by options which are expected to be exercised. Useful lives
by asset category are as follows:
Asset Category Years
-------------- -----
Buildings ........................... 10 - 30
Manufacturing equipment ............. 5
Laboratory equipment ................ 5
Furniture and office equipment ...... 3 - 10
Product sales
Product sales consist of three products, EPOGEN(R) (Epoetin
alfa), NEUPOGEN(R) (Filgrastim) and INFERGEN(R) (Interferon alfacon-
1).
The Company has the exclusive right to sell Epoetin alfa for
dialysis, diagnostics and all non-human uses in the United States.
The Company sells Epoetin alfa under the brand name EPOGEN(R).
Amgen has granted to Ortho Pharmaceutical Corporation, a subsidiary
of Johnson & Johnson ("Johnson & Johnson"), a license relating to
Epoetin alfa for sales in the United States for all human uses
except dialysis and diagnostics. Pursuant to this license, Amgen
does not recognize product sales it makes into the exclusive market
of Johnson & Johnson and does recognize the product sales made by
Johnson & Johnson into Amgen's exclusive market. Sales in Amgen's
exclusive market and adjustments thereto are derived from Company
shipments and from third-party data on shipments to end users and
their usage (see Note 4, "Contingencies - Johnson & Johnson
arbitrations").
Research and development costs
Research and development costs are expensed as incurred.
Payments related to the acquisition of technology rights, for which
F-9
development work is in-process, are expensed and considered a
component of research and development costs.
Foreign currency transactions
The Company has a program to manage foreign currency risk. As
part of this program, it has purchased foreign currency option and
forward contracts to hedge against possible reductions in values of
certain anticipated foreign currency cash flows generally over the
next 12 months, primarily resulting from its sales in Europe. At
December 31, 1997, the Company had option and forward contracts to
exchange foreign currencies for U.S. dollars of $60.3 million and
$15.2 million, respectively, all having maturities of ten months or
less. The option contracts, which have only nominal intrinsic value
at the time of purchase, are designated and effective as hedges of
anticipated foreign currency transactions for financial reporting
purposes and accordingly, the net gains on such contracts are
deferred and recognized in the same period as the hedged
transactions. The forward contracts do not qualify as hedges for
financial reporting purposes and accordingly, are marked-to-market.
Net gains on option contracts (including option contracts for hedged
transactions whose occurrence are no longer probable) and changes in
market values of forward contracts are reflected in "Interest and
other income". The deferred premiums on option contracts and fair
values of forward contracts are included in "Other current assets".
The Company has additional foreign currency forward contracts
to hedge exposures to foreign currency fluctuations of certain
receivables and payables denominated in foreign currencies. At
December 31, 1997, the Company had forward contracts to exchange
foreign currencies, primarily Swiss francs, for U.S. dollars of
$54.4 million, all having maturities of five months or less. These
contracts are designated and effective as hedges and accordingly,
gains and losses on these forward contracts are recognized in the
same period the offsetting gains and losses of hedged assets and
liabilities are realized and recognized. The fair values of the
forward contracts are included in the corresponding captions of the
hedged assets and liabilities. Gains and losses on forward
contracts, to the extent they differ in amount from the hedged
receivables and payables, are included in "Interest and other
income".
Interest
Interest costs are expensed as incurred, except to the extent
such interest is related to construction in progress, in which case
interest is capitalized. Interest costs capitalized for the years
ended December 31, 1997, 1996 and 1995, were $10.5 million, $4.2
million and $4.7 million, respectively.
Stock option and purchase plans
The Company's stock option and purchase plans are accounted for
under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees" (see Note 7).
F-10
Earnings per share
During the year ended December 31, 1997, the Company adopted
SFAS No. 128, "Earnings Per Share", which required a change in the
method used to compute earnings per share. Under this new standard,
primary and fully diluted earnings per share were replaced with
"Basic" and "Diluted" earnings per share. Basic earnings per share
amounts exclude the dilutive effect of potential common shares and
are therefore higher than the primary earnings per share amounts
previously presented. For Amgen, diluted earnings per share amounts
under the new standard are the same as primary earnings per share
amounts previously presented. As required by SFAS No. 128, all
prior period amounts have been restated to conform to the new
presentation.
Basic earnings per share is based upon the weighted-average
number of common shares outstanding. Diluted earnings per share is
based upon the weighted-average number of common shares and dilutive
potential common shares outstanding. Potential common shares are
outstanding options under the Company's stock option plans which are
included under the treasury stock method.
The following table sets forth the computation for basic and
diluted earnings per share (in millions, except per share
information):
Years ended December 31,
1997 1996 1995
------ ------ ------
Numerator for basic and diluted
earnings per share - net
income ........................ $644.3 $679.8 $537.7
====== ====== ======
Denominator:
Denominator for basic
earnings per share -
weighted-average shares...... 264.1 264.9 265.0
Effect of dilutive securities
- employee stock options..... 10.5 15.8 15.7
------ ------ ------
Denominator for diluted
earnings per share - adjusted
weighted-average shares...... 274.6 280.7 280.7
====== ====== ======
Basic earnings per share ........ $2.44 $2.57 $2.03
====== ====== ======
Diluted earnings per share ...... $2.35 $2.42 $1.92
====== ====== ======
Options to purchase 10.7 million, 0.2 million and 0.4 million
shares with exercise prices greater than the average market prices
of common stock were outstanding during the years ended December 31,
1997, 1996 and 1995, respectively. These options were excluded from
the respective computations of diluted earnings per share because
their effect would be anti-dilutive.
F-11
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results may
differ from those estimates.
Reclassification
Certain prior year amounts have been reclassified to conform to
the current year presentation.
2. Related party transactions
The Company owns a 50% interest in Kirin-Amgen, Inc. ("Kirin-
Amgen"), a corporation formed in 1984 for the development and
commercialization of certain products based on advanced
biotechnology. Pursuant to the terms of agreements entered into
with Kirin-Amgen, the Company conducts certain research and
development activities on behalf of Kirin-Amgen and is paid for such
services at negotiated rates. Included in revenues from corporate
partners for the years ended December 31, 1997, 1996 and 1995, are
$87.9 million, $79.9 million and $72.6 million, respectively,
related to these agreements.
In connection with its various agreements with Kirin-Amgen, the
Company has been granted sole and exclusive licenses for the
manufacture and sale of certain products in specified geographic
areas of the world. In return for such licenses, the Company paid
Kirin-Amgen stated amounts upon the receipt of the licenses and/or
pays Kirin-Amgen royalties based on sales. During the years ended
December 31, 1997, 1996 and 1995, Kirin-Amgen earned royalties from
Amgen of $91.4 million, $86.2 million and $74.2 million,
respectively, under such agreements, which are included in "Cost of
sales" in the accompanying consolidated statements of operations.
At December 31, 1997, Amgen's share of Kirin-Amgen's
undistributed retained earnings was approximately $73.5 million.
3. Debt
The Company has a commercial paper program which provides for
unsecured short-term borrowings up to an aggregate of $200 million.
No commercial paper was outstanding at December 31, 1997 and 1996.
F-12
Long-term debt consisted of the following (in millions):
December 31,
1997 1996
------ ------
Debt securities ................ $259.0 $109.0
Promissory notes ............... - 68.2
------ ------
259.0 177.2
Less current portion ........... (30.0) (118.2)
------ ------
$229.0 $ 59.0
====== ======
In November 1997, the Company established a $500 million debt
shelf registration statement. In December 1997, pursuant to this
registration statement, the Company issued $100 million of debt
securities that bear interest at a fixed rate of 6.5% and mature in
10 years (the "Notes") and established a $400 million medium term
note program. The Company may offer and issue medium term notes
from time to time with terms to be determined by market conditions.
In April 1997, the Company issued $100 million of debt
securities that bear interest at a fixed rate of 8.1% and mature in
2097 (the "Century Notes"). These securities may be redeemed in
whole or in part at the Company's option at any time for a
redemption price equal to the greater of the principal amount to be
redeemed or the sum of the present values of the principal and
remaining interest payments discounted at a determined rate plus, in
each case, accrued interest.
In addition to the Notes and the Century Notes, debt securities
outstanding at December 31, 1997 include $59 million of notes that
bear interest at fixed rates averaging 5.8% and mature in one to six
years. The terms of the debt securities require the Company to meet
certain debt to tangible net asset ratios and places limitations on
liens and sale/leaseback transactions and, except with respect to
the Notes and the Century Notes, places limitations on subsidiary
indebtedness.
The Company issued promissory notes to assist in financing the
acquisition and related construction of a manufacturing facility in
Puerto Rico. These notes were repaid in 1997.
The Company has an unsecured credit facility (the "credit
facility") that includes a commitment expiring on June 23, 2000 for
up to $150 million of borrowings under a revolving line of credit
(the "revolving line commitment"). As of December 31, 1997, $150
million was available under the revolving line commitment for
borrowing. Borrowings under the revolving line commitment bear
interest at various rates which are a function of, at the Company's
option, either the prime rate of a major bank, the federal funds
rate or a Eurodollar base rate. Under the terms of the credit
facility, the Company is required to meet a minimum interest
coverage ratio and maintain a minimum level of tangible net worth.
In addition, the credit facility contains limitations on
investments, liens and sale/leaseback transactions.
F-13
The aggregate stated maturities of all long-term obligations
due subsequent to December 31, 1997, are as follows: $30 million in
1998; $6 million in 1999; none in 2000; none in 2001; none in 2002;
and $223 million after 2002.
4. Contingencies
Johnson & Johnson arbitrations
Epoetin alfa
In September 1985, the Company granted Johnson & Johnson's
affiliate, Ortho Pharmaceutical Corporation, a license relating to
certain patented technology and know-how of the Company to sell a
genetically engineered form of recombinant human erythropoietin,
called Epoetin alfa, throughout the United States for all human uses
except dialysis and diagnostics. Johnson & Johnson sells Epoetin
alfa under the brand name PROCRIT(R). A number of disputes have
arisen between Amgen and Johnson & Johnson as to their respective
rights and obligations under the various agreements between them,
including the agreement granting the license (the "License
Agreement").
A dispute between Amgen and Johnson & Johnson that is the
subject of a current arbitration proceeding relates to the audit
methodology currently employed by the Company for Epoetin alfa sales.
The Company and Johnson & Johnson are required to compensate each
other for Epoetin alfa sales which either party makes into the other
party's exclusive market. The Company has established and is
employing an audit methodology to assign the proceeds of sales of
EPOGEN(R) and PROCRIT in the Company's and Johnson & Johnson's
respective exclusive markets, sometimes referred to as "spillover".
Spillover occurs when, for example, a hospital or other purchaser
buys one brand for use in both dialysis and non-dialysis indications.
On September 12, 1997, the arbitrator in this matter (the
"Arbitrator") issued an opinion adopting the Company's audit
methodology. For the free standing dialysis center segment of the
Epoetin alfa market, which accounts for about two-thirds of the
Company's EPOGEN sales, the Arbitrator ruled that the Company's audit
accurately determined that all Epoetin alfa sales to free standing
dialysis centers are made for dialysis. For the other segments of
the Epoetin alfa market, the Arbitrator ruled that the detailed
methodology used by Amgen accurately measured and allocated Epoetin
alfa sales for all but the Hospital and Home Health Care segments,
for which he ordered certain adjustments to the results of the audit
for the 1991-94 time period. The Arbitrator also ruled that no
payments are due for the 1989-90 period. Subject to further guidance
from the Arbitrator to clarify his opinion, the Company estimated
that the effect of the opinion would be a net spillover payment to
Johnson & Johnson which, after benefit of income tax effects, was $78
million for the 1991-94 period and interest in the amount of $18
million after tax. As a result of the opinion, the Company took a
charge of $0.35 per share in the third quarter of 1997 for the
spillover payment and interest.
A hearing before the Arbitrator was held on October 27, 1997 to
clarify, among other issues, the calculation for the amount of the
spillover payment due to Johnson & Johnson for the 1991-94 time
F-14
period. As a result of that hearing, the Company will pay an
additional amount to Johnson & Johnson for the 1991-94 period which
is covered by amounts previously provided for by the Company.
Further rulings clarifying the Company's entitlement to attorneys'
fees and costs and audit costs as well as the calculation of
spillover payments, if any, that may be due to the Company or Johnson
& Johnson for 1995, 1996 and 1997 have been sought by the parties
before a final order is issued. Pending determination by the
Arbitrator, the Company has not taken any benefit for the possible
recovery of attorneys' fees and costs or audit costs and has retained
spillover reserves. Johnson & Johnson also disputes the Company's
entitlement to reimbursement for attorneys' fees and costs or audit
costs. Accordingly, there can be no assurance that the Arbitrator
will award such reimbursement. If, as a result of these further
arbitration rulings, any adjustments to the results of the Company's
audit yield results that are different from the results of the audit
currently employed by the Company, the Company may be required to pay
additional compensation to Johnson & Johnson for sales during 1995,
1996 and 1997, or Johnson & Johnson may be required to pay
compensation to the Company for such prior period sales.
The Company has filed a demand in the arbitration to terminate
Johnson & Johnson's rights under the License Agreement and to recover
damages for breach of the License Agreement. Johnson & Johnson
disputes the Arbitrator's jurisdiction to decide the Company's
demand. A hearing before the Arbitrator on the Company's demand will
be scheduled following his final adjudication of the audit
methodologies for Epoetin alfa sales.
On October 2, 1995, Johnson & Johnson filed a demand for a
separate arbitration proceeding against the Company before the
American Arbitration Association ("AAA") in Chicago, Illinois.
Johnson & Johnson alleges in this demand that the Company has
breached the License Agreement. The demand also includes allegations
of various antitrust violations. In this demand, Johnson & Johnson
seeks an injunction, declaratory relief, unspecified compensatory
damages, punitive damages and costs. On October 27, 1995, the
Company filed a complaint in the Circuit Court of Cook County,
Illinois seeking an order compelling Johnson & Johnson to arbitrate
the Company's claim for termination before the Arbitrator as well as
all related counterclaims asserted in Johnson & Johnson's October 2,
1995 AAA arbitration demand. The Company is unable to predict at
this time the outcome of the demand for termination or when it will
be resolved. The Company has filed a motion to stay the AAA
arbitration pending the outcome of the existing arbitration
proceedings before the Arbitrator discussed above. The Company has
also filed an answer and counterclaim denying that AAA has
jurisdiction to hear or decide the claims stated in the demand,
denying the allegations in the demand and counter claiming for
certain unpaid invoices.
NESP
On June 5, 1997, Johnson & Johnson filed a demand for
arbitration against Kirin-Amgen, Inc. ("Kirin-Amgen"), an affiliate
of the Company, before the AAA. The demand alleges that Amgen's
novel erythropoiesis stimulating protein ("NESP") is covered by a
license granted by Kirin-Amgen to Johnson & Johnson in 1985 for the
F-15
development, manufacture and sale of Epoetin alfa in certain
territories outside the United States, Japan and China (the "K-A
License"). In 1996 Kirin-Amgen acquired exclusive worldwide rights
in NESP from Amgen. Kirin-Amgen, in turn, transferred certain rights
in NESP to Kirin and certain rights to Amgen. Johnson & Johnson
alleges that the K-A License effectively grants Johnson & Johnson the
same right to develop, manufacture and sell NESP as granted under the
K-A License with respect to Epoetin alfa. Kirin-Amgen filed its
answer to Johnson & Johnson's complaint on January 12, 1998, denying
that Johnson & Johnson has rights to NESP. Kirin-Amgen also asserted
a counterclaim for the recovery of certain royalty payments which
Kirin-Amgen asserts were improperly withheld. The trial in this
matter is scheduled to commence in July 1998.
While it is not possible to predict accurately or determine the
eventual outcome of the above described legal matters or various
other legal proceedings (including patent disputes) involving Amgen,
the Company believes that the outcome of these proceedings will not
have a material adverse effect on its annual financial statements.
5. Income taxes
The provision for income taxes includes the following (in
millions):
Years ended December 31,
1997 1996 1995
------ ------ ------
Current provision:
Federal (including U.S. possessions) $227.2 $240.4 $211.5
State ............................... 21.2 16.6 21.3
------ ------ ------
Total current provision ........... 248.4 257.0 232.8
------ ------ ------
Deferred provision (benefit):
Federal (including U.S. possessions) (25.6) 24.1 25.1
State ............................... (5.7) 1.4 (1.2)
------ ------ ------
Total deferred provision (benefit) (31.3) 25.5 23.9
------ ------ ------
$217.1 $282.5 $256.7
====== ====== ======
Deferred income taxes reflect the net tax effects of net
operating loss carryforwards and temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities are
as follows (in millions):
F-16
December 31,
1997 1996
------ ------
Deferred tax assets:
Expense accruals .................... $103.3 $ 55.9
Net operating loss carryforwards .... 63.1 83.3
Fixed assets ........................ 25.4 12.9
Research collaboration expenses ..... 23.1 19.0
Royalty obligation buyouts .......... 9.8 11.0
Other ............................... 7.1 9.5
------ ------
Total deferred tax assets ......... 231.8 191.6
Valuation allowance ................... (79.7) (82.6)
------ ------
Net deferred tax assets ........... 152.1 109.0
------ ------
Deferred tax liabilities:
Purchase of technology rights ....... (54.9) (45.0)
Other ............................... (3.9) (2.7)
------ ------
Total deferred tax liabilities .... (58.8) (47.7)
------ ------
$ 93.3 $ 61.3
====== ======
The net change in the valuation allowance for deferred tax
assets during the year ended December 31, 1997 was a $2.9 million
reduction.
At December 31, 1997, the Company had operating loss
carryforwards available to reduce future federal taxable income of
which $80.2 million expire in 2008 and $81.9 million expire in 2009.
These operating loss carryforwards relate to the 1994 acquisition of
Synergen, Inc., a biotechnology company. Utilization of these
operating loss carryforwards is limited to approximately $16 million
per year.
The provision for income taxes varies from income taxes
provided based on the federal statutory rate as follows:
Years ended December 31,
1997 1996 1995
------ ------ ------
Statutory rate applied to income
before income taxes ................. 35.0% 35.0% 35.0%
Benefit of Puerto Rico operations, net
of Puerto Rico income taxes ......... (7.3)% (6.8)% (3.5)%
Utilization of tax credits, primarily
research and experimentation ........ (2.9)% (1.1)% (0.8)%
Other, net ............................ 0.4% 2.3% 1.6%
----- ----- -----
25.2% 29.4% 32.3%
===== ===== =====
Income taxes paid during the years ended December 31, 1997,
1996 and 1995, totaled $176.1 million, $246 million and $100.8
million, respectively.
F-17
6. Stockholders' equity
Stockholder Rights agreement
On February 18, 1997, the Board of Directors of the Company
redeemed the rights under the Company's former common stock rights
plan and declared and distributed a dividend of one preferred share
purchase right (a "Right") for each then outstanding share of common
stock of the Company and authorized the distribution of one Right
with respect to each subsequently issued share of common stock. The
Rights and the redemption price were payable to stockholders of
record on March 21, 1997.
Each Right entitles a stockholder to buy one one-thousandth of
a share of Series A Junior Participating Preferred Stock of the
Company at an exercise price of $225. The Rights will expire on
March 21, 2007.
Under certain circumstances, if an acquiring person or group
acquires 10% or more of the Company's outstanding common stock, an
exercisable Right will entitle its holder (other than the acquirer)
to buy shares of common stock of the Company having a market value
of two times the exercise price of one Right. However, in limited
circumstances approved by the outside directors of the Board, a
stockholder who enters into an acceptable standstill agreement may
acquire up to 20% of the outstanding shares without triggering the
Rights. If an acquirer acquires at least 10%, but less than 50%, of
the Company's common stock, the Board may exchange each Right (other
than those of the acquirer) for one share of common stock per Right.
In addition, under certain circumstances, if the Company is involved
in a merger or other business combination where it is not the
surviving corporation, an exercisable Right will entitle its holder
to buy shares of common stock of the acquiring company having a
market value of two times the exercise price of one Right. The
Company may redeem the Rights at $.001 per Right at any time prior
to the public announcement that a 10% position has been acquired.
Stock repurchase program
The Company has a stock repurchase program primarily to offset
the dilutive effect of its employee stock option and stock purchase
plans. Stock repurchased under the program is retired. In October
1997, the Board of Directors authorized the Company to repurchase up
to $1 billion of common stock through December 31, 1998. As of
December 31, 1997, $712.1 million was available for repurchase under
the program.
In connection with the Company's stock repurchase program, put
warrants were sold to an independent third party during 1996. Each
put warrant entitled the holder to sell one share of Amgen Inc.
common stock to the Company at a specified price. The maximum
potential repurchase obligation outstanding under these instruments
was reclassified from stockholders' equity to "Put warrants". No
put warrants were outstanding at December 31, 1997. The repurchase
obligation for put warrants at December 31, 1996 was $157.4 million.
Additionally during 1996, the Company purchased call options
from an independent third party. Each call option entitled the
Company to buy one share of Amgen Inc. common stock at a specified
F-18
price. The premiums received from the sale of the put warrants
offset in full the cost of the call options. No call options were
outstanding at December 31, 1997.
Other
In addition to common stock, the Company's authorized capital
includes 5 million shares of preferred stock, $.0001 par value, of
which 0.8 million shares have been designated Series A Junior
Participating Preferred Stock. At December 31, 1997, no shares of
preferred stock were issued or outstanding.
At December 31, 1997, the Company had reserved 61.7 million
shares of its common stock which may be issued through its stock
option and stock purchase plans and had reserved 0.8 million shares
of preferred stock in connection with its preferred stock rights
plan.
7. Stock option and purchase plans
The Company's stock option plans provide for option grants
designated as either nonqualified or incentive stock options. The
options generally vest over a three to five year period and expire
seven years from the date of grant. Most employees are eligible to
receive a grant of stock options periodically with the number of
shares generally determined by the employee's salary grade,
performance level and the stock price. In addition, certain
management and professional level employees normally receive a stock
option grant upon hire. In 1997, most employees received an
additional stock option grant in which all shares will vest the
earlier of: (i) five years from date of grant; and (ii) the date on
which the closing price of Amgen stock equals or exceeds $75 per
share. In December 1997, the Board of Directors of Amgen adopted
the 1997 Special Non-Officer Equity Incentive Plan (the "1997 Plan")
and reserved 12 million shares for issuance thereunder. The terms
of the 1997 Plan are substantially similar to the terms of the
Company's Amended and Restated 1991 Equity Incentive Plan except
that the 1997 Plan does not permit: (i) repricing of options; (ii)
the granting of reload options; and (iii) the granting of incentive
stock options. As of December 31, 1997, the Company had 21.6
million shares of common stock available for future grant under its
stock option plans.
F-19
Stock option information with respect to all of the Company's
stock option plans follows (shares in millions):
Exercise Price
-----------------------------
Weighted-
Shares Low High Average
------ --- ---- --------
Balance unexercised at
December 31, 1994 ......... 35.0 $1.76 $38.88 $16.58
Granted ................. 7.1 $28.94 $58.88 $39.62
Exercised ............... (8.1) $1.93 $38.88 $12.87
Forfeited ............... (1.0) $2.25 $39.88 $19.86
----
Balance unexercised at
December 31, 1995 ......... 33.0 $1.76 $58.88 $22.35
Granted ................. 4.6 $51.50 $64.13 $56.00
Exercised ............... (6.6) $2.25 $55.75 $14.92
Forfeited ............... (.5) $3.69 $61.88 $32.48
----
Balance unexercised at
December 31, 1996 ......... 30.5 $1.76 $64.13 $29.00
Granted ................. 13.0 $46.50 $67.88 $54.56
Exercised ............... (7.1) $1.76 $58.25 $18.36
Forfeited ............... (.9) $4.31 $65.50 $45.74
----
Balance unexercised at
December 31, 1997 ......... 35.5 $2.30 $67.88 $40.08
====
At December 31, 1997, 1996 and 1995, stock options to purchase
15.0 million, 15.7 million and 15.7 million shares were exercisable
at weighted-average prices of $27.34, $20.53 and $15.71,
respectively.
The Company has an employee stock purchase plan whereby, in
accordance with Section 423 of the Internal Revenue Code, eligible
employees may authorize payroll deductions of up to 10% of their
salary to purchase shares of the Company's common stock at the lower
of 85% of the fair market value of common stock on the first or last
day of the offering period. During each of the years ended December
31, 1997, 1996 and 1995, 0.2 million shares were purchased by
employees at prices of approximately $46.00, $46.22 and $24.76 per
share, respectively. At December 31, 1997, the Company had 4.6
million shares available for future issuance under this plan.
Fair value disclosures
Stock option grants are set at the closing price of the
Company's common stock on the date of grant and the related number
of shares granted are fixed at that point in time. Therefore under
the principles of APB Opinion No. 25, the Company does not recognize
compensation expense associated with the grant of stock options.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires
the use of option valuation models to provide supplemental
information regarding options granted after 1994. Pro forma
information regarding net income and earnings per share shown below
was determined as if the Company had accounted for its employee
F-20
stock options and shares sold under its stock purchase plan under
the fair value method of that statement.
The fair value of the options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997, 1996 and 1995, respectively:
risk-free interest rates of 6.0%, 6.4% and 5.9%; dividend yields of
0%, 0% and 0%; volatility factors of the expected market price of
the Company's common stock of 33%, 34% and 33%; and expected life of
the options of 3.7 years, 3.4 years and 3.4 years. These
assumptions resulted in weighted-average fair values of $17.95,
$18.25 and $12.40 per share for stock options granted in 1997, 1996
and 1995, respectively.
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options. The Company's
employee stock options have characteristics significantly different
from those of traded options such as vesting restrictions and
extremely limited transferability. In addition, the assumptions
used in option valuation models (see above) are highly subjective,
particularly the expected stock price volatility of the underlying
stock. Because changes in these subjective input assumptions can
materially affect the fair value estimate, in management's opinion,
existing valuation models do not provide a reliable single measure
of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized over the options' vesting periods. The
pro forma effect on net income for 1997, 1996 and 1995 is not
representative of the pro forma effect on net income in future years
because it does not take into consideration pro forma compensation
expense related to option grants made prior to 1995. Pro forma
information in future years will reflect the amortization of a
larger number of stock options granted in several succeeding years.
The Company's pro forma information is as follows (in million,
except per share information):
Years ended December 31,
1997 1996 1995
------ ------ ------
Pro forma net income ........... $575.8 $631.5 $517.6
Pro forma earnings per share:
Basic ........................ $2.18 $2.38 $1.95
Diluted ...................... $2.12 $2.26 $1.85
F-21
Information regarding stock options outstanding as of December
31, 1997 is as follows (options in millions):
Options Outstanding Options Exercisable
----------------------------- -------------------
Weighted-
Weighted- Average Weighted-
Average Remaining Average
Exercise Contractual Exercise
Price Range Shares Price Life Shares Price
-------------- ------ --------- ----------- -------- ---------
Under $20.00 4.6 $13.64 2.2 years 4.2 $13.59
$20.00 - $40.00 13.4 $29.94 3.4 years 9.1 $28.59
Over $40.00 17.5 $54.76 6.3 years 1.7 $55.18
8. Balance sheet accounts
Property, plant and equipment consisted of the following (in
millions):
December 31,
1997 1996
-------- --------
Land ................................ $ 70.1 $ 62.6
Buildings ........................... 491.0 425.5
Manufacturing equipment ............. 81.4 63.0
Laboratory equipment ................ 205.8 174.9
Furniture and office equipment ...... 320.0 266.2
Leasehold improvements .............. 58.8 56.5
Construction in progress ............ 442.1 252.5
-------- --------
1,669.2 1,301.2
Less accumulated depreciation and
amortization...................... (483.0) (390.7)
-------- --------
$1,186.2 $ 910.5
======== ========
Accrued liabilities consisted of the following (in millions):
December 31,
1997 1996
------ ------
Due to affiliated companies and
corporate partners................ $232.5 $121.2
Income taxes ........................ 98.7 86.8
Sales incentives, royalties and
allowances........................ 92.9 79.7
Employee compensation and benefits .. 87.8 83.4
Other ............................... 96.1 78.6
------ ------
$608.0 $449.7
====== ======
F-22
9. Fair values of financial instruments
The carrying amounts of cash, cash equivalents, marketable
securities and cost method equity investments approximated their
fair values. Fair values of cash equivalents, marketable securities
and cost method equity investments are based on quoted market
prices.
The fair value of debt securities at December 31, 1997 was
approximately $276 million. The carrying values of debt securities
and promissory notes at December 31, 1996 approximated their fair
values. The fair values were estimated based on quoted market rates
for instruments with similar terms and remaining maturities.
The fair values of the foreign currency forward contracts and
purchased foreign currency option contracts were not significant
based on quoted market rates.
10. Major customers
Amgen uses wholesale distributors of pharmaceutical products as
the principal means of distributing the Company's products to
clinics, hospitals and pharmacies. The Company monitors the
financial condition of its larger distributors and limits its credit
exposure by setting appropriate credit limits and requiring
collateral from certain of its customers. For the years ended
December 31, 1997, 1996 and 1995, sales to two large wholesale
distributors as a percentage of total revenues were 24% and 14%, 24%
and 14%, and 21% and 15%, respectively.
11. Geographic information
Information about the Company's operations in the United States
and its possessions, Europe and other international markets, which
include Canada, Australia and Japan is as follows (in millions):
Years ended December 31,
1997 1996 1995
-------- -------- --------
Sales to unaffiliated customers:
United States and possessions .. $1,943.3 $1,803.5 $1,546.1
Europe ......................... 245.8 257.6 254.7
Other .......................... 30.7 27.1 17.8
Transfers between geographic
areas:
United States and possessions .. 16.9 24.5 12.6
Other revenue .................... 181.2 151.6 121.3
Adjustments and eliminations ..... (16.9) (24.5) (12.6)
-------- -------- --------
Total revenues ................... $2,401.0 $2,239.8 $1,939.9
======== ======== ========
F-23
Years ended December 31,
1997 1996 1995
-------- -------- --------
Operating profit (loss):
United States and possessions .. $864.1 $ 980.0 $801.7
Europe ......................... 55.2 71.4 75.7
Other .......................... (38.7) (34.8) (33.1)
Adjustments and eliminations ..... 5.7 (5.7) (1.7)
-------- -------- ------
Total operating profit ........... 886.3 1,010.9 842.6
Interest and other income, net ... 68.9 57.4 50.8
Loss of affiliates, net .......... (36.1) (52.8) (53.3)
General corporate expenses ....... (57.7) (53.2) (45.7)
-------- -------- ------
Income before income taxes ....... $861.4 $ 962.3 $794.4
======== ======== ======
Operating profit (loss) represents revenue less operating
expenses directly related to each geographic area. Operating profit
(loss) excludes "Interest and other income", "Loss of affiliates,
net" and other expenses attributable to general corporate
operations.
Included in operating profit for the United States and its
possessions is a legal assessment of $157 million for the year ended
December 31, 1997. "Loss of affiliates, net" includes the minority
interest in earnings of majority controlled European affiliates of
$47.9 million, $55.3 million and $50.7 million, for the years ended
December 31, 1997, 1996 and 1995, respectively.
Information about the Company's identifiable assets in each
geographic area is as follows (in millions):
December 31,
1997 1996
-------- --------
Identifiable assets:
United States and possessions..... $1,434.6 $1,127.0
Europe............................ 143.8 123.5
Other............................. 12.7 23.1
Adjustments and eliminations ....... 5.3 (6.2)
-------- --------
Total identifiable assets .......... 1,596.4 1,267.4
Corporate assets including equity
method investments................ 1,513.8 1,498.2
-------- --------
Total assets ....................... $3,110.2 $2,765.6
======== ========
Identifiable assets are those assets of the Company that are
identified with the operations in each geographic area. Europe's
identifiable assets include accounts receivable of approximately
$48.1 million and $44.2 million as of December 31, 1997 and 1996,
respectively, denominated in foreign currencies. Corporate assets,
which are excluded from identifiable assets, are principally
comprised of cash, cash equivalents and marketable securities. At
December 31, 1997 and 1996, total international assets approximated
$200.9 million and $207.3 million, respectively, and total
F-24
international liabilities approximated $30.5 million and $68.1
million, respectively.
12. Quarterly financial data
(unaudited, in millions, except per share data):
1997 Quarter Ended Dec. 31 Sept. 30 June 30 Mar. 31
------------------ ------- -------- ------- -------
Product sales..... $564.3 $552.8 $566.7 $536.0
Gross margin from
product sales ... 486.6 478.5 489.9 464.0
Net income........ 179.7 83.8 (1) 200.5 180.3
Earnings per
share:
Basic............ .69 .32 (1) .76 .68
Diluted.......... .67 .31 (1) .72 .65
1996 Quarter Ended Dec. 31 Sept. 30 June 30 Mar. 31
------------------ ------- -------- ------- -------
Product sales..... $559.1 $533.3 $518.9 $476.9
Gross margin from
product sales ... 484.2 460.2 450.6 410.0
Net income........ 178.0 179.5 178.7 143.6
Earnings per
share:
Basic............ .67 .68 .67 .54
Diluted.......... .64 .64 .64 .51
(1)During the third quarter of 1997, the Company accrued a $157
million spillover liability which resulted in an after-tax charge
of $96.4 million, or $.35 per share on a diluted basis, related
to arbitration proceedings with Johnson & Johnson (see Note 4,
"Contingencies - Johnson & Johnson arbitrations").
F-25
SCHEDULE II
AMGEN INC.
VALUATION ACCOUNTS
Years ended December 31, 1997, 1996 and 1995
(In millions)
Additions
Charged Balance
Balance at to Costs at End
Beginning and of
of Period Expenses Deductions Period
-------- -------- ---------- -------
Year ended December 31, 1997:
Allowance for doubtful
accounts.................. $11.8 $2.8 $0.4 $14.2
Year ended December 31, 1996:
Allowance for doubtful
accounts.................. $13.8 $2.9 $4.9 $11.8
Year ended December 31, 1995:
Allowance for doubtful
accounts.................. $13.3 $5.4 $4.9 $13.8
F-26
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
AMGEN INC.
(AS AMENDED THROUGH FEBRUARY 2, 1998)
INDEX
Page
ARTICLE I Offices 1
Section 1. Registered Office 1
Section 2. Other Offices 1
ARTICLE II Corporate Seal 1
Section 3. Corporate Seal 1
ARTICLE III Stockholders' Meetings 1
Section 4. Place of Meetings 1
Section 5. Annual Meeting 1
Section 6. Special Meetings 1
Section 7. Notice of Meetings 2
Section 8. Quorum 2
Section 9. Adjournment and Notice of Adjourned
Meetings 2
Section 10. Voting Rights 3
Section 11. Joint Owners of Stock 3
Section 12. List of Stockholders 3
Section 13. No Action Without Meeting 3
Section 14. Organization 4
Section 15. Notifications of Nominations and
Proposed Business 4
ARTICLE IV Directors 5
Section 16. Number 5
Section 17. Classes of Directors 5
Section 18. Newly Created Directorships and
Vacancies 5
Section 19. Powers 5
Section 20. Resignation 6
Section 21. Removal 6
Section 22. Meetings 6
(a) Annual Meetings 6
(b) Regular Meetings 6
(c) Special Meetings 6
(d) Telephone Meetings 6
(e) Notice of Meetings 7
(f) Waiver of Notice 7
Section 23. Quorum and Voting 7
(a) Quorum 7
(b) Majority Vote 7
Section 24. Action without Meeting 7
Section 25. Fees and Compensation 7
Section 26. Committees 8
(a) Executive Committee 8
(b) Other Committees 8
(c) Term 8
(d) Meetings 9
Section 27. Organization 9
ARTICLE V Officers 9
Section 28. Officers Designated 9
Section 29. Tenure and Duties of Officers 10
(a) General 10
(b) Duties of Chairman of the Board 10
(c) Duties of Chief Executive Officer 10
(d) Duties of President and Chief Operating
Officer 10
(e) Duties of Vice Presidents 10
(f) Duties of Chief Financial Officer 11
(g) Duties of Secretary 11
Section 30. Resignations 11
Section 31. Removal 11
Section 32. Compensation 12
ARTICLE VI Execution of Corporate Instruments
and Voting of Securities Owned by
the Corporation 12
Section 33. Execution of Corporate Instruments 12
Section 34. Voting of Securities Owned by the
Corporation 12
ARTICLE VII Shares of Stock 12
Section 35. Form and Execution of
Certificates 13
Section 36. Lost Certificates 13
Section 37. Transfers 13
Section 38. Fixing Record Dates 13
Section 39. Registered Stockholders 14
Section 40. Issuance, Transfer and Resignation of
Shares 14
ARTICLE VIII Other Securities of the Corporation 14
Section 41. Execution of Other Securities 14
ARTICLE IX Dividends 15
Section 42. Declaration of Dividends 15
Section 43. Dividend Reserve 15
ARTICLE X Fiscal Year 15
Section 44. Fiscal Year 15
ARTICLE XI Indemnification of Directors, Officers,
Employees and Other Agents 15
Section 45. Indemnification of Directors,Officers,
Employees and Other Agents 15
(a) Directors and Officers 15
(b) Other Employees and Other Agents 16
(c) Expenses 16
(d) Enforcement 16
(e) Non-Exclusivity of Rights 17
(f) Survival of Rights 17
(g) Insurance 17
(h) Amendments 17
(i) Savings Clause 18
(j) Certain Definitions 18
ARTICLE XII Notices 19
Section 46. Notices 19
(a) Notice to Stockholders 19
(b) Notice to Directors 19
(c) Address Unknown 19
(d) Affidavit of Mailing 19
(e) Time Notices Deemed Given 19
(f) Methods of Notice 19
(g) Failure to Receive Notice 20
(h) Notice to Person with Whom
Communication Is Unlawful 20
ARTICLE XIII Amendments 20
Section 47. Amendments 20
ARTICLE XIV Loans of Officers and Others 20
Section 48. Certain Corporate Loans and
Guaranties 20
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the
corporation in the State of Delaware shall be in the City of Dover,
County of Kent. (Del. Code Ann., tit. 8, Sec. 131)
Section 2. Other Offices. The corporation also shall have
and maintain an office or principal place of business at such place
as may be fixed by the Board of Directors, and also may have offices
at such other places, both within and without the State of Delaware
as the Board of Directors may from time to time determine or the
business of the corporation may require. (Del. Code Ann., tit. 8,
Sec. 122(8))
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. The corporate seal shall consist
of a die bearing the name of the corporation and the inscription,
"Corporate Seal-Delaware." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or
otherwise. (Del. Code Ann., tit. 8, Sec. 122(3))
ARTICLE III
Stockholders' Meetings
Section 4. Place of Meetings. Meetings of the stockholders
of the corporation shall be held at such place, either within or
without the State of Delaware, as may be designated from time to time
by the Board of Directors, or, if not so designated, then at the
office of the corporation required to be maintained pursuant to
Section 2 hereof. (Del. Code Ann., tit. 8, Sec. 211(a))
Section 5. Annual Meeting. The annual meeting of the
stockholders of the corporation shall be held on any date and time
which may from time to time be designated by the Board of Directors.
At such annual meeting, directors shall be elected and any other
business may be transacted that may properly come before the meeting.
(Del. Code Ann., tit. 8, Sec. 211(b))
Section 6. Special Meetings. Special meetings of the
stockholders of the corporation may be called, for any purpose or
purposes, by the Chairman of the Board of Directors ("Chairman of the
Board"), the Chief Executive Officer, the President, or the Board of
Directors at any time. Upon written request of any stockholder or
stockholders holding in the aggregate 20% or more of the voting power
of all stockholders delivered in person or sent by registered mail to
the Chief Executive Officer, the President or Secretary, the
Secretary shall call a special meeting of stockholders to be held at
the office of the corporation required to be maintained pursuant to
Section 2 hereof, or at such other place as may be designated by the
Secretary, at such time as the Secretary may fix, such meeting to be
held not less than ten (10) nor more than sixty (60) days after the
receipt of such request, and if the Secretary shall neglect or refuse
1
to call such meeting, within seven (7) days after the receipt of such
request, the stockholder making such request may do so. (Del. Code
Ann., tit. 8, Sec. 211(d))
Section 7. Notice of Meetings. Except as otherwise provided
by law or the Certificate of Incorporation, written notice of each
meeting of stockholders shall be given not less than ten (10) nor
more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting, such notice to specify
the place, date and hour and purpose or purposes of the meeting.
Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice
thereof, either before or after such meeting, and will be waived by
any stockholder by his attendance thereat in person or by proxy,
except when the stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened.
Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice
thereof had been given. (Del. Code Ann., tit. 8, Secs. 222, 229)
Section 8. Quorum. At all meetings of stockholders, except
where otherwise provided by statute or by the Certificate of
Incorporation, or by these Bylaws, the presence, in person or by
proxy duly authorized, of the holders of a majority of the
outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. Any shares, the voting of
which at said meeting has been enjoined, or which for any reason
cannot be lawfully voted at such meeting, shall not be counted to
determine a quorum at such meeting. In the absence of a quorum any
meeting of stockholders may be adjourned, from time to time, by vote
of the holders of a majority of the shares represented thereat, but
no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a
quorum is present, may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the voting power represented at any meeting
at which a quorum is present shall be valid and binding upon the
corporation. (Del. Code Ann., tit. 8, Sec. 216)
Section 9. Adjournment and Notice of Adjourned Meetings.
Any meeting of stockholders, whether annual or special, may be
adjourned from time to time by the vote of a majority of the shares,
the holders of which are present either in person or by proxy. When
a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting. (Del. Code Ann., tit. 8,
Sec. 222(c))
2
Section 10. Voting Rights. For the purpose of determining
those stockholders entitled to vote at any meeting of the
stockholders, except as otherwise provided by law, only persons in
whose names shares stand on the stock records of the corporation on
the record date, as provided in Section 12 of these Bylaws, shall be
entitled to vote at any meeting of stockholders. Every person
entitled to vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by a written
proxy executed by such person or his duly authorized agent, which
proxy shall be filed with the Secretary at or before the meeting at
which it is to be used. An agent so appointed need not be a
stockholder. No proxy shall be voted on after three (3) years from
its date of creation unless the proxy provides for a longer period.
All elections of Directors shall be by written ballot, unless
otherwise provided in the Certificate of Incorporation. (Del. Code
Ann., tit. 8, Secs. 211(e), 212(b))
Section 11. Joint Owners of Stock. If shares or other
securities having voting power stand of record in the names of two
(2) or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary is
given written notice to the contrary and is furnishedwith a copy of
the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall
have the following effect: (a) if only one (1) votes, his act binds
all; (b) if more than one (1) votes, the act of the majority so
voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the
securities in question proportionally, or may apply to the Delaware
Court of Chancery for relief as provided in the General Corporation
Law of Delaware, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a
majority or even-split for the purpose of this subsection (c) shall
be a majority or even-split in interest. (Del. Code Ann., tit. 8,
Sec. 217(b))
Section 12. List of Stockholders. The Secretary shall
prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at
said meeting, arranged in alphabetical order, showing the address of
each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting,
or, if not specified, at the place where the meeting is to be held.
The list shall be produced and kept at the time and place of meeting
during the whole time thereof, and may be inspected by any
stockholder who is present. (Del. Code Ann., tit. 8, Sec. 219(a))
Section 13. No Action Without Meeting. Any action required
or permitted to be taken by the stockholders of the corporation must
be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such
holders.
3
Section 14. Organization. At every meeting of stockholders,
the Chairman of the Board, or, if the Chairman of the Board is
absent, the Chief Executive Officer, or, if the Chief Executive
Officer is absent, the President, or, if the President is absent, the
most senior Vice President present, or in the absence of any such
officer, a chairman of the meeting chosen by a majority in interest
of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the Chief Executive Officer,
shall act as secretary of the meeting.
Section 15. Notifications of Nominations and Proposed
Business. Subject to the rights of holders of any class or series
of stock having a preference over the Common Stock as to dividends or
upon liquidation,
(x) nominations for the election of directors, and
(y) business proposed to be brought before any stockholder
meeting, may be made by the Board of Directors or a proxy committee
appointed by the Board of Directors or by any stockholder entitled to
vote in the election of directors generally. However, any such
stockholder may nominate one or more persons for election as
directors at a meeting or propose business to be brought before a
meeting, or both, only if such stockholder has given timely notice in
proper written form of his intent to make such nomination or
nominations or to propose such business. To be timely, a
stockholder's notice must be delivered to or mailed and received by
the Secretary of the corporation not later than 90 days prior to such
meeting; provided, however, that in the event that less than 100
days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely
must be received not later than the close of business on the 10th day
following the date on which such notice of the date of such meeting
was mailed or such public disclosure was made. To be in proper
written form, a stockholder's notice to the Secretary shall set
forth:
(a) the name and address of the stockholder who intends to make
the nominations or propose the business and, as the case may be, of
the person or persons to be nominated or of the business to be
proposed;
(b) a representation that the stockholder is a holder of record
of stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(c) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder;
(d) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had the nominee
4
been nominated, or intended to be nominated, or the matter been
proposed, or intended to be proposed by the Board of Directors; and
(e) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance
with the foregoing procedure.
ARTICLE IV
Directors
Section 16. Number. The authorized number of directors of
the corporation shall be fixed from time to time by the Board of
Directors. The number of directors presently authorized is nine.
Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause the directors shall
not have been elected at an annual meeting, they may be elected as
soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these
Bylaws. (Del. Code Ann., tit. 8, Secs. 141(b), 211(b), (c))
Section 17. Classes of Directors. The Board of Directors
shall be divided into three classes: Class I, Class II and Class
III, which shall be as nearly equal in number as possible. Each
director shall serve for a term ending on the date of the third
annual meeting of stockholders following the annual meeting at which
the director was elected. Notwithstanding the foregoing provisions
of this section, each director shall serve until his successor is
duly elected and qualified or until his death, resignation or
removal. (Del. Code Ann., tit. 8, Sec. 141(d))
Section 18. Newly Created Directorships and Vacancies. In
the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of
Directors among the three classes of directors so as to maintain such
classes as nearly equal in number as possible. No decrease in the
number of directors constituting the Board of Directors shall shorten
the term of any incumbent director. Newly created directorships
resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled
by the affirmative vote of a majority of the remaining directors then
in office (and not by stockholders), even though less than a quorum
of the authorized Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such
director's successors shall have been elected and qualified.
Section 19. Powers. The powers of the corporation shall be
exercised, its business conducted and its property controlledby the
Board of Directors, except as may be otherwise provided by statute or
by the Certificate of Incorporation (Del. Code Ann., tit. 8, Sec.
141(a))
5
Section 20. Resignation. Any director may resign at any time
by delivering his written resignation to the Secretary, such
resignation to specify whether it will be effective at a particular
time, upon receipt by the Secretary or at the pleasure of the Board
of Directors. If no such specification is made, it shall be deemed
effective at the pleasure of the Board of Directors. When one or
more directors shall resign from the Board of Directors, effective at
a future date, a majority of the directors then in office, including
those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen
shall hold office for the unexpired portion of the term of the
director whose place shall be vacated and until his successor shall
have been duly elected and qualified. (Del. Code Ann., tit. 8, Secs.
141(b), 223(d))
Section 21. Removal. At a special meeting of stockholders
called for the purpose in the manner hereinabove provided, the Board
of Directors, or any individual director, may be removed from office,
(a) with cause, and one or more new directors may be elected, by a
vote of stockholders holding a majority of the outstanding shares
entitled to vote at an election of Directors or (b), without cause,
by a vote of stockholders holding at least 66.67% of the outstanding
shares entitled to vote at an election of directors. (Del. Code
Ann., tit. 8, Sec. 141(k))
Section 22. Meetings.
(a) Annual Meetings. The annual meeting of the Board of
Directors shall be held on the date of the annual meeting of
stockholders and at the place where such meeting is held. No notice
of an annual meeting of the Board of Directors shall be necessary and
such meeting shall be held for the purpose of electing officers and
transacting such other business as may lawfully come before it.
(b) Regular Meetings. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in
the office of the corporation required to be maintained pursuant to
Section 2 hereof. Unless otherwise restricted by the Certificate of
Incorporation, regular meetings of the Board of Directors also may be
held at any place within or without the State of Delaware which has
been designated by resolution of the Board of Directors or the
written consent of all Directors. (Del. Code Ann., tit. 8, Sec.
141(g))
(c) Special Meetings. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of
Directors may be held at any time and place within or without the
State of Delaware whenever called by the Chairman of the Board, the
Chief Executive Officer, the President or a majority of the
Directors. (Del. Code Ann., tit. 8, Sec. 141(g))
(d) Telephone Meetings. Any member of the Board of
Directors, or of any committee thereof, may participate in a meeting
by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear
each other, and participation in a meeting by such means shall
6
constitute presence in person at such meeting. (Del. Code Ann., tit.
8, Sec. 141(i))
(e) Notice of Meetings. Written notice of the time and
place of all regular and special meetings of the Board of Directors
shall be given at least one (1) day before the date of the meeting.
Notice of any meeting may be waived in writing at any time before or
after the meeting and will be waived by any director by attendance
thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully
called or convened. (Del. Code Ann., tit. 8, Sec. 229)
(f) Waiver of Notice. The transaction of all business at
any meeting of the Board of Directors, or any committee thereof,
however called or noticed, or wherever held, shall be as valid as
though taken at a meeting duly held after regular call and notice, if
a quorum is present and if, either before or after the meeting, each
of the Directors not present sign a written waiver of notice, or a
consent to holding such meeting, or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
(Del. Code Ann., tit. 8, Sec. 229)
Section 23. Quorum and Voting.
(a) Quorum. Unless the Certificate of Incorporation
requires a greater number, a quorum of the Board of Directors shall
consist of a majority of the exact number of Directors fixed from
time to time in accordance with Section 16 of these Bylaws, but not
less than one (1); provided, however, at any meeting whether a quorum
is present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by
announcement at the meeting. (Del. Code Ann., tit. 8, Sec. 141(b))
(b) Majority Vote. At each meeting of the Board of
Directors at which a quorum is present all questions and business
shall be determined by a vote of a majority of the Directors present,
unless a different vote is required by law, the Certificate of
Incorporation or these Bylaws. (Del. Code Ann., tit. 8, Sec. 141(b))
Section 24. Action without Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of
Directors or committee. (Del. Code Ann., tit. 8, Sec. 141(f))
Section 25. Fees and Compensation. Directors shall not
receive any stated salary for their services as Directors, but by
resolution of the Board of Directors a fixed fee, with or without
expense of attendance, may be allowed for serving on the Board of
Directors and/or attendance at each meeting and at each meeting of
any committee of the Board of Directors. Nothing herein contained
shall be construed to preclude any director from serving the
7
corporation in any other capacity as an officer, agent, consultant,
employee, or otherwise and receiving compensation therefor. (Del.
Code Ann., tit. 8, Sec. 141(h))
Section 26. Committees.
(a) Executive Committee. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors,
appoint an Executive Committee to consist of one (1) or more members
of the Board of Directors. The Executive Committee, to the extent
permitted by law and specifically granted by the Board of Directors,
shall have and may exercise when the Board of Directors is not in
session all powers of the Board of Directors in the management of the
business and affairs of the corporation, including, without
limitation, the power and authority to declare a dividend or to
authorize the issuance of stock, except such committee shall not have
the power or authority to amend the Certificate of Incorporation
(except that the committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of
stock adopted by the Board of Directors as provided by law, fix any
of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares
for shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation), to
adopt an agreement of merger or consolidation, to recommend to the
stockholders the sale, lease or exchange of all or substantially all
of the corporation's property and assets, to recommend to the
stockholders a dissolution of the corporation or a revocation of a
dissolution or to amend these Bylaws. (Del. Code Ann., tit. 8, Sec.
141(c))
(b) Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from
time to time appoint such other committees as may be permitted by
law. Such other committees appointed by the Board of Directors shall
consist of one (1) or more members of the Board of Directors, and
shall have such powers and perform such duties as may be prescribed
by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive
Committee in these Bylaws. (Del. Code Ann., tit. 8, Sec. 141(c))
(c) Term. Each member of a committee of the Board of
Directors shall serve a term on the committee coexistent with such
member's term on the Board of Directors. The Board of Directors,
subject to the provisions of subsections (a) or (b) of this Section
26, may at any time increase or decrease the number of members of a
committee or terminate the existence of a committee. The membership
of a committee member shall terminate on the date of his death or
voluntary resignation. The Board of Directors may at any time for
any reason remove any individual committee member and the Board of
Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the
committee. The Board of Directors may designate one or more
Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee, and,
in addition, in the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and
8
not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member. (Del. Code Ann., tit. 8, Sec. 141(c))
(d) Meetings. Unless the Board of Directors shall
otherwise provide, regular meetings of the Executive Committee or any
other committee appointed pursuant to this Section 26 shall be held
at such times and places as are determined by the Board of Directors,
or by any such committee, and when notice thereof has been given to
each member of such committee, no further notice of such regular
meetings need be given thereafter. Special meetings of any such
committee may be held at the principal office of the corporation
required to be maintained pursuant to Section 2 hereof, or at any
place which has been designated from time to time by resolution of
such committee or by written consent of all members thereof, and may
be called by any director who is a member of such committee, upon
written notice to the members of such committee of the time and place
of such special meeting given in the manner provided for the giving
of written notice to members of the Board of Directors of the time
and place of special meetings of the Board of Directors. Notice of
any special meeting of any committee may be waived in writing at any
time before or after the meeting and will be waived by any director
by attendance thereat, except when the director attends such special
meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is
not lawfully called or convened. A majority of the authorized number
of members of any such committee shall constitute a quorum for the
transaction of business, and the act of a majority of those present
at any meeting at which a quorum is present shall be the act of such
committee. (Del. Code Ann., tit. 8, Secs. 141(c), 229)
Section 27. Organization. At every meeting of the directors,
the Chairman of the Board, or, if the Chairman of the Board is
absent, the Chief Executive Officer, or if the Chief Executive
Officer is absent, the President, or if the President is absent, the
most senior Vice President, or, in the absence of any such officer, a
chairman of the meeting chosen by a majority of the directors
present, shall preside over the meeting. The Secretary, or in his
absence, an Assistant Secretary directed to do so by the Chief
Executive Officer, shall act as secretary of the meeting.
ARTICLE V
Officers
Section 28. Officers Designated. The officers of the
corporation shall be the Chairman of the Board, the Chief Executive
Officer, the President and Chief Operating Officer, one or more Vice
Presidents, the Chief Financial Officer and the Secretary, all of
whom shall be elected at the annual meeting of the Board of
Directors. The Board of Directors also may appoint such other
officers and agents with such powers and duties as it shall deem
necessary. The order of the seniority of the Vice Presidents shall be
in the order of their nomination, unless otherwise determined by the
Board of Directors. The Board of Directors may assign such
additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the
9
corporation at any one time unless specifically prohibited therefrom
by law. The salaries and other compensation of the officers of the
corporation shall be fixed by or in the manner designated by the
Board of Directors.
Section 29. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the
pleasure of the Board of Directors and until their successors shall
have been duly elected and qualified, unless sooner removed. Any
officer elected or appointed by the Board of Directors may be removed
at any time by the Board of Directors. If the office of any officer
becomes vacant for any reason, the vacancy may be filled by the Board
of Directors.
(b) Duties of Chairman of the Board. The Chairman of the
Board, subject to the control of the Board of Directors, shall
perform such duties and functions as are necessary to further the
strategic direction of the corporation. Unless the Board of
Directors designates another person, the Chairman of the Board shall
preside at all meetings of the stockholders, the Board of Directors
and of the Executive Committee.
(c) Duties of Chief Executive Officer. The Chief
Executive Officer, at the request of the Chairman of the Board or
upon his absence or disability, or in the event of a vacancy in the
office of Chairman of the Board, shall exercise all the powers of
Chairman of the Board as provided in Subsection 29(b). The Chief
Executive Officer shall, subject to the control of the Board of
Directors, exercise general management and supervision over the
property, affairs and business of the corporation and shall authorize
officers of the corporation, other than the Chairman of the Board, to
exercise such powers as he, in his discretion, may deem to be in the
best interests of the corporation. The Chief Executive Officer shall
in general perform all duties incident to general management and
supervision of the corporation and such other duties as the Board of
Directors shall designate from time to time.
(d) Duties of President and Chief Operating Officer. The
President and Chief Operating Officer, at the request of the Chief
Executive Officer or upon his absence or disability, or in the event
of a vacancy in the office of Chief Executive Officer, shall exercise
all the powers of Chief Executive Officer as provided in Subsection
29(c). The President and Chief Operating Officer shall, subject to
the control of the Chief Executive Officer and the Board of
Directors, exercise general management and supervision over the
operating functions of the corporation, and shall authorize officers
of the corporation, other than the Chairman of the Board and the
Chief Executive Officer, to exercise such powers with respect to the
operating function of the corporation as he, in his discretion, may
deem to be in the best interests of the corporation. The President
and Chief Operating Officer shall perform such other duties and have
such other powers as the Board of Directors shall designate from time
to time.
(e) Duties of Vice Presidents. The Vice Presidents, in
the order of their seniority, may assume and perform the duties of
the President and Chief Operating Officer in the absence or
10
disability of the Chief Executive Officer and the President and Chief
Operating Officer or whenever the offices of Chief Operating Officer
and President and Chief Operating Officer are vacant. The Vice
Presidents shall perform other duties commonly incident to their
office and also shall perform such other duties and have such other
powers as the Board of Directors, the Chief Executive Officer, or the
President and Chief Operating Officer shall designate from time to
time.
(f) Duties of Chief Financial Officer. The Chief
Financial Officer shall keep or cause to be kept the books of account
of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form
and as often as required by the Board of Directors or the Chief
Executive Officer. The Chief Financial Officer, subject to the order
of the Board of Directors, shall have the custody of all funds and
securities of the corporation. The Chief Financial Officer shall
perform other duties commonly incident to his office and also shall
perform such other duties and have such other powers as the Board of
Directors or the Chief Executive Officer shall designate from time to
time. The Chief Executive Officer may direct any Assistant Chief
Financial Officer to assume and perform the duties of the Chief
Financial Officer in the absence or disability of the Chief Financial
Officer, and each Assistant Chief Financial Officer shall perform
other duties commonly incident to his office and also shall perform
such other duties and have such other powers as the Board of
Directors or the Chief Executive Officer shall designate from time to
time.
(g) Duties of Secretary. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors, and shall
record all acts and proceedings thereof in the minute books of the
corporation. The Secretary shall give notice in conformity with
these Bylaws of all meetings of the stockholders, and of all meetings
of the Board of Directors and any committee thereof requiring notice.
The Secretary shall perform all other duties given him in these
Bylaws and other duties commonly incident to his office and also
shall perform such other duties and have such other powers as the
Board of Directors shall designate from time to time. The Chief
Executive Officer may direct any Assistant Secretary to assume and
perform the duties of the Secretary in the absence or disability of
the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and also shall perform such
other duties and have such other powers as the Board of Directors or
the Chief Executive Officer shall designate from time to time.
Section 30. Resignations. Any officer may resign at any time
by giving written notice to the Board of Directors or to the Chief
Executive Officer or to the President or to the Secretary. Any such
resignation shall be effective when received by the person or persons
to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at
such later time. Unless otherwise specified in such notice, the
acceptance of any such resignation shall not be necessary to make it
effective. (Del. Code Ann., tit. 8, Sec. 142(b))
Section 31. Removal. Any officer may be removed from office
at any time, with or without cause, by the vote or written consent of
11
a majority of the directors in office at the time, or by any
committee or superior officers upon whom such power of removal may
have been conferred by the Board of Directors.
Section 32. Compensation. The compensation of the officers
shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving such compensation by reason
of the fact that such officer is also a director of the corporation.
ARTICLE VI
Execution of Corporate Instruments and Voting
of Securities Owned by the Corporation
Section 33. Execution of Corporate Instruments. The Board of
Directors may, in its discretion, determine the method and designate
the signatory officer or officers, or other person or persons, to
execute on behalf of the corporation any corporate instrument or
document, or to sign on behalf of the corporation the corporate name
without limitation, or to enter into contracts on behalf of the
corporation, except where otherwise provided by law or these Bylaws,
and such execution or signature shall be binding upon the
corporation. (Del. Code Ann., tit. 8, Secs. 103(a), 142(a), 158)
Unless otherwise specifically determined by the Board
of Directors or otherwise required by law, promissory notes, deeds of
trust, mortgages and other evidences of indebtedness of the
corporation, and other corporate instruments or documents requiring
the corporate seal, and certificates of shares of stock owned by the
corporation, shall be executed, signed or endorsed by the Chairman of
the Board, or the Chief Executive Officer, or the President or any
Vice President, and by the Secretary or Treasurer or any Assistant
Secretary or Assistant Treasurer. All other instruments and
documents requiring the corporate signature, but not requiring the
corporate seal, may be executed as aforesaid or in such other manner
as may be directed by the Board of Directors. (Del. Code Ann., tit.
8, Secs. 103(a), 142(a), 158)
All checks and drafts drawn on banks or other
depositaries on funds to the credit of the corporation or in special
accounts of the corporation shall be signed by such person or persons
as the Board of Directors shall authorize so to do. (Del. Code Ann.,
tit. 8, Secs. 103(a), 142(a), 158)
Section 34. Voting of Securities Owned by the Corporation.
All stock and other securities of other corporations owned or held by
the corporation for itself, or for other parties in any capacity,
shall be voted, and all proxies with respect thereto shall be
executed, by the person authorized to do so by resolution of the
Board of Directors, or, in the absence of such authorization, by the
Chairman of the Board, the Chief Executive Officer, the President, or
any Vice President. (Del. Code Ann., tit. 8, Sec. 123)
ARTICLE VII
Shares of Stock
12
Section 35. Form and Execution of Certificates. The shares
of the corporation shall be represented by certificates, provided
that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or
series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate
until such certificate is surrendered to the corporation.
Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon
request every holder of uncertificated shares shall be entitled to
have a certificate signed by, or in the name of the corporation by,
the Chairman of the Board or any vice-chairman of the Board of
Directors, or the Chief Executive Officer, or the President or any
Vice-President, and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the corporation
representing the number of shares registered in certificate form.
Any or all the signatures on the certificate may be a facsimile. In
case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or
registrar at the date of issue. (Del. Code Ann., tit. 8, Sec. 158)
Section 36. Lost Certificates. The corporation may issue a
new certificate of stock or uncertificated shares in place of any
certificate theretofore issued by the corporation alleged to have
been lost, stolen or destroyed, and the corporation may require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to
indemnify it against any claim that may be made against the
corporation on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate or
uncertificated shares. (Del. Code Ann., tit. 8, Sec. 167)
Section 37. Transfers. Transfers of record of shares of
stock of the corporation shall be made only upon its books by the
holders thereof, in person or by attorney duly authorized, and upon
the surrender of a properly endorsed certificate or certificates for
a like number of shares. (Del. Code Ann., tit. 6, Sec. 8-401(1))
Section 38. Fixing Record Dates. In order that the
corporation may determine the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof, or
to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to any other action. If no record date is
fixed: (a) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held; and (b) the
record date for determining stockholders for any other purpose shall
13
be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting
of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting. (Del. Code Ann., tit. 8, Sec. 213)
Section 39. Registered Stockholders. The corporation shall
be entitled to recognize the exclusive right of a person registered
on its books as the owner of shares to receive dividends, and to vote
as such owner, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any
other person whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware. (Del.
Code Ann., tit. 8, Secs. 213(a), 219)
Section 40. Issuance, Transfer and Resignation of Shares.
The Board of Directors may make such rules and regulations, not
inconsistent with law or with these Bylaws, as it may deem advisable
concerning the issuance, transfer and registration of certificates
for shares of the capital stock of the corporation. The Board of
Directors may appoint a transfer agent or registrar of transfers, or
both, and may require all certificates for shares of the corporation
to bear the signature of either or both.
ARTICLE VIII
Other Securities of the Corporation
Section 41. Execution of Other Securities. All bonds,
debentures and other corporate securities of the corporation, other
than stock certificates, may be signed by the Chairman of the Board,
the Chief Executive Officer, the President or any Vice President, or
such other person as may be authorized by the Board of Directors, and
the corporate seal impressed thereon or a facsimile of such seal
imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Treasurer or an Assistant Treasurer;
provided, however, that where any such bond, debenture or other
corporate security shall be authenticated by the manual signature of
a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the
persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile
of the signatures of such persons. Interest coupons appertaining to
any such bond, debenture or other corporate security, authenticated
by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be
authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall
have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any
such interest coupon, shall have ceased to be such officer before the
bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate
security nevertheless may be adopted by the corporation and issued
and delivered as though the person who signed the same or whose
facsimile signature shall have been used thereon had not ceased to be
such officer of the corporation.
14
ARTICLE IX
Dividends
Section 42. Declaration of Dividends. Dividends upon the
capital stock of the corporation, subject to the provisions of the
Certificate of Incorporation, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting.
Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the Certificate of
Incorporation. (Del. Code Ann., tit. 8, Secs. 170, 173)
Section 43. Dividend Reserve. Before payment of any
dividend, there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the Board of Directors
may from time to time, in its absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors
shall think conducive to the interests of the corporation, and the
Board of Directors may modify or abolish any such reserve in the
manner in which it was created. (Del. Code Ann., tit. 8, Sec. 171)
ARTICLE X
Fiscal Year
Section 44. Fiscal Year. Unless otherwise fixed by
resolution of the Board of Directors, effective as of January 1,
1992, the fiscal year of the corporation shall end on the 31st day of
the month of December in each calendar year.
ARTICLE XI
Indemnification of Directors, Officers
Employees and Other Agents
Section 45. Indemnification of Directors, Officers,
Employees and Other Agents.
(a) Directors and Officers. The corporation shall
indemnify its directors and officers to the full extent permitted by
the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the corporation to provide
broader indemnification rights than said Law permitted the
corporation to provide prior to such amendment); provided, further,
that the corporation shall not be required to indemnify any director
or officer in connection with any proceeding (or part thereof)
initiated by such person or any proceeding by such person against the
corporation or its directors, officers, employees or other agents
unless (i) such indemnification is expressly required to be made by
law, (ii) the proceeding was authorized by the Board of Directors of
the corporation or (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in
the corporation under the Delaware General Corporation Law, or (iv)
15
such indemnification is required to be made under subsection (d) of
this Article XI.
(b) Other Employees and Other Agents. The corporation
shall have the power to indemnify its other employees and other
agents as set forth in the Delaware General Corporation Law.
(c) Expenses. The corporation shall advance to any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the
fact that he is or was a director or officer of the corporation, or
is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of any such
proceeding, promptly following request therefor, all expenses
incurred by any director or officer in connection with such
proceeding upon receipt of any undertaking by or on behalf of such
person to repay said amounts if it should be determined ultimately
that such person is not entitled to be indemnified under this Bylaw
or otherwise.
Notwithstanding the foregoing, unless otherwise determined
pursuant to paragraph (d) of this Bylaw, no advance shall be made by
the corporation to an officer of the corporation in any action, suit
or proceeding, whether civil, criminal, administrative or
investigate, if a determination is reasonably and promptly made (1)
by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to the proceeding, or (2) if such
quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion that, the facts known to the decision-making party at
the time such determination is made demonstrate clearly and
convincingly that such person acted in bad faith or in a manner that
such person did not reasonably believe to be in or not opposed to the
best interests of the corporation, or, with respect to any criminal
action or proceeding, such person believed or had reasonable cause to
believe his conduct was unlawful, except by reason of the fact that
such officer is or was a director of the corporation or is or was
serving at the request of the corporation as a director of another
corporation, joint venture, trust or other enterprise in which event
this paragraph shall not apply.
(d) Enforcement. Without the necessity of entering into
an express contract, all rights to indemnification and advances under
this Bylaw shall be deemed to be contractual rights and be effective
to the same extent and as if provided for in a contract between the
corporation and the director or officer who serves in such capacity
at any time while this Bylaw and other relevant provisions of the
Delaware General Corporation Law and other applicable law, if any,
are in effect. Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on
behalf of the person holding such right in any court of competent
jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. The claimant in
such enforcement action, if successful in whole or in part, shall be
entitled to be paid also the expense of prosecuting his claim. In
16
connection with any claim for indemnification, the corporation shall
be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the
corporation to indemnify the claimant for the amount claimed. In
connection with any claim by an officer of the corporation (except in
any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
officer is or was a director of the corporation or is or was serving
at the request of the corporation as a director of another
corporation, partnership, joint venture, trust or other enterprise)
for advances, the corporation shall be entitled to raise a defense as
to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not reasonably
believe to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding,
such person believed or had reasonable cause to believe his conduct
was unlawful. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel or its stockholders) to
have made a determination prior to the commencement of such action
that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal
counsel or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant has not met the applicable
standard of conduct. In any suit brought by a director or officer to
enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that the director or officer is not
entitled to be indemnified, or to such advancement of expenses, under
this Article XI or otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on
any person by this Bylaw shall not be exclusive of any other right
which such person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, Bylaws, agreement,
vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its
directors, officers, employees or agents respecting indemnification
and advances, as provided by law.
(f) Survival of Rights. The rights conferred on any
person by this Bylaw shall continue as to a person who has ceased to
be a director, officer, employee or other agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(g) Insurance. To the fullest extent permitted by the
Delaware General Corporation Law, the corporation, upon approval by
the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this
Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw
shall only be prospective and shall not affect the rights under this
17
Bylaw in effect at the time of the alleged occurrence of any action
or omission to act that is the cause of any proceeding against any
agent of the corporation.
(i) Savings Clause. If this Bylaw or any portion hereof
shall be invalidated on any ground by any court of competent
jurisdiction, then the corporation shall nevertheless indemnify each
director and officer to the full extent permitted by any applicable
portion of this Bylaw that shall not have been invalidated, or by any
other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw,
the following definitions shall apply:
(i) The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation,
preparation, prosecution, defense, settlement, arbitration
and appeal of, and the giving of testimony in, any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative.
(ii) The term "expenses" shall be broadly construed
and shall include, without limitation, court costs,
attorneys' fees, witness fees, fines, amounts paid in
settlement or judgment and any other costs and expenses of
any nature or kind incurred in connection with any
proceeding.
(iii) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and
authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position
under the provisions of this Bylaw with respect to the
resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate
existence had continued.
(iv) References to a "director," "officer,"
"employee," or "agent" of the corporation shall include,
without limitation, situations where such person is serving
at the request of the corporation as, respectively, a
director, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust or other
enterprise.
(v) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the
18
request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in
this Bylaw.
ARTICLE XII
Notices
Section 46. Notices.
(a) Notice to Stockholders. Whenever under any provisions
of these Bylaws notice is required to be given to any stockholder, it
shall be given in writing, timely and duly deposited in the United
States mail, postage prepaid, and addressed to his last known post
office address as shown by the stock record of the corporation or its
transfer agent. (Del. Code Ann., tit. 8, Sec. 222)
(b) Notice to Directors. Any notice required to be given
to any director may be given by the method stated in subsection (a),
or by telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such director
shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) Address Unknown. If no address of a stockholder or
director be known, notice may be sent to the office of the
corporation required to be maintained pursuant to Section 2 hereof.
(d) Affidavit of Mailing. An affidavit of mailing,
executed by a duly authorized and competent employee of the
corporation or its transfer agent appointed with respect to the class
of stock affected, specifying the name and address or the names and
addresses of the stockholder or stockholders, or director or
directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence
of the statements therein contained. (Del. Code Ann., tit. 8, Sec.
222)
(e) Time Notices Deemed Given. All notices given by mail,
as above provided, shall be deemed to have been given as at the time
of mailing and all notices given by telegram shall be deemed to have
been given as at the sending time recorded by the telegraph company
transmitting the notices.
(f) Methods of Notice. It shall not be necessary that the
same method of giving notice be employed in respect of all directors,
but one permissible method may be employed in respect of any one or
more, and any other permissible method or methods may be employed in
respect of any other or others.
19
(g) Failure to Receive Notice. The period or limitation
of time within which any stockholder may exercise any option or
right, or enjoy any privilege or benefit, or be required to act, or
within which any director may exercise any power or right, or enjoy
any privilege, pursuant to any notice sent him in the manner above
provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(h) Notice to Person with Whom Communication Is Unlawful.
Whenever notice is required to be given, under any provision of law
or of the Certificate of Incorporation or Bylaws of the corporation,
to any person with whom communication is unlawful, the giving of such
notice to such person shall not be required and there shall be no
duty to apply to any governmental authority or agency for a license
or permit to give such notice to such person. Any action or meeting
which shall be taken or held without notice to any such person with
whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action
taken by the corporation is such as to require the filing of a
certificate under any provision of the Delaware General Corporation
Law, the certificate shall state, if such is the fact and if notice
is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(Del. Code Ann., tit. 8, Sec. 230)
ARTICLE XIII
Amendments
Section 47. Amendments. These Bylaws may be repealed,
altered or amended or new Bylaws adopted by the stockholders. The
Board of Directors also shall have the authority, if such authority
is conferred upon the Board of Directors by the Certificate of
Incorporation, to repeal, alter or amend these Bylaws or adopt new
Bylaws (including, without limitation, the amendment of any Bylaw
setting forth the number of directors who shall constitute the whole
Board of Directors) subject to the power of the stockholders to
change or repeal such Bylaws and provided that the Board of Directors
shall not make or alter any Bylaws fixing the qualifications,
classifications, term of office or compensation of directors. (Del.
Code Ann., tit. 8, Sec. 109(a), 122(6))
ARTICLE XIV
Loans of Officers and Others
Section 48. Certain Corporate Loans and Guaranties. The
corporation may make loans of money or property to, or guarantee the
obligations of, or otherwise assist any officer or other employee who
is a director of the corporation or its parent or any subsidiary, or
adopt an employee benefit plan or plans authorizing such loans or
guaranties, upon the approval of the Board of Directors alone if the
Board of Directors determines that such a loan or guaranty or plan
may reasonably be expected to benefit the corporation.
20
EXHIBIT 10.1
AMGEN INC.
AMENDED AND RESTATED 1991 EQUITY INCENTIVE PLAN
1. PURPOSE.
(a) The purpose of the Amended and Restated 1991 Equity
Incentive Plan (the "Plan") is to provide a means by which employees
or directors of and consultants to Amgen Inc., a Delaware corporation
(the "Company"), and its Affiliates, as defined in paragraph 1(b),
directly, or indirectly through Trusts, may be given an opportunity
to benefit from increases in value of the stock of the Company
through the granting of (i) incentive stock options, (ii)
nonqualified stock options, (iii) stock bonuses, and (iv) rights to
purchase restricted stock, all as defined below.
(b) The word "Affiliate" as used in the Plan means any
parent corporation or subsidiary corporation of the Company, as those
terms are defined in Sections 424(e) and (f), respectively, of the
Internal Revenue Code of 1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the
services of persons now employed by or serving as directors or
consultants to the Company, to secure and retain the services of
persons capable of filling such positions, and to provide incentives
for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights issued under the
Plan ("Stock Awards") shall, in the discretion of the Board of
Directors of the Company (the "Board") or any committee to which
responsibility for administration of the Plan has been delegated
pursuant to paragraph 2(c), be either (i) stock options granted
pursuant to Sections 5 or 6 hereof, including incentive stock options
as that term is used in Section 422 of the Code ("Incentive Stock
Options"), or options which do not qualify as Incentive Stock Options
("Nonqualified Stock Options") (together hereinafter referred to as
"Options"), or (ii) stock bonuses or rights to purchase restricted
stock granted pursuant to Section 7 hereof.
(e) The word "Trust" as used in the Plan shall mean a
trust created for the benefit of the employee, director or
consultant, his or her spouse, or members of their immediate family.
The word optionee shall mean the person to whom the option is granted
or the employee, director or consultant for whose benefit the option
is granted to a Trust, as the context shall require.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and
until the Board delegates administration to a committee, as provided
in paragraph 2(c).
(b) The Board shall have the power, subject to, and within
1
the limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the
persons eligible under the Plan shall be granted Stock Awards; when
and how Stock Awards shall be granted; whether a Stock Award will be
an Incentive Stock Option, a Nonqualified Stock Option, a stock
bonus, a right to purchase restricted stock, or a combination of the
foregoing; the provisions of each Stock Award granted (which need not
be identical), including the time or times when a person shall be
permitted to purchase or receive stock pursuant to a Stock Award; and
the number of shares with respect to which Stock Awards shall be
granted to each such person.
(2) To construe and interpret the Plan and Stock
Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of
this power, may correct any defect, omission or inconsistency in the
Plan or in any Stock Award, in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan as provided in Section 15.
(4) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the
best interests of the Company.
(c) The Board may delegate administration of the Plan to a
committee composed of not fewer than two (2) members of the Board
(the "Committee"). One or more of these members may be non-employee
directors and outside directors, if required and as defined by the
provisions of paragraphs 2(d) and 2(e). If administration is
delegated to a Committee, the Committee shall have, in connection
with the administration of the Plan, the powers theretofore possessed
by the Board (except amendment of Section 6 or the options granted
thereunder shall only be by action taken by the Board or a committee
of one or more members of the Board to which such authority has been
specifically delegated by the Board), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may
be adopted from time to time by the Board. Notwithstanding anything
else in this paragraph 2(c) to the contrary, at any time the Board or
the Committee may delegate to a committee of one or more members of
the Board the authority to grant or amend options to all employees,
directors or consultants or any portion or class thereof.
(d) The term "non-employee director" shall mean a member
of the Board who (i) is not currently an officer of the Company or a
parent or subsidiary of the Company (as defined in Rule 16a-1(f)
promulgated by the Securities and Exchange Commission under Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or an employee of the Company or a parent or subsidiary of the
Company; (ii) does not receive compensation from the Company or a
parent or subsidiary of the Company for services rendered in any
capacity other than as a member of the Board (including a consultant)
in an amount required to be disclosed to the Company's stockholders
under Rule 404 of Regulation S-K promulgated by the Securities and
Exchange Commission ("Rule 404"); (iii) does not possess an interest
in any other transaction required to be disclosed under Rule 404; or
(iv) is not engaged in a business relationship required to be
2
disclosed under Rule 404, as all of these provisions are interpreted
by the Securities and Exchange Commission under Rule 16b-3
promulgated under the Exchange Act.
(e) The term "outside director," as used in this Plan,
shall mean an administrator of the Plan, whether a member of the
Board or of any Committee to which responsibility for administration
of the Plan has been delegated pursuant to paragraph 2(c), who is
considered to be an "outside director" in accordance with the rules,
regulations or interpretations of Section 162(m) of the Code.
(f) Any requirement that an administrator of the Plan be a
"non-employee director" or "outside director" shall not apply if the
Board or the Committee expressly declares that such requirement shall
not apply.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, the stock that may be issued
pursuant to Stock Awards granted under the Plan shall not exceed in
the aggregate Forty Eight Million (48,000,000) shares of the
Company's $.0001 par value common stock (the "Common Stock"). If any
Stock Award granted under the Plan shall for any reason expire or
otherwise terminate without having been exercised in full, the Common
Stock not purchased under such Stock Award shall again become
available for the Plan. Shares repurchased by the Company pursuant
to any repurchase rights reserved by the Company pursuant to the Plan
shall not be available for subsequent issuance under the Plan.
(b) The Common Stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
(c) An Incentive Stock Option may be granted to an
eligible person under the Plan only if the aggregate fair market
value (determined at the time the Incentive Stock Option is granted)
of the Common Stock with respect to which incentive stock options (as
defined by the Code) are exercisable for the first time by such
optionee during any calendar year under all such plans of the Company
and its Affiliates does not exceed one hundred thousand dollars
($100,000). If it is determined that an entire Option or any portion
thereof does not qualify for treatment as an Incentive Stock Option
by reason of exceeding such maximum, such Option or the applicable
portion shall be considered a Nonqualified Stock Option.
4. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to
employees (including officers) of the Company or its Affiliates. A
director of the Company shall not be eligible to receive Incentive
Stock Options unless such director is also an employee of the Company
or any Affiliate. Stock Awards other than Incentive Stock Options
may be granted to employees (including officers) or directors of or
consultants to the Company or any Affiliate or to Trusts of any such
employee, director or consultant.
(b) A director shall in no event be eligible for the
benefits of the Plan (other than from a Director NQSO under Section 6
3
of the Plan) unless and until such director is expressly declared
eligible to participate in the Plan by action of the Board or the
Committee, and only if, at any time discretion is exercised by the
Board or the Committee in the selection of a director as a person to
whom Stock Awards may be granted, or in the determination of the
number of shares which may be covered by Stock Awards granted to a
director, the Plan complies with the requirements of Rule 16b-3
promulgated under the Exchange Act, as from time to time in effect.
The Board shall otherwise comply with the requirements of Rule 16b-3
promulgated under the Exchange Act, as from time to time in effect.
Notwithstanding the foregoing, the restrictions set forth in
this paragraph 4(b) shall not apply if the Board or Committee
expressly declares that such restrictions shall not apply.
(c) No person shall be eligible for the grant of an
Incentive Stock Option under the Plan if, at the time of grant, such
person owns (or is deemed to own pursuant to Section 424(d) of the
Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of
any of its Affiliates unless the exercise price of such Incentive
Stock Option is at least one hundred and ten percent (110%) of the
fair market value of the Common Stock at the date of grant and the
Incentive Stock Option is not exercisable after the expiration of
five (5) years from the date of grant.
(d) Stock Awards shall be limited to a maximum of 500,000
shares of Common Stock per person per calendar year, which reflects
the Company's two for one stock split in August 1995.
5. TERMS OF DISCRETIONARY STOCK OPTIONS.
An option granted pursuant to this Section 5 (a
"Discretionary Stock Option") shall be in such form and shall contain
such terms and conditions as the Board or the Committee shall deem
appropriate. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.
(b) The exercise price of each Incentive Stock Option and
each Nonqualified Stock Option shall be not less than one hundred
percent (100%) of the fair market value of the Common Stock subject
to the Option on the date the Option is granted.
(c) The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either: (i) in cash at the time the Option
is exercised; or (ii) at the discretion of the Board or the
Committee, either at the time of grant or exercise of the Option (A)
by delivery to the Company of shares of Common Stock that have been
held for the period required to avoid a charge to the Company's
reported earnings and valued at the fair market value on the date of
exercise, (B) according to a deferred payment or other arrangement
with the person to whom the Option is granted or to whom the Option
4
is transferred pursuant to paragraph 5(d), or (C) in any other form
of legal consideration that may be acceptable to the Board or the
Committee in their discretion; including but not limited to payment
of the purchase price pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which
results in the receipt of cash (or a check) by the Company before
Common Stock is issued or the receipt of irrevocable instruction to
pay the aggregate exercise price of the Company from the sales
proceeds before Common Stock is issued.
In the case of any deferred payment arrangement, interest shall
be payable at least annually and shall be charged at not less than
the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts
other than amounts stated to be interest under the deferred payment
arrangement.
(d) An Option granted to a natural person shall be
exercisable during the lifetime of such person only by such person,
provided that such person during such person's lifetime may designate
a Trust to be such person's beneficiary with respect to any Incentive
Stock Options granted after February 25, 1992 and with respect to any
Nonqualified Stock Options, and such beneficiary shall, after the
death of the person to whom the Option was granted, have all the
rights that such person has while living, including the right to
exercise the Option. In the absence of such designation, after the
death of the person to whom the Option is granted, the Option shall
be exercisable by the person or persons to whom the optionee's rights
under such Option pass by will or by the laws of descent and
distribution.
(e) The total number of shares of Common Stock subject to
an Option may, but need not, be allotted in periodic installments
(which may, but need not, be equal). From time to time during each
of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that
period, and may be exercised with respect to some or all of the
shares allotted to such period and/or any prior period as to which
the Option was not fully exercised. During the remainder of the term
of the Option (if its term extends beyond the end of the installment
periods), the Option may be exercised from time to time with respect
to any shares then remaining subject to the Option. The provisions
of this paragraph 5(e) are subject to any Option provisions governing
the minimum number of shares as to which an Option may be exercised.
(f) The Company may require any optionee, or any person to
whom an Option is transferred under paragraph 5(d), as a condition of
exercising any such Option: (i) to give written assurances
satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a
purchaser representative who has such knowledge and experience in
financial and business matters, and that such person is capable of
evaluating, alone or together with the purchaser representative, the
merits and risks of exercising the Option; and (ii) to give written
assurances satisfactory to the Company stating that such person is
acquiring the Common Stock subject to the Option for such person's
own account and not with any present intention of selling or
otherwise distributing the Common Stock. These requirements, and any
5
assurances given pursuant to such requirements, shall be inoperative
if: (x) the issuance of the shares upon the exercise of the Option
has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended (the
"Securities Act"); or (y) as to any particular requirement, a
determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then
applicable securities law.
(g) An Option shall terminate three (3) months after
termination of the optionee's employment or relationship as a
consultant or director with the Company or an Affiliate, unless: (i)
such termination is due to the optionee's permanent and total
disability, within the meaning of Section 422(c)(6) of the Code, in
which case the Option may, but need not, provide that it may be
exercised at any time within one (1) year following such termination
of employment or relationship as a consultant or director; (ii) the
optionee dies while in the employ of or while serving as a consultant
or director to the Company or an Affiliate, or within not more than
three (3) months after termination of such employment or relationship
as a consultant or director, in which case the Option may, but need
not, provide that it may be exercised at any time within eighteen
(18) months following the death of the optionee by the person or
persons to whom the optionee's rights under such Option pass by will
or by the laws of descent and distribution; or (iii) the Option by
its term specifies either (A) that it shall terminate sooner than
three (3) months after termination of the optionee's employment or
relationship as a consultant or director with the Company or an
Affiliate; or (B) that it may be exercised more than three (3) months
after termination of the optionee's employment or relationship as a
consultant or director with the Company or an Affiliate. This
paragraph 5(g) shall not be construed to extend the term of any
Option or to permit anyone to exercise the Option after expiration of
its term, nor shall it be construed to increase the number of shares
as to which any Option is exercisable from the amount exercisable on
the date of termination of the optionee's employment or relationship
as a consultant or director.
(h) The Option may, but need not, include a provision
whereby the optionee may elect at any time during the term of the
optionee's employment or relationship as a consultant or director
with the Company or any Affiliate to exercise the Option as to any
part or all of the shares subject to the Option prior to the stated
vesting dates of the Option. Any shares so purchased from any
unvested installment or Option may be subject to a repurchase right
in favor of the Company or to any other restriction the Board or the
Committee determines to be appropriate.
(i) To the extent provided by the terms of an Option, each
optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the
following means or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold from the
shares of the Common Stock otherwise issuable to the optionee as a
result of the exercise of the Option a number of shares having a fair
market value less than or equal to the amount of the withholding tax
obligation; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock having a fair market value less than or
6
equal to the amount of the withholding tax obligation.
(j) Without in any way limiting the authority of the Board
or Committee to make or not to make grants of Discretionary Stock
Options under this Section 5, the Board or Committee shall have the
authority (but not an obligation) to include as part of any Option
agreement a provision entitling the optionee to a further Option (a
"Re-Load Option") in the event the optionee exercises the Option
evidenced by the Option agreement, in whole or in part, by
surrendering other shares of Common Stock in accordance with this
Plan and the terms and conditions of the Option agreement. Any such
Re-Load Option (i) shall be for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of
such Option; (ii) shall have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to
such Re-Load Option; and (iii) shall have an exercise price which is
equal to one hundred percent (100%) of the fair market value of the
Common Stock subject to the Re-Load Option on the date of exercise of
the original Option or, in the case of a Re-Load Option which is an
Incentive Stock Option and which is granted to a 10% stockholder (as
defined in paragraph 4(c)), shall have an exercise price which is
equal to one hundred and ten percent (110%) of the fair market value
of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option.
Any such Re-Load Option may be an Incentive Stock
Option or a Nonqualified Stock Option, as the Board or Committee may
designate at the time of the grant of the original Option, provided,
however, that the designation of any Re-Load Option as an Incentive
Stock Option shall be subject to the one hundred thousand dollars
($100,000) annual limitation on exercisability of Incentive Stock
Options described in paragraph 3(c) of the Plan and in Section 422(d)
of the Code. There shall be no Re-Load Option on a Re-Load Option.
Any such Re-Load Option shall be subject to the availability of
sufficient shares under paragraph 3(a) and shall be subject to such
other terms and conditions as the Board or Committee may determine.
6. TERMS OF NON-DISCRETIONARY OPTIONS.
(a) On January 27 of each year commencing January 27,
1998, each person who is at that time an Eligible Director of the
Company, (as defined in paragraph 6(k)), shall automatically be
granted under the Plan, without further action by the Company, the
Board, or the Company's stockholders, a Nonqualified Stock Option (a
"Director NQSO") to purchase four thousand (4,000) shares of Common
Stock on the terms and conditions set forth herein. An Eligible
Director may designate that such Director NQSO be granted in the name
of a Trust instead of in the name of such Eligible Director. The
number of shares to be granted hereunder shall not be adjusted as
provided for in Section 12. The Director NQSO shall be on the terms
and conditions set forth herein and should the date of grant set
forth above be a Saturday, Sunday or legal holiday, such grant shall
be made on the next business day.
(b) Each person who, after January 27 of any year
commencing January 27, 1998 and prior to November 1 of any year,
becomes an Eligible Director, shall, upon the date such person
becomes an Eligible Director, automatically be granted under the
7
Plan, without further action by the Company, the Board, or the
Company's stockholders, a Director NQSO to purchase fifteen thousand
(15,000) shares of Common Stock on the terms and conditions set forth
herein. An Eligible Director may designate that such Director NQSO
be granted in the name of a Trust instead of in the name of such
Eligible Director. The number of shares to be granted under this
Section 6 shall not be adjusted as provided for in Section 12. The
Director NQSO shall be on the terms and conditions set forth herein
and should the date of grant set forth above be a Saturday, Sunday or
legal holiday, such grant shall be made on the next business day.
(c) Each Director NQSO granted pursuant to this Section 6
(or any Director Re-Load Option granted pursuant to paragraph 6(j))
shall be in such form and shall contain such terms and conditions as
the Board or the Committee shall deem appropriate. The provisions of
separate Director NQSO's need not be identical, but each Director
NQSO shall include (through incorporation of provisions hereof by
reference in the Director NQSO or otherwise) the substance of each of
the following provisions as set forth in paragraphs 6(d) through
6(j), inclusive.
(d) The term of each Director NQSO shall be ten (10) years
from the date it was granted.
(e) The exercise price of each Director NQSO shall be one
hundred percent (100%) of the fair market value of the Common Stock
subject to such Director NQSO on the date such Director NQSO is
granted.
(f) The purchase price of Common Stock acquired pursuant
to a Director NQSO shall be paid, to the extent permitted by
applicable statutes and regulations, either (i) in cash at the time
the Director NQSO is exercised; (ii) by delivery to the Company of
shares of Common Stock that have been held for the period required to
avoid a charge to the Company's reported earnings and valued at their
fair market value on the date of exercise; or (iii) pursuant to a
program developed under Regulation T as promulgated by the Federal
Reserve Board which results in the receipt of cash (or a check) by
the Company before Common Stock is issued or the receipt of
irrevocable instructions to pay the aggregate exercise price to the
Company from the sales proceeds before Common Stock is issued.
(g) A Director NQSO shall be exercisable during the
lifetime of the Eligible Director with respect to whom it was granted
only by the person to whom it was granted (whether the Eligible
Director or a Trust), provided that such person during the Eligible
Director's lifetime may designate a Trust to be a beneficiary with
respect to the Director NQSO, and such beneficiary shall, after the
death of the Eligible Director to whom the Director NQSO was granted,
have all of the rights designated for such beneficiary. In the
absence of such designation, after the death of the Eligible Director
with respect to whom the Director NQSO was granted, if such Director
NQSO was granted to the Eligible Director, the Director NQSO shall be
exercisable by the person or persons to whom the optionee's rights
under such option pass by will or by the laws of descent and
distribution.
(h) A Director NQSO shall not vest with respect to an
8
Eligible Director, or the affiliate of such Eligible Director, as the
case may be, (i) unless the Eligible Director, has, at the date of
grant, provided three (3) years of prior continuous service as an
Eligible Director, or (ii) until the date upon which such Eligible
Director has provided one year of continuous service as an Eligible
Director following the date of grant of such Director NQSO, whereupon
such Director NQSO shall become fully vested and exercisable in
accordance with its terms.
(i) The Company may require any optionee under this
Section 6, or any person to whom a Director NQSO is transferred under
paragraph 6(g), as a condition of exercising any such option: (i) to
give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters
and/or to employ a purchaser representative who has such knowledge
and experience in financial and business matters, and that such
person is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Director NQSO;
and (ii) to give written assurances satisfactory to the Company
stating that such person is acquiring the Common Stock subject to the
Director NQSO for such person's own account and not with any present
intention of selling or otherwise distributing the stock. These
requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the
exercise of the Director NQSO has been registered under a then
currently effective registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), or (ii), as to any
particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances
under the then applicable securities laws.
(j) Subject to the last sentence of this paragraph 6(j),
each Director NQSO shall include a provision entitling the optionee
to a further Nonqualified Stock Option (a "Director Re-Load Option")
in the event the optionee exercises the Director NQSO evidenced by
the Director NQSO grant, in whole or in part, by surrendering other
shares of Common Stock in accordance with the Plan and the terms of
the Director NQSO grant. Any such Director Re-Load Option (i) shall
be for a number of shares equal to the number of shares surrendered
as part or all of the exercise price of the original Director NQSO;
(ii) shall have an expiration date which is the same as the
expiration date of the original Director NQSO; and (iii) shall have
an exercise price which is equal to one hundred percent (100%) of the
fair market value of the Common Stock subject to the Director Re-Load
Option on the date of exercise of the original Director NQSO. Any
such Director Re-Load Option shall be subject to the availability of
sufficient shares under paragraph 3(a). There shall be no Director
Re-Load Option on a Director Re-Load Option.
(k) For purposes of this Section 6, the term "Eligible
Director" shall mean a member of the Board who is not an employee of
the Company or any Affiliate, and the term "affiliate" shall mean a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Eligible Director.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
9
Each stock bonus or restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as
the Board or the Committee shall deem appropriate. The terms and
conditions of stock bonus or restricted stock purchase agreements may
change from time to time, and the terms and conditions of separate
agreements need not be identical, but each stock bonus or restricted
stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions as appropriate:
(a) The purchase price under each stock purchase agreement
shall be such amount as the Board or Committee shall determine and
designate in such agreement. Notwithstanding the foregoing, the
Board or the Committee may determine that eligible participants in
the Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or
for its benefit.
(b) No rights under a stock bonus or restricted stock
purchase agreement shall be assignable by any participant under the
Plan, either voluntarily or by operation of law, except where such
assignment is required by law or expressly authorized by the terms of
the applicable stock bonus or restricted stock purchase agreement.
(c) The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board or the
Committee, according to a deferred payment or other arrangement with
the person to whom the Common Stock is sold; or (iii) in any other
form of legal consideration that may be acceptable to the Board or
the Committee in their discretion; including but not limited to
payment of the purchase price pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which
results in the receipt of cash (or a check) by the Company before
Common Stock is issued or the receipt of irrevocable instruction to
pay the aggregate exercise price of the Company from the sales
proceeds before Common Stock is issued. Notwithstanding the
foregoing, the Board or the Committee to which administration of the
Plan has been delegated may award Common Stock pursuant to a stock
bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(d) Shares of Common Stock sold or awarded under the Plan
may, but need not, be subject to a repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the
Board or the Committee.
(e) In the event a person ceases to be an employee of or
ceases to serve as a director or consultant to the Company or an
Affiliate, the Company may repurchase or otherwise reacquire any or
all of the shares of Common Stock held by that person which have not
vested as of the date of termination under the terms of the stock
bonus or restricted stock purchase agreement between the Company and
such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to
10
effect, at any time and from time to time, with the consent of the
affected holders of Options, (i) the repricing of any outstanding
Options under the Plan and/or (ii) the cancellation of any
outstanding Options under the Plan and the grant in substitution
therefor of new Options under the Plan covering the same or different
numbers of shares of Common Stock, but having an exercise price per
share not less than one hundred percent (100%) of the fair market
value per share of Common Stock on the new grant date or, in the case
of a 10% stockholder (as defined in paragraph 4(c)), not less than
one hundred and ten percent (110%) of the fair market value per share
of Common Stock on the new grant date.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards granted under the
Plan, the Company shall keep available at all times the number of
shares of Common Stock required to satisfy such Stock Awards up to
the number of shares of Common Stock authorized under the Plan.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority
as may be required to issue and sell shares of Common Stock under the
Stock Awards granted under the Plan; provided, however, that this
undertaking shall not require the Company to register under the
Securities Act either the Plan, any Stock Award granted under the
Plan or any Common Stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority
that counsel for the Company deems necessary for the lawful issuance
and sale of Common Stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell Common
Stock upon exercise of such Stock Awards unless and until such
authority is obtained.
10. USE OF PROCEEDS FROM COMMON STOCK.
Proceeds from the sale of Common Stock pursuant to Stock
Awards granted under the Plan shall constitute general funds of the
Company.
11. MISCELLANEOUS.
(a) The Board or Committee shall have the power to
accelerate the time during which a Stock Award may be exercised or
the time during which a Stock Award or any part thereof will vest,
notwithstanding the provisions in the Stock Award stating the time
during which it may be exercised or the time during which it will
vest. Each Discretionary Stock Option providing for vesting pursuant
to paragraph 5(e) shall also provide that if the employee's
employment or a director's or consultant's affiliation with the
Company is terminated by reason of death or disability (within the
meaning of Title II or XVI of the Social Security Act and as
determined by the Social Security Administration), the vesting
schedule of Discretionary Stock Options granted to such employee,
director or consultant or to the Trusts of such employee, director or
consultant shall be accelerated by twelve months for each full year
the employee has been employed by or the director or consultant has
been affiliated with the Company. Discretionary Stock Options
11
granted under the Plan that are outstanding on February 25, 1992,
shall be amended to include the accelerated vesting upon death
provided for in the preceding sentence of this paragraph 11(a) and
Discretionary Stock Options granted under the Plan that are
outstanding on June 18, 1996, shall be amended to include the
accelerated vesting upon disability provided for in the preceding
sentence of this paragraph 11(a).
(b) Neither an optionee nor any person to whom an Option
is transferred under the provisions of the Plan shall be deemed to be
the holder of, or to have any of the rights of a holder with respect
to, any shares subject to such Option unless and until such person
has satisfied all requirements for exercise of the Option pursuant to
its terms.
(c) Nothing in the Plan or any instrument executed or
Stock Award granted pursuant thereto shall confer upon any eligible
employee, consultant, director, optionee or holder of Stock Awards
under the Plan any right to continue in the employ of the Company or
any Affiliate or to continue acting as a consultant or director or
shall affect the right of the Company or any Affiliate to terminate
the employment or consulting relationship or directorship of any
eligible employee, consultant, director, optionee or holder of Stock
Awards under the Plan with or without cause. In the event that a
holder of Stock Awards under the Plan is permitted or otherwise
entitled to take a leave of absence, the Company shall have the
unilateral right to (i) determine whether such leave of absence will
be treated as a termination of employment or relationship as
consultant or director for purposes hereof, and (ii) suspend or
otherwise delay the time or times at which exercisability or vesting
would otherwise occur with respect to any outstanding Stock Awards
under the Plan.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
If any change is made in the Common Stock subject to the
Plan, or subject to any Stock Award granted under the Plan (through
merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split,
liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding
Stock Awards will be appropriately adjusted in the class(es) and
maximum number of shares subject to the Plan, the maximum number of
shares which may be granted to a participant in a calendar year, and
the class(es) and number of shares and price per share of stock
subject to outstanding Stock Awards; provided, that the minimum and
maximum number of shares of Common Stock to be granted as provided
for in paragraphs 6(a) and 6(b) shall not be so adjusted. Such
adjustment shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of
consideration".)
13. CHANGE OF CONTROL.
(a) Notwithstanding anything to the contrary in this Plan,
12
in the event of a Change in Control (as hereinafter defined), then,
to the extent permitted by applicable law: (i) the time during which
Stock Awards become vested shall automatically be accelerated so that
the unvested portions of all Stock Awards shall be vested prior to
the Change in Control and (ii) the time during which the Options may
be exercised shall automatically be accelerated to prior to the
Change in Control. Upon and following the acceleration of the
vesting and exercise periods, at the election of the holder of the
Stock Award, the Stock Award may be: (x) exercised (with respect to
Options) or, if the surviving or acquiring corporation agrees to
assume the Stock Awards or substitute similar stock awards, (y)
assumed; or (z) replaced with substitute stock awards. Options not
exercised, substituted or assumed prior to or upon the Change in
Control shall be terminated.
(b) For purposes of the Plan, a "Change of Control" shall
be deemed to have occurred at any of the following times:
(i) upon the acquisition (other than from the
Company) by any person, entity or "group," within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding, for this
purpose, the Company or its affiliates, or any employee benefit plan
of the Company or its affiliates which acquires beneficial ownership
of voting securities of the Company), of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of
fifty percent (50%) or more of either the then outstanding shares of
Common Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors; or
(ii) at the time individuals who, as of April 2,
1991, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that
any person becoming a director subsequent to April 2, 1991, whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
shall be, for purposes of the Plan, considered as though such person
were a member of the Incumbent Board; or
(iii) immediately prior to the consummation by the
Company of a reorganization, merger, consolidation, (in each case,
with respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than fifty
percent (50%) of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities) or a
liquidation or dissolution of the Company or of the sale of all or
substantially all of the assets of the Company; or
(iv) the occurrence of any other event which the
Incumbent Board in its sole discretion determines constitutes a
Change of Control.
13
14. QUALIFIED DOMESTIC RELATIONS ORDERS.
(a) Anything in the Plan to the contrary notwithstanding,
rights under Stock Awards may be assigned to an Alternate Payee to
the extent that a QDRO so provides. (The terms "Alternate Payee" and
"QDRO" are defined in paragraph 14(c) below.) The assignment of a
Stock Award to an Alternate Payee pursuant to a QDRO shall not be
treated as having caused a new grant. The transfer of an Incentive
Stock Option to an Alternate Payee may, however, cause it to fail to
qualify as an Incentive Stock Option. If a Stock Award is assigned
to an Alternate Payee, the Alternate Payee generally has the same
rights as the grantee under the terms of the Plan; provided however,
that (i) the Stock Award shall be subject to the same vesting terms
and exercise period as if the Stock Award were still held by the
grantee, (ii) an Alternate Payee may not transfer a Stock Award and
(iii) an Alternate Payee is ineligible for Re-Load Options described
at paragraph 5(j) or Director Re-Load Options described at paragraph
6(j).
(b) In the event of the Plan administrator's receipt of a
domestic relations order or other notice of adverse claim by an
Alternate Payee of a grantee of a Stock Award, transfer of the
proceeds of the exercise of such Stock Award, whether in the form of
cash, stock or other property, may be suspended. Such proceeds shall
thereafter be transferred pursuant to the terms of a QDRO or other
agreement between the grantee and Alternate Payee. A grantee's
ability to exercise a Stock Award may be barred if the Plan
administrator receives a court order directing the Plan administrator
not to permit exercise.
(c) The word "QDRO" as used in the Plan shall mean a court
order (i) that creates or recognizes the right of the spouse, former
spouse or child (an "Alternate Payee") of an individual who is
granted a Stock Award to an interest in such Stock Award relating to
marital property rights or support obligations and (ii) that the
administrator of the Plan determines would be a "qualified domestic
relations order," as that term is defined in section 414(p) of the
Code and section 206(d) of the Employee Retirement Income Security
Act ("ERISA"), but for the fact that the Plan is not a plan described
in section 3(3) of ERISA.
15. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 12 relating
to adjustments upon changes in the Common Stock, no amendment shall
be effective unless approved by the stockholders of the Company
within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) increase the number of shares reserved for Stock
Awards under the Plan;
(ii) modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to satisfy the
14
requirements of Section 422(b) of the Code); or
(iii) modify the Plan in any other way if such
modification requires stockholder approval in order for the Plan to
satisfy the requirements of Section 422(b) of the Code.
(b) The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations
promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of
compensation to certain executive officers.
(c) It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable to
provide optionees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations
promulgated thereunder relating to employee Incentive Stock Options
and/or to bring the Plan and/or Options granted under it into
compliance therewith.
(d) Rights and obligations under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment
of the Plan, unless: (i) the Company requests the consent of the
person to whom the Stock Award was granted; and (ii) such person
consents in writing.
16. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on December
31, 2000. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Awards granted
while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the consent of the person to
whom the Stock Award was granted.
17. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board.
15
EXHIBIT 10.39
PROMISSORY NOTE
$79,000.00
1. Promise to Pay.
For value received, I, Kathryn Falberg ("Staff Member"), an
unmarried woman, promises to pay to the order of Amgen Inc., a
Delaware corporation ("Payee"), at its office at Amgen Center,
Thousand Oaks, CA 91320-1789, the sum of Seventy Nine Thousand
Dollars and No Cents ($79,000.00) (the "Principal"), payable in
full on the earlier of five (5) years from date of execution of
this Note or thirty (30) days from the date on which Staff
Member ceases to be an employee of Payee, whichever first
occurs, together with interest on the Principal from the date of
this Note until such date as the Note is paid in full. Interest
on this Note shall be computed as set forth below. The interest
rate for the period from the date of this Note through December
31, 1995 (the "initial rate") is 4.9 percent per annum on the
unpaid Principal. After December 31, 1995 the interest rate on
this Note shall change as set forth below.
2. Adjustable Interest Rate.
The interest rate shall be adjusted annually on January 1 of
each year (the "Change Date") so as to equal the average
interest rate designated as the "Introduction Rates" on
adjustable rate loans as publicly offered by the 32 largest
banks and savings and loans in California as published by the
Los Angeles Times in its Saturday edition. The rate shall be
set using the rates published in the Los Angeles Times on the
Saturday immediately preceding the Change Date. In the event
that the "Introduction Rates" list is not published in the Los
Angeles Times for any reason, then, in such event, the Payee
shall establish the interest rate based on a survey by it of the
introductory interest rates on adjustable loans offered by no
fewer than five banking institutions located in Southern
California that the Payee, in its sole discretion, deems
representative of banking institutions in the Ventura and Los
Angeles County areas. Payee shall give Staff Member notice if
the interest rate shall be determined using this alternative
method. Notwithstanding the foregoing, the interest rate shall
never be increased or decreased on any single Change Date by
more than one percentage point from the interest rate for the
preceding 12 months. At no time during the term of this Note
shall the annual interest rate exceed 7.9% per annum.
Payee shall deliver or mail to Staff Member a notice of any
changes in the adjustable interest rate on this Note and the
amount of the Staff Member's semi-monthly payroll deductions
before the effective date of any change. The notice shall
include information required by law to be given to Staff Member
and also the title and telephone number of a person who shall
answer any questions Staff Member may have regarding the notice.
1
3. Salary Deduction.
The interest on this Note shall be payable by semi-monthly
deductions from Staff Member's salary. The amount of such
deductions shall initially be One Hundred Sixty One Dollars and
Twenty Nine Cents ($161.29) per installment; provided, however,
that the manner of payment of this Note shall not be limited to
deductions from Staff Member's salary. The amount of such
deductions shall be adjusted annually concurrently with any
adjustment in the interest rate on this Note to ensure that
interest to be incurred during the ensuing calendar year shall
be paid in twenty-four (24) equal payments. The first such
installment shall be on April 30, 1995; the second installment
shall be on May 15, 1995; and each successive installment shall
be on the fifteenth and last days of each successive month until
the Principal is repaid. Payee shall give Staff Member at least
seven (7) days advance notice of any adjustment in the amount of
said payroll deductions. Staff Member acknowledges and agrees
that by executing this Note, Staff Member agrees to the payroll
deductions described in this Note.
4. Option to Convert.
At the end of the term of this Note, Staff Member shall have the
option to seek to convert this loan to a loan amortized over an
additional five-year period by executing a new Promissory Note
at terms to be mutually agreed upon by Staff Member and Payee.
In the event that Staff Member and Payee are unable to reach
agreement on such terms, this Note shall become immediately due
and payable.
5. Prepayment.
Staff Member may prepay without penalty this Note in whole or in
part at any time. Any and all payments or prepayments under
this Note may be made by Staff Member to Payee at the following
address (or such other address as it designates in writing to
Staff Member):
AMGEN INC.
Amgen Center
Thousand Oaks, California 91320-1789
Attention: Accounting Manager
6. Attorneys' Fees.
Staff Member agrees to pay all costs and expenses, including,
without limitation, collection agency fees and expenses,
reasonable attorneys' fees, costs of suit and costs of appeal,
which Payee may incur in the exercise, preservation or
enforcement of its right, powers and remedies hereunder, or
under any documents or instruments securing this Note, or under
law.
7. Modification of Terms.
2
Payee may, with or without notice to Staff Member, cause
additional parties to be added to this Note, or release any
party to this Note, or revise, extend, or renew the Note, or
extend the time for making any installment provided for by this
Note, or accept any installment in advance, all without
affecting the liability of Staff Member. Staff Member may not
assign or transfer in any manner whatsoever this Note or any of
Staff Member's obligations under this Note.
8. Security Interest.
The purpose of this loan is for the improvement of a personal
residence. Staff Member shall secure this loan by executing and
causing to be filed, immediately a trust deed on this residence,
commonly known as 946 Aleeda Lane, Montecito, California 93108
whose property description is Lot 26 of Santecito Estates, in
the City of Santa Barbara, County of Santa Barbara, State of
California, as per Map recorded in Book 53, Page(s) 13 and 14 of
Maps, in the Office of the County Recorder of said county.
9. Acceleration.
A) In the event Staff Member fails to pay when due any sums
under this Note, then:
(1) the entire unpaid balance of this Note shall, at the
option of the Payee hereof, immediately become due and payable
in full and unpaid Principal thereafter shall bear interest at
the lesser of the maximum rate permitted by law or at the rate
of 7.9 percent per annum; and
(2) Staff Member authorizes Payee to deduct any sums due to
Payee under this Note from any monies, including any wages
due, otherwise owing to Staff Member.
B) If Staff Member sells the residence which is purchased with
the funds herein provided, this Note shall immediately become
due and payable upon the sale of such residence.
10. Waiver of Rights by Staff Member.
Staff Member waives (1) presentment, demand, protest, notice of
dishonor and/or protest and notice of non-payment; (2) the
right, if any, to the benefit of, or to direct the application
of, any security hypothecated to Payee until all indebtedness of
Staff Member to Payee, however arising, has been paid; and (3)
the right to require the Payee to proceed against any party to
this Note, or to pursue any other remedy in Payee's power.
Payee may proceed against Staff Member directly and
independently of any other party to this Note, and the cessation
of the liability of any other party for any reason other than
full payment, or any revision, renewal, extension, forbearance,
change of rate of interest, or acceptance, release or
substitution of security, or any impairment or suspension of
Payee's remedies or rights against any other party, shall not in
any way affect the liability of Staff Member.
3
11. Obligations of Persons Under this Note.
If more than one person signs this Note, each person is fully
and personally obligated to keep all of the promises made in
this Note, including the promise to pay the full amount owed.
Any person who is a guarantor, surety, or endorser of this Note
is also obligated to do these things. Any person who takes over
these obligations, including the obligations of a guarantor,
surety or endorser of this Note, is also obligated to keep all
of the promises made in this Note. Payee may enforce its rights
under this Note against each person individually or against all
of the signatories to this Note. This means that any one of the
signatories to this Note may be required to pay all of the
amounts owed under this Note.
12. Governing Law.
This Note and the obligations under this Note of Staff Member or
any other signatory to this Note shall be governed by and
interpreted and determined in accordance with the laws of the
State of California as applied to contracts between California
residents entered into and to be performed entirely within said
State.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Note as of the 7th day of April, 1995.
/s/ Kathryn Falberg
KATHRYN FALBERG
4
EXHIBIT 10.40
PROMISSORY NOTE
$100,000.00
1. Promise to Pay.
For value received, I, Edward F. Garnett ("Staff Member"), a
married man, and I, Sandra K. Garnett, wife of Staff Member,
promise to pay to the order of Amgen Inc., a Delaware
corporation ("Payee"), at its office at Amgen Center, Thousand
Oaks, CA 91320-1789, the sum of One Hundred Thousand Dollars
and No Cents ($100,000.00) (the "Principal"), payable in full on
the earlier of five (5) years from date of execution of this
Note or thirty (30) days from the date on which Staff Member
ceases to be an employee of Payee, whichever first occurs,
together with interest on the Principal from the date of this
Note until such date as the Note is paid in full. Interest on
this Note shall be computed as set forth below. The interest
rate for the period from the date of this Note through December
31, 1997 (the "initial rate") is 4.1 percent per annum on the
unpaid Principal. After December 31, 1997 the interest rate on
this Note shall change as set forth below.
2. Adjustable Interest Rate.
The interest rate shall be adjusted annually on January 1 of
each year (the "Change Date") so as to equal the average
interest rate designated as the "Introduction Rates" on
adjustable rate loans as publicly offered by the banks and
savings and loans in California as published by the Los Angeles
Times in its Sunday edition. The rate shall be set using the
rates published in the Los Angeles Times on the Sunday
immediately preceding the Change Date. In the event that the
"Introduction Rates" list is not published in the Los Angeles
Times for any reason, then, in such event, the Payee shall
establish the interest rate based on a survey by it of the
introductory interest rates on adjustable loans offered by no
fewer than five banking institutions located in Southern
California that the Payee, in its sole discretion, deems
representative of banking institutions in the Ventura and Los
Angeles County areas. Payee shall give Staff Member notice if
the interest rate shall be determined using this alternative
method. Notwithstanding the foregoing, the interest rate shall
never be increased or decreased on any single Change Date by
more than one percentage point from the interest rate for the
preceding 12 months. At no time during the term of this Note
shall the annual interest rate exceed 7.1 percent per annum.
Payee shall deliver or mail to Staff Member a notice of any
changes in the adjustable interest rate on this Note and the
amount of the Staff Member's semi-monthly payroll deductions
before the effective date of any change. The notice shall
include information required by law to be given to Staff Member
1
and also the title and telephone number of a person who shall
answer any questions Staff Member may have regarding the notice.
3. Salary Deduction.
The interest on this Note shall be payable by semi-monthly
deductions from Staff Member's salary. The amount of such
deductions shall initially be One Hundred Seventy Dollars and
Eighty-Three Cents ($170.83) per installment; provided, however,
that the manner of payment of this Note shall not be limited to
deductions from Staff Member's salary. The amount of such
deductions shall be adjusted annually concurrently with any
adjustment in the interest rate on this Note to ensure that
interest to be incurred during the ensuing calendar year shall
be paid in twenty-four (24) equal payments. The first such
installment shall be on August 15, 1997; the second installment
shall be on August 31, 1997; and each successive installment
shall be on the fifteenth and last days of each successive month
until the Principal is repaid. Payee shall give Staff Member at
least seven (7) days advance notice of any adjustment in the
amount of said payroll deductions. Staff Member acknowledges
and agrees that by executing this Note, Staff Member agrees to
the payroll deductions described in this Note.
4. Option to Convert.
At the end of the term of this Note, Staff Member shall have the
option to seek to convert this loan to a loan amortized over an
additional five-year period by executing a new Promissory Note
at terms to be mutually agreed upon by Staff Member and Payee.
In the event that Staff Member and Payee are unable to reach
agreement on such terms, this Note shall become immediately due
and payable.
5. Prepayment.
Staff Member may prepay without penalty this Note in whole or in
part at any time. Any and all payments or prepayments under
this Note may be made by Staff Member to Payee at the following
address (or such other address as it designates in writing to
Staff Member):
AMGEN INC.
Amgen Center
Thousand Oaks, California 91320-1789
Attention: Accounting Manager
6. Attorneys' Fees.
Staff Member agrees to pay all costs and expenses, including,
without limitation, collection agency fees and expenses,
reasonable attorneys' fees, costs of suit and costs of appeal,
which Payee may incur in the exercise, preservation or
enforcement of its right, powers and remedies hereunder, or
under any documents or instruments securing this Note, or under
law.
2
7. Modification of Terms.
Payee may, with or without notice to Staff Member, cause
additional parties to be added to this Note, or release any
party to this Note, or revise, extend, or renew the Note, or
extend the time for making any installment provided for by this
Note, or accept any installment in advance, all without
affecting the liability of Staff Member. Staff Member may not
assign or transfer in any manner whatsoever this Note or any of
Staff Member's obligations under this Note.
8. Security Interest.
The purpose of this loan is to purchase a personal residence.
Staff Member shall secure this loan by executing and causing to
be filed, immediately upon close of escrow, a trust deed on this
residence, commonly known as 5037 Lakeview Canyon Road, Westlake
Village, California 91362 whose property description is as
follows:
Lot 39 of Tract No. 3507-2, in the City of Thousand Oaks, County
of Ventura, State of California, as per map recorded in Book 94,
Pages 57 through 77 of Miscellaneous Records (Maps), in the
Office of the County Recorder of said County.
9. Acceleration.
A) In the event Staff Member fails to pay when due any sums
under this Note, then:
(1) the entire unpaid balance of this Note shall, at the
option of the Payee hereof, immediately become due and payable
in full and unpaid Principal thereafter shall bear interest at
the lesser of the maximum rate permitted by law or at the rate
of 7.1 percent per annum; and
(2) Staff Member authorizes Payee to deduct any sums due to
Payee under this Note from any monies, including any wages
due, otherwise owing to Staff Member.
B) If Staff Member sells the residence which is purchased with
the funds herein provided, this Note shall immediately become
due and payable upon the sale of such residence.
10. Waiver of Rights by Staff Member.
Staff Member waives (1) presentment, demand, protest, notice of
dishonor and/or protest and notice of non-payment; (2) the
right, if any, to the benefit of, or to direct the application
of, any security hypothecated to Payee until all indebtedness of
Staff Member to Payee, however arising, has been paid; and (3)
the right to require the Payee to proceed against any party to
this Note, or to pursue any other remedy in Payee's power.
Payee may proceed against Staff Member directly and
independently of any other party to this Note, and the cessation
of the liability of any other party for any reason other than
full payment, or any revision, renewal, extension, forbearance,
change of rate of interest, or acceptance, release or
3
substitution of security, or any impairment or suspension of
Payee's remedies or rights against any other party, shall not in
any way affect the liability of Staff Member.
11. Obligations of Persons Under this Note.
If more than one person signs this Note, each person is fully
and personally obligated to keep all of the promises made in
this Note, including the promise to pay the full amount owed.
Any person who is a guarantor, surety, or endorser of this Note
is also obligated to do these things. Any person who takes over
these obligations, including the obligations of a guarantor,
surety or endorser of this Note, is also obligated to keep all
of the promises made in this Note. Payee may enforce its rights
under this Note against each person individually or against all
of the signatories to this Note. This means that any one of the
signatories to this Note may be required to pay all of the
amounts owed under this Note.
12. Governing Law.
This Note and the obligations under this Note of Staff Member or
any other signatory to this Note shall be governed by and
interpreted and determined in accordance with the laws of the
State of California as applied to contracts between California
residents entered into and to be performed entirely within said
State.
IN WITNESS WHEREOF, the undersigned has/have executed and delivered
this Note as of the 18th day of July, 1997.
/s/ Edward F. Garnett
EDWARD F. GARNETT
/s/ Sandra K. Garnett
SANDRA K. GARNETT
4
EXHIBIT 10.41
FOURTH AMENDMENT TO THE
AMGEN RETIREMENT AND SAVINGS PLAN
AS AMENDED AND RESTATED EFFECTIVE APRIL 1, 1996
The Amgen Retirement and Savings Plan As Amended and Restated
Effective April 1, 1996 (the "Plan") is hereby amended, effective
April 1, 1996, as follows:
Section 22.2 of the Plan is amended to read in its entirety as
follows:
"22.2 Minimum Allocations. For any Plan Year during which
the Plan is a Top-Heavy Plan, the Company Contributions (exclusive of
Qualified Nonelective Contributions and Qualified Matching
Contributions) allocated to the Account of each Participant who is
not a Key Employee, but who is an Employee on the last day of such
Plan Year, shall not be less than the lesser of the following
amounts:
(a) Three percent of his or her Top-Heavy Compensation;
or
(b) A percentage of his or her Top-Heavy Compensation
equal to the greatest allocation of Company
Contributions and Participant Elected Contributions,
expressed as a percentage of Top-Heavy Compensation,
made on behalf of any Participant who is a Key
Employee."
To record this Fourth Amendment to the Plan as set forth herein, the
Company has caused its authorized officer to execute this document
this 20th day of October, 1997.
AMGEN INC.
By: /s/ George A. Vandeman
GEORGE A. VANDEMAN
Title: Senior Vice President,
General Counsel and Secretary
1
EXHIBIT 10.42
FIFTH AMENDMENT TO THE
AMGEN RETIREMENT AND SAVINGS PLAN
AS AMENDED AND RESTATED EFFECTIVE APRIL 1, 1996
Section 2.17 entitled "Compensation Limitation" is amended to read as
follows:
"Compensation Limitation" means the limitation in effect under
section 401(a)(17) of the Code for the Plan Year.
Section 2.26 entitled "Family Member" is deleted.
Article 3 entitled "Eligibility and Participation" shall be amended
by adding new Section 3.6 to the end thereof, as follows:
3.6 Military Service. Notwithstanding any provision of the Plan to
the contrary, contributions, benefits and service credit with
respect to qualified military service will be provided in
accordance with Code Section 414(u).
Section 8.5 entitled "Latest Time of Distribution" is amended to read
as follows:
8.5 Latest Time of Distribution. In no event shall a Participant's
Plan Benefit be distributed later than the April 1 next
following the calendar year in which the Participant attained
age 70 1/2 if the Participant is not then an Employee.
Section 8.10 entitled "Small Benefits: Lump Sum" is amended to read
as follows:
8.10 Small Benefits: Lump Sum. Any other provision of this Article
notwithstanding, if the value of a Participant's entire Plan
Benefit equals $3,500 (after December 31, 1997, $5,000) or less
(including a Plan Benefit of $0) before the first payment of the
Plan Benefit is made, then the Plan Benefit shall be paid (or
deemed paid if the Plan Benefit is $0) as soon as reasonably
practicable after the Participant's termination of employment to
the Participant (or to his or her beneficiary in the case of the
Participant's death) in a single lump sum in cash.
Section 11.4 entitled "Consequences of a Hardship Withdrawal"
subsection (b) is amended to read as follows:
(b) For the calendar year following the Hardship Withdrawal,
the maximum amount of Participant Elected Contributions and
all other before-tax employee contributions to qualified
retirement plans sponsored by members of the Affiliated
Group shall be limited to the applicable limit under
section 402(g) of the Code for that calendar year ($9,500
for 1997 and $10,000 for 1998), minus the amount of the
Participant's Participant Elected Contributions and all
other before tax employee contributions to qualified
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retirement plans sponsored by members of the Affiliated
Group for the calendar year of the Hardship Withdrawal.
Section 12.1 entitled "Determining the Highly Compensated Group" is
amended to read as follows:
12.1. Determining the Highly Compensated Group. An individual is
deemed to be a Highly Compensated Employee for any Plan Year if
the individual is an active Employee who, during the look-back
year, received Total Compensation of more than $80,000 (or such
larger amount as may be adopted by the Commissioner of Internal
Revenue to reflect a cost-of-living adjustment) and was a member
of the Top-Paid Group; or was a five-percent owner at any time
during the Plan Year or the look-back year. The look-back year
shall be the 12-month period immediately preceding the Plan
Year. The determination of who is a Highly Compensated
Employee, including the determinations of the number and
identity of Employees in the Top Paid Group and the Total
Compensation that is considered, will be made in accordance with
section 414(q) of the Code and the regulations thereunder.
Section 12.2 entitled "Special Elections for determining the Highly
Compensated Employees Group" and Section 12.3 entitled "Determining
the Highly Compensated Employee Group Using the Simplified Method"
are deleted.
Section 12.6 entitled "Special Definitions Used in Article 12"
subsection (a) "Family Member" is deleted.
Section 13.2 entitled "Average Deferral Percentage Limitation" is
amended to read as follows:
13.2 Actual Deferral Percentage Limitation. The Plan shall satisfy
the actual deferral percentage test, as provided in section
401(k)(3) of the Code and the regulations issued thereunder.
Subject to the special rules described in Section 13.7, the
Aggregate 401(k) Contributions of Highly Compensated Employees
shall not exceed the limits described below:
(a) An Actual Deferral Percentage shall be determined for each
individual who, at any time during the Plan Year, is a
Participant (including a suspended Participant) or is
eligible to participate in the Plan, which Actual Deferral
Percentage shall be the ratio, computed to the nearest one-
hundredth of one percent, of the individual's Aggregate
401(k) Contributions for the Plan Year to the individual's
Section 414(s) Compensation for the Plan Year;
(b) The Actual Deferral Percentages (including zero
percentages) of Highly Compensated Employees and Nonhighly
Compensated Employees shall be separately averaged to
determine each group's Actual Deferral Percentage; and
(c) The Aggregate 401(k) Contributions of Highly Compensated
Employees shall constitute Excess Contributions and shall
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be reduced, pursuant to Sections 13.3 and 13.4, to the
extent that the Actual Deferral Percentage of Highly
Compensated Employees exceeds the greater of (1) 125
percent of the Actual Deferral Percentage of Nonhighly
Compensated Employees for the preceding Plan Year or (2)
the lesser of (A) 200 percent of the Actual Deferral
Percentage of Nonhighly Compensated Employees for the
preceding Plan Year or (B) the Actual Deferral Percentage
of Nonhighly Compensated Employees for the preceding Plan
Year plus two percentage points.
Section 13.3 entitled "Allocation of Excess Contributions to Highly
Compensated Employees" is amended to read as follows:
13.3 Allocation of Excess Contributions to Highly Compensated
Employees. Any Excess Contributions for a Plan Year shall be
allocated to Highly Compensated Employees by use of a leveling
process, whereby the amount of deferrals of the Highly
Compensated Employee with the highest amount of deferrals is
reduced to the extent required to (a) eliminate all Excess
Contributions or (b) cause such Highly Compensated Employee's
amount of deferrals to equal the amount of deferrals of the
Highly Compensated Employee with the next highest amount of
deferrals. The leveling process shall be repeated until all
Excess Contributions for the Plan Year are allocated to Highly
Compensated Employees.
Section 13.7 entitled "Special Rules" subsections (f) and (g) are
deleted.
Section 13.9 entitled "Special Definitions Used in Article 13"
subsection (b) is amended to read as follows:
"Annual Deferral Limit" means the dollar limit in effect for any
calendar year under section 402(g) of the Code. For 1987, the
first year in which this limitation was applicable, the Annual
Deferral Limit was $7,000. The Annual Deferral Limit is subject
to annual or periodic cost-of-living adjustments by the
Commissioner of Internal Revenue and is $9,500 for 1997 and
$10,000 for 1998.
Section 14.6 entitled "Special Rules" subsections (d) and (e) are
deleted.
To record this Fifth Amendment to the Plan as set forth herein, the
Company has caused its authorized officer to execute this document
this 8th day of December, 1997.
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AMGEN INC.
By: /s/ George A. Vandeman
GEORGE A. VANDEMAN
Title: Senior Vice President,
General Counsel and Secretary
4
AMGEN INC.
Exhibit 21
SUBSIDIARY STATE OF
INCORPORATION
(Name under which OR
subsidiary does business) ORGANIZATION
Amgen AB Sweden
Amgen Australia Pty Limited Australia
Amgen-Bio-Farmaceutica, Lda. Portugal
Amgen Boulder Development Colorado
Corporation
Amgen Boulder Production Colorado
Corporation
Amgen B.V. The Netherlands
Amgen Cambridge Real Estate Delaware
Holdings Inc.
Amgen Canada Inc. Canada
Amgen Caribe Corporation Puerto Rico
Amgen (Europe) AG Switzerland
Amgen Europe B.V. The Netherlands
Amgen GmbH Austria
Amgen GmbH Germany
Amgen Greater China, Ltd. Hong Kong
Amgen Holding, Inc. California
Amgen International Inc. Delaware
Amgen Kabushiki Kaisha Japan
Amgen Limited United Kingdom
Amgen N.V. Belgium
Amgen Puerto Rico, Inc. Delaware
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SUBSIDIARY STATE OF
INCORPORATION
(Name under which OR
subsidiary does business) ORGANIZATION
Amgen Sales Corporation Barbados
Amgen S.A. France
Amgen S.A. Spain
Amgen S.p.A. Italy
Kirin-Amgen, Inc. Delaware
Synergen B.V. The Netherlands
Synergen Europe, Inc. Colorado
2