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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000898430-01-000873.txt : 20010308
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ACCESSION NUMBER: 0000898430-01-000873
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 25
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010307
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AMGEN INC
CENTRAL INDEX KEY: 0000318154
STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
IRS NUMBER: 953540776
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 000-12477
FILM NUMBER: 1562847
BUSINESS ADDRESS:
STREET 1: ONE AMGEN CENTER DRIVE
CITY: THOUSAND OAKS
STATE: CA
ZIP: 91320-1799
BUSINESS PHONE: 805-447-1000
MAIL ADDRESS:
STREET 1: ONE AMGEN CENTER DRIVE
STREET 2: MAIL STOP 27-3-C
CITY: THOUSAND OAKS
STATE: CA
ZIP: 91320-1799
FORMER COMPANY:
FORMER CONFORMED NAME: AMGEN
DATE OF NAME CHANGE: 19870305
</SEC-HEADER>
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<TYPE>10-K
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
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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, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-12477
AMGEN INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-3540776
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
One Amgen Center Drive, Thousand Oaks, California 91320-1799
(Address of principal executive offices) (Zip Code)
805-447-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.0001 par value; preferred share 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. [_]
The approximate aggregate market value of voting and non-voting stock held
by non-affiliates of the registrant was $74,135,056,000 as of February 15,
2001 (A)
1,041,537,659
(Number of shares of common stock outstanding as of February 15, 2001)
Documents incorporated by reference:
<TABLE>
<CAPTION>
Form 10-K
Document Parts
-------- ---------
<S> <C>
Definitive 2001 Proxy Statement, to be filed within
120 days of December 31, 2000 (specified portions).............. III
</TABLE>
- -------
(A) Excludes 12,777,130 shares of common stock held by directors and officers,
and any stockholders whose ownership exceeds five percent of the shares
outstanding, at February 15, 2001. 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.
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<PAGE>
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 four human therapeutic products,
EPOGEN(R) (Epoetin alfa), NEUPOGEN(R) (Filgrastim), INFERGEN(R) (Interferon
alfacon-1) and STEMGEN(R) (Ancestim). 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.
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, for supporting peripheral
blood progenitor cell ("PBPC") transplants and for reducing the recovery time
of neutrophils and the duration of fever following chemotherapy treatment in
patients being treated for acute myelogenous leukemia ("AML"). NEUPOGEN(R) is
also marketed in the EU, Canada and Australia for use in treating neutropenia
in patients infected with the human immunodeficiency virus ("HIV") receiving
antiviral and/or other myelosuppressive medications. INFERGEN(R) is a non-
naturally occurring type-1 interferon which stimulates the immune system to
fight viral infections and is indicated for the treatment of chronic hepatitis
C viral infection. The Company sells INFERGEN(R) in the United States and
Canada. STEMGEN(R) stimulates the production, mobilization and maturation of
progenitor cells and is indicated for use in support of stem cell
transplantation. The Company markets STEMGEN(R) in Canada and Australia.
The Company focuses its research and development efforts on human
therapeutics delivered in the form of proteins, monoclonal antibodies and small
molecules in the therapeutic areas of nephrology, cancer, inflammation and
neurology and metabolism. 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 and the People's Republic of China. In addition to
internal research and development efforts, the Company has acquired certain
product and technology rights and has established research and development
collaborations.
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, EU, Canada, Australia, New Zealand and the
People's Republic of China. In addition, Amgen has entered into licensing
and/or co-promotion agreements to market EPOGEN(R), NEUPOGEN(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 91320-1799.
Products
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. Amgen promotes
EPOGEN(R) for the treatment
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of anemia associated with chronic renal failure for patients who are on
dialysis and is indicated to elevate or maintain the red blood cell level (as
determined by hematocrit or hemoglobin measurements) 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, Inc. ("Kirin-
Amgen"), a joint venture between Kirin Brewery Company, Limited ("Kirin") and
Amgen (see "Joint Ventures and Business Relationships--Kirin Brewery Company,
Limited"). The Company began selling EPOGEN(R) in 1989 when the U.S. Food and
Drug Administration ("FDA") approved its use in the treatment of anemia
associated with chronic renal failure. In November 1999, the FDA approved
EPOGEN(R) for the treatment of anemia in children with chronic renal failure
who are on dialysis.
The Company has retained exclusive rights to market EPOGEN(R) in the United
States for dialysis patients. Amgen has granted Ortho Pharmaceutical
Corporation (which has assigned its rights under the Product License Agreement
to Ortho Biotech Products, L.P.), a subsidiary of Johnson & Johnson, hereafter
referred to as "Johnson & Johnson", a license to commercialize recombinant
human erythropoietin as a human therapeutic in the United States in all markets
other than dialysis. Johnson & Johnson markets recombinant human erythropoietin
under the trademark PROCRIT(R) in the United States. See Note 1 to the
Consolidated Financial Statements, "Summary of significant accounting
policies--Product sales". In countries other than the United States, the
People's Republic of China and Japan, Johnson & Johnson was granted rights to
commercialize erythropoietin as a human therapeutic under a licensing agreement
with Kirin-Amgen. Affiliates of Johnson & Johnson manufacture and market
erythropoietin under the trademark EPREX(R) in various 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 licensing agreements with Kirin-
Amgen (see "Joint Ventures and Business Relationships-- Kirin Brewery Company,
Limited"). Kirin manufactures and markets its recombinant human erythropoietin
product under the trademark ESPO(R).
For EPOGEN(R) sales information for the years ended December 31, 2000, 1999
and 1998, see Note 10 to the Consolidated Financial Statements.
Recombinant-methionyl human granulocyte colony-stimulating factor
NEUPOGEN(R) (proper name--Filgrastim) is Amgen's registered trademark for
its recombinant-methionyl human 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. Myelosuppressive chemotherapy can be
administered with the intent to cure cancer (curative setting) or with the
intent to reduce pain and other complications of cancer by shrinking the tumor
(palliative setting). NEUPOGEN(R) is prescribed more frequently in the curative
setting. 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
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immature blood cells (progenitor cells, sometimes referred to as stem cells) to
migrate (mobilize) from the bone marrow into the blood circulatory system. When
these peripheral blood progenitor cells (PBPC) are collected from the blood,
stored and re-infused (transplanted) after high dose chemotherapy, recovery of
platelets, red blood cells and neutrophils is accelerated. PBPC transplantation
may be 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 FDA approved NEUPOGEN(R) for additional indications: to
reduce the duration of neutropenia for patients with non-myeloid malignancies
undergoing myeloablative therapy followed by bone marrow transplantation; 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); for use in
mobilization of PBPC for stem cell transplantation; and to reduce the recovery
time of neutrophils and the duration of fever following chemotherapy treatment
in patients being treated for AML. In the EU, Canada and Australia, NEUPOGEN(R)
is marketed for the same indications.
The Company also markets NEUPOGEN(R) in the EU, Canada and Australia for the
treatment of neutropenia in HIV patients receiving antiviral and/or other
myelosuppressive medications. 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, and the Company
cannot predict the outcome of discussions with the FDA.
The Company began selling NEUPOGEN(R) in the United States in February 1991
pursuant to a licensing agreement with Kirin-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. Hoffmann-La Roche Ltd ("Roche") under a co-
promotion agreement (see "Joint Ventures and Business Relationships--F.
Hoffmann-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. Hoffmann-La Roche Ltd").
For NEUPOGEN(R) sales information for the years ended December 31, 2000,
1999 and 1998, see Note 10 to the Consolidated Financial Statements.
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 ("HCV") is
a potentially deadly disease that, if not treated, may lead to cirrhosis and
hepatocellular carcinoma, or liver cancer. The Company began selling
INFERGEN(R) in the United States in October 1997. Amgen sells INFERGEN(R) for
the treatment of adults with chronic HCV. INFERGEN(R) is approved for the
treatment of newly diagnosed or previously untreated HCV patients for 24 weeks
and for 48 weeks at a higher dose in patients who relapsed or failed to respond
to initial interferon treatment. Amgen also sells INFERGEN(R) for the treatment
of chronic HCV in Canada.
In 1996, Amgen licensed to Yamanouchi Pharmaceutical Co., Ltd. of Japan
("Yamanouchi") the rights to develop, manufacture and commercialize Interferon
alfacon-1 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 and Taiwan (see
"Joint Ventures and Business Relationships--Yamanouchi Pharmaceutical Co.,
Ltd.").
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STEMGEN(R) (proper name--Ancestim) is Amgen's registered trademark for its
recombinant-methionyl human stem cell factor. STEMGEN(R), when used in
combination with NEUPOGEN(R), has been shown to induce immature blood cells
(progenitor cells, sometimes referred to as stem cells) to migrate (mobilize)
from the bone marrow into the blood circulatory system. When these peripheral
blood progenitor cells (PBPC) are collected from the blood, stored and re-
infused (transplanted) after high dose chemotherapy, recovery of platelets, red
blood cells and neutrophils is accelerated. PBPC transplantation may be an
alternative to autologous bone marrow transplantation for some patients. In
1999, STEMGEN(R) was approved for use in support of stem cell transplantation
by the regulatory authorities in Canada, Australia and New Zealand. In 2000,
the Company withdrew its application to market STEMGEN(R) in the United States.
Discussions with other regulatory agencies are continuing. The Company is also
investigating the potential benefits of STEMGEN(R) for patients with aplastic
anemia in a phase 1/2 clinical trial.
Product Candidates
The Company focuses its research and development efforts on human
therapeutics delivered in the form of proteins, monoclonal antibodies and small
molecules in the therapeutic areas of nephrology, cancer, inflammation and
neurology and metabolism (see "Factors That May Affect Amgen--Results of our
product development are uncertain.").
Nephrology
ARANESP(TM) (proper name--darbepoetin alfa) is Amgen's registered trademark
for its novel erythropoiesis stimulating protein, a protein that stimulates red
blood cell production. In December 1999 and early 2000, the Company filed
regulatory submissions for the use of ARANESP(TM) in patients with chronic
renal insufficiency and chronic renal failure in the U.S., EU, Canada,
Australia and New Zealand. Data from phase 3 clinical trials indicate that
ARANESP(TM) permits less frequent dosing than Epoetin alfa in the treatment of
anemia in patients with chronic renal insufficiency and chronic renal failure.
In April 1999, the Company announced that phase 2 clinical trials of
darbepoetin alfa for the treatment of anemia resulting from chemotherapy had
been initiated. Preliminary data from these clinical trials were presented in
December 2000 and suggest that treatment of anemia with darbepoetin alfa in
cancer patients receiving myelosuppressive chemotherapy may be effective given
once weekly or once every three weeks. Phase 3 clinical trials of darbepoetin
alfa for the treatment of anemia resulting from chemotherapy are ongoing.
The Company has entered into an agreement with Kirin to jointly develop
darbepoetin alfa through its joint venture, Kirin-Amgen (see "Joint Ventures
and Business Relationships--Kirin Brewery Company, Limited"). Amgen has been
granted an exclusive license by Kirin-Amgen to manufacture and market
darbepoetin alfa in the United States, all European countries, Canada,
Australia, New Zealand, Mexico and all Central and South American countries.
Kirin has been granted similar rights by Kirin-Amgen for Japan, the People's
Republic of China, Taiwan, Korea and certain other countries in Southeast Asia.
A focus of the Company's effort in nephrology is in the area of
hyperparathyroidism ("HPT"). HPT is a disorder that causes excessive secretion
of parathyroid hormone ("PTH") from the parathyroid gland, leading to elevated
serum calcium, called hypercalcemia. Symptoms of HPT include bone loss, muscle
weakness, depression and forgetfulness. Secondary HPT is commonly seen as a
result of kidney failure, affecting a majority of dialysis patients. Primary
HPT primarily afflicts post-menopausal women. 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. The Company is in
separate phase 2 clinical trials for primary and secondary HPT with a second
generation calcimimetic compound. In 2000, data from phase 2 studies were
presented suggesting that treatment with small-molecule calcimimetics results
in dose-dependent decreases in PTH levels and may provide effective reduction
of calcium levels.
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Cancer
In March 1999, Amgen acquired the rights from PRAECIS PHARMACEUTICALS
INCORPORATED ("Praecis") to develop and commercialize abarelix-depot (see
"Joint Ventures and Business Relationships--PRAECIS PHARMACEUTICALS
INCORPORATED"). Data from clinical trials suggest that abarelix-depot, a
gonadotropin releasing hormone ("GnRH") antagonist, may inhibit the action of
endogenous GnRH on the pituitary gland, thereby reducing the production of
testosterone in men and estrogen in women. The reduction of testosterone or
estrogen through the use of pharmaceuticals, a practice known as hormonal
therapy, may confer a therapeutic benefit to patients with a number of diseases
and medical conditions including prostate cancer and endometriosis. Abarelix-
depot has completed phase 3 clinical trials in patients with hormonally-
responsive prostate cancer and a regulatory file was submitted to the FDA in
December 2000. In January 2001, this filing was accepted and granted priority
review by the FDA. Abarelix-depot is also in a phase 2 clinical trial in
patients with endometriosis, a painful gynecologic condition resulting from
abnormal growth of uterine tissue, usually in the pelvic or abdominal area.
Amgen is developing a sustained duration version of G-CSF called SD/01.
NEUPOGEN(R) is indicated to reduce the incidence of infections by reducing the
duration and severity of neutropenia. Appropriate NEUPOGEN(R) doses are
administered daily to be most effective. SD/01 is being developed to provide
for less frequent dosing, possibly only once-per-cycle of chemotherapy, and
thereby potentially improve compliance and patient satisfaction. In November
2000, the Company announced that phase 3 clinical trials of SD/01 to support
breast cancer patients receiving multiple cycles of chemotherapy were
successful.
In December 2000, Amgen acquired the rights from Immunomedics, Inc. to
develop and commercialize epratuzumab. Epratuzumab is currently being evaluated
for the treatment of non-Hodgkin's lymphoma ("NHL"). Epratuzumab is a humanized
monoclonal antibody which apparently binds to the cell surface of many normal
and most malignant B-cells, a type of white blood cell. Preliminary research
and early-stage clinical trials suggest that epratuzumab may exert an anti-
tumor activity. In the fourth quarter of 2000, a phase 3 clinical trial
commenced to evaluate epratuzumab for the treatment of low-grade NHL in
patients who failed to respond, or who responded for less than 6 months, to
Rituximab, a monoclonal antibody (see "Competition--Cancer"). A phase 1/2
clinical trial of epratuzumab in combination with Rituximab to treat low-grade
and aggressive NHL also is ongoing. A phase 1/2 clinical trial in patients with
low-grade or aggressive NHL was completed in the fourth quarter of 2000.
Certain tissue growth factors are believed to play a role in tissue
protection, regeneration and/or repair processes. Mucositis is a side effect
often experienced by patients undergoing radiation therapy and chemotherapy and
is characterized as the irritation or ulceration of the lining of the
gastrointestinal tract. Amgen currently is conducting research with
Keratinocyte Growth Factor ("KGF") as a prevention and treatment for mucositis.
Phase 2 and 3 clinical trials of KGF in cancer patients suffering from
mucositis are ongoing.
Osteoprotegerin ("OPG") is implicated in the regulation of bone mass. Bone
mass is maintained in the body by the regulation of the competing activities of
bone forming cells (osteoblasts) and bone resorbing cells (osteoclasts). Cancer
metastases (cancers which have spread from their original tumor site) to bone
cause bone destruction, leading to fractures and bone pain. In preclinical
studies, OPG has been shown to inhibit the osteoclast mediated bone destruction
induced by invading cancer cells. The Company's OPG program is in a phase 1
clinical trial in patients with bone metastases.
Inflammation
The inflammatory response is essential for defense against harmful
microorganisms 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. Interleukin-1 receptor antagonist (proper name--
anakinra) and tumor necrosis factor binding protein were two product candidates
added to the Company's inflammation research
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program through the acquisition of Synergen, Inc. ("Synergen") (see "Joint
Ventures and Business Relationships--Other business relationships").
In July 1999, the Company announced that a large, controlled phase 2
clinical trial of anakinra in combination with methotrexate demonstrated
benefit over methotrexate alone for patients with rheumatoid arthritis. In
December 1999, the Company filed a licensing application with the FDA for
anakinra for the treatment of rheumatoid arthritis. Amgen plans to supplement
this application with data from two additional clinical studies in the first
quarter of 2001.
In April 1999, the Company announced that a phase 2 clinical trial of a
second generation inhibitor of tumor necrosis factor, soluble tumor necrosis
factor-receptor type I ("sTNF-RI"), was initiated in patients with rheumatoid
arthritis.
In July 2000, the Company announced that a phase 1 clinical trial of
anakinra in combination with sTNF-RI was initiated in patients with rheumatoid
arthritis.
Neurology and Metabolism
In 1997, Amgen acquired the rights from Guilford Pharmaceuticals Inc.
("Guilford") for a novel class of small molecule, orally-active, neurotrophic
agents called neuroimmunophilin compounds (see "Joint Ventures and Business
Relationships--Other business relationships"). The neuroimmunophilin compounds
are initially being developed to promote nerve regeneration and repair in
neurodegenerative disorders. In July 2000, the Company initiated a phase 2
clinical trial with neuroimmunophilins in patients with Parkinson's disease.
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. In January 2001, all
clinical development of brain-derived neurotrophic factor ("BDNF") that was
being developed in collaboration with Regeneron Pharmaceuticals, Inc.
("Regeneron") (see "Joint Ventures and Business Relationships--Other business
relationships") for the potential treatment of amyotrophic lateral sclerosis
("ALS") was discontinued following notification that BDNF did not provide a
therapeutic advantage to ALS patients in clinical trials. On behalf of the
collaboration with the Company, Regeneron is conducting clinical trials with
Neurotrophin-3 ("NT-3") for the treatment of chronic constipation.
The Company is currently developing leptin, a protein encoded by the obesity
gene. Leptin is made in fat cells and is believed to help regulate the amount
of fat stored by the body. 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 October 1998, the Company announced the results of an
interim analysis of preliminary three-month clinical data from two phase 2
clinical trials. This analysis revealed that there was no statistically
significant difference in weight loss between native leptin and placebo for the
study population as a whole. In April 1999, the Company announced that
development of native leptin for both obesity and diabetes was being
discontinued. The Company's leptin program now focuses on the development of
second generation forms of leptin. The leptin program is in phase 2 clinical
trials in obese subjects. Amgen has entered into a license agreement with
Interneuron Pharmaceuticals, Inc. pursuant to which Amgen has been granted
exclusive rights for the development and commercialization of products using
leptin receptor technology.
Joint Ventures and Business Relationships
The Company generally intends to self-market its products. From time to
time, the Company may enter into joint ventures and other business
relationships to provide additional marketing and product development
capabilities in certain countries. In addition to internal research and
development efforts, the Company has acquired certain product and technology
rights and has established research and development collaborations. Amgen has
established the relationships described below and may establish others in the
future.
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F. Hoffmann-La Roche Ltd
Amgen and Roche have entered into an 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 Amgen has a majority share in the
related costs and profits from sales. Amgen has most of the responsibilities
for marketing, promotion, distribution and other key functions relating to
product sales, and the Company distributes the product to EU countries from its
European Logistics Center in Breda, The Netherlands. Amgen and Roche have also
entered into another 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.
Amgen and Roche are also collaborating on the development of a second
generation G-CSF product, SD/01, for the EU.
Johnson & Johnson
Amgen granted Johnson & Johnson a license to commercialize recombinant human
erythropoietin as a human therapeutic in the United States in all markets other
than dialysis. In countries other than the United States, the People's Republic
of China and Japan, Johnson & Johnson was granted rights to commercialize
recombinant human erythropoietin as a human therapeutic for all uses 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
has licensed to 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 to Kirin similar rights with respect to G-CSF in Japan, Taiwan and
Korea. Kirin markets recombinant human erythropoietin and recombinant-methionyl
human granulocyte colony-stimulating factor 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. Hoffmann-La Roche Ltd"). Under
this agreement, Roche markets NEUPOGEN(R) in these countries and pays a royalty
to Kirin-Amgen on these sales.
In 1996, Kirin-Amgen licensed to Amgen and Kirin the rights to develop and
market darbepoetin alfa. Amgen has been granted an exclusive license by Kirin-
Amgen to manufacture and market darbepoetin alfa in the United States, all
European countries, Canada, Australia, New Zealand, Mexico and all Central and
South American countries. Kirin has been licensed by Kirin-Amgen with similar
rights for darbepoetin alfa 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
"Corporate partner revenues" in the Company's Consolidated Financial Statements
for the years ended December 31, 2000, 1999 and 1998, are $221.0 million,
$138.5 million and $121.0 million, respectively, related to these agreements.
In connection with its various license agreements with Kirin-Amgen, the
Company pays Kirin-Amgen royalties based on sales. During the years ended
December 31, 2000, 1999 and 1998, Kirin-Amgen earned royalties from Amgen of
$140.8 million, $128.1 million and $105.0 million, respectively, under such
agreements, which are included in "Cost of sales" in the Company's Consolidated
Financial Statements.
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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 viral
infection and any additional indications around the world except in the United
States and Canada. Amgen sells Interferon alfacon-1 under the trademark
INFERGEN(R) in the United States and Canada. 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 and Taiwan.
PRAECIS PHARMACEUTICALS INCORPORATED
In March 1999, Amgen entered into a collaboration with Praecis relating to
the development and commercialization of abarelix-depot. Amgen has been granted
the exclusive right to commercialize abarelix-depot for all indications,
including prostate cancer and endometriosis in the United States, Canada,
Australia, Japan and several secondary markets. Amgen will conduct and pay for
certain research, development and commercialization activities. In general,
Praecis will receive a transfer price and royalty based on a sharing of the
resulting profits on sales of abarelix products in the United States; Praecis
will receive a royalty on net sales of abarelix products in Amgen's territories
outside of the United States.
Other business relationships
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.
In 1994, the Company acquired Synergen, a biotechnology company. The
acquisition of Synergen principally added its inflammation program to Amgen's
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 anakinra in certain geographic areas. As a
result of the acquisition of Synergen, the general partner of SCP became a
subsidiary of Amgen. In connection with the settlement of certain litigation
relating to Synergen and SCP, Amgen acquired all of the limited partnership
units of SCP. Amgen may be required to pay future amounts to the former limited
partners that were members of the plaintiff class, other members of the
plaintiff class and their counsel if the FDA should grant approval to market
anakinra (as more specifically defined in the related settlement agreement) and
additional amounts if certain product revenues are realized.
In 1997, Amgen and Guilford entered into an agreement granting Amgen
worldwide rights for Guilford's neuroimmunophilin compounds, a novel class of
small molecule, orally-active, 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 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. In
connection with this agreement, Amgen made an equity investment in Guilford.
Marketing
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 seeks to limit its credit exposure by setting appropriate
credit limits and requiring collateral from certain customers. Sales to two
large wholesalers accounted for more than 10% of total revenues
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for the years ended December 31, 2000, 1999 and 1998. Sales to one of these
wholesalers, Bergen Brunswig Corporation, were $1,233.4 million, $1,078.0
million and $856.2 million for the years ended December 31, 2000, 1999 and
1998, respectively. Sales to the other wholesaler, Cardinal Distribution, were
$445.2 million, $438.2 million and $366.5 million for the years ended December
31, 2000, 1999 and 1998, 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"). Changes in coverage and
reimbursement policies could have a material adverse effect on EPOGEN(R) sales
(see "Factors That May Affect Amgen--Our sales depend on reimbursement and
third party payors.").
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) (see "Factors That May Affect Amgen--Our
sales depend on reimbursement and third party payors.").
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 for products in each country. Most patients receiving
NEUPOGEN(R) for approved indications are covered by government health care
programs. Generally, 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) is sold by the Company in the United States and Canada.
INFERGEN(R) is reimbursed through both private and public sources, with primary
reimbursement through private payors.
STEMGEN(R) is marketed by the Company directly to hospitals, pharmacies and
medical practitioners in Canada and Australia. Distribution is handled by third
party contractors.
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 Amgen--We face competition".
Some competitors, principally large pharmaceutical companies, have greater
clinical, research, regulatory and marketing resources and experience than the
Company, particularly in the area of small molecule therapeutics. 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
product competition 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 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, in some cases, the relative speed
with which the Company can develop products, complete the testing and approval
process and supply commercial quantities of
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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 the biotechnology
industry is conducted by small 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 or for the sale of products they have
discovered or 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 or product candidates from
these entities. Accordingly, the Company may have difficulty acquiring
technologies or product candidates on acceptable terms. Additionally, the
Company competes with these entities and with pharmaceutical and biotechnology
companies to attract and retain qualified scientific and technical personnel.
Nephrology
Any products or technologies that are directly or indirectly successful in
addressing anemia could negatively impact the market for EPOGEN(R) or for
ARANESP(TM). ARANESP(TM) will directly compete with other currently marketed
products which treat anemia, including EPOGEN(R) and the recombinant human
erythropoietin product marketed by Johnson & Johnson (see "Products--
Recombinant human erythropoietin"). Aventis S.A. ("Aventis") is developing
gene-activated erythropoietin for the treatment of anemia (see "Item 3. Legal
Proceedings--Transkaryotic Therapies and Aventis S.A. litigation").
The calcimimetic program could face competition from products currently
marketed by Abbott Laboratories, Bone Care International, Inc., Genzyme
Corporation and Roche which treat secondary HPT. In addition, another product
to treat HPT is currently being developed by Chugai Pharmaceuticals Co., Ltd.
("Chugai").
Cancer
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) has
been approved, development of chemotherapy treatments that are less
myelosuppressive than existing treatments and the availability 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 competition include other G-CSF
products, GM-CSF products, FLT-3 ligand, myelopoietin, PGG-glucan,
promegapoietin, and progenipoietin, among others.
Chugai markets a G-CSF product in Japan as an adjunct to chemotherapy and as
a treatment for BMT patients. Chugai and Aventis market a G-CSF product in
certain EU countries as an adjunct to chemotherapy and as a treatment in BMT
settings. Chugai, through its licensee, AMRAD, markets this G-CSF product in
Australia as an adjunct to chemotherapy and as a treatment for BMT patients.
Under an agreement with Amgen, Chugai is precluded from selling its G-CSF
product in the United States, Canada and Mexico.
Immunex Corporation ("Immunex") markets GM-CSF in the United States for BMT
and PBPC transplant patients and as an adjunct to chemotherapy treatments for
acute non-lymphocytic leukemia ("ANLL") and AML. Immunex is also pursuing other
indications for its GM-CSF product including as an adjunct to chemotherapy
outside the limited settings of ANLL and AML. Novartis AG markets another GM-
CSF product for use in BMT patients and as an adjunct to chemotherapy in the EU
and certain other countries. This GM-CSF product is currently being developed
for similar indications in the United States and Canada. Nartograstim, a
modified G-CSF protein, is sold by Kyowa Hakko Kogyo Co., Ltd. in Japan.
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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 markets for STEMGEN(R) and potential markets for SD/01.
Abarelix-depot could face competition from products currently marketed by
TAP Pharmaceuticals, Inc. and AstraZeneca PLC which treat prostate cancer
and/or endometriosis. In addition, other products to treat prostate cancer are
currently approved, but not yet marketed, by Pharmacia Corporation and Bayer
Corporation. Other products to treat prostate cancer are being developed by
ASTA Medica AG, Atrix Laboratories, Inc. and Sanofi-Synthelabo.
NHL is primarily treated with standard chemotherapy agents, monoclonal
antibodies, or a combination of the two modalities. Epratuzumab could face
competition from Rituximab, another monoclonal antibody marketed jointly by
Genentech, Inc. and Idec Pharmaceuticals Corporation. However, it is also
possible that Epratuzumab may be used in combination with Rituximab (see
"Product candidates--Cancer"). In addition, other monoclonal antibodies are
being investigated for the treatment of NHL including those in development by
GlaxoSmithKline plc (in collaboration with Beckman Coulter, Inc.) and Idec
Pharmaceuticals Corporation.
Many companies are developing products that promote wound healing, soft
tissue regeneration and chemoprotection. Companies such as Human Genome
Sciences, Inc., Genetics Institute, Inc., U.S. Bioscience, Inc./MedImmune,
Inc., IntraBiotics Pharmaceuticals, Inc. and ALZA Corporation are currently
among many companies that are developing products which could be potential
competitors for KGF.
The OPG program could face competition from a product currently marketed by
Novartis AG for the treatment of cancer metastases to the bone.
Inflammation
Anakinra and sTNF-RI could face competition from a number of companies
developing or marketing rheumatoid arthritis treatments. Current anti-arthritic
treatments include generic methotrexate and other products marketed by
Centocor, Inc./Johnson & Johnson, Immunex/American Home Products Corporation,
Merck & Co., Inc., Pharmacia Corporation, Novartis AG and Sanofi-Synthelabo. In
addition, a number of companies have cytokine inhibitors in development
including Abbott Laboratories, GlaxoSmithKline plc and Taisho Pharmaceutical
Co., Ltd.
Neurology and Metabolism
Several companies are developing neurotrophic factors that could compete
with the neuroimmunophilin program or NT-3. These companies include Abbott
Laboratories, Astra AB, Cephalon Inc., Kosan Biosciences Inc., Regeneron,
Schering AG, SIBIA Neurosciences, Inc./Merck & Co., Inc. and Vertex
Pharmaceuticals Incorporated.
Many companies currently market or are believed to be developing obesity
treatments that could compete with the leptin program. Potential future
competitors include Millennium Pharmaceuticals, Inc. (in collaboration with
Roche), Neurogen Corporation (in collaboration with Pfizer Inc.), Bristol Myers
Squibb Company, Novartis AG, Eli Lilly and Company and Merck & Co., Inc. Knoll
AG and Roche currently market obesity treatments in various countries.
Other
INFERGEN(R) competes with other interferons and related products, several of
which are in development or on the market. Schering-Plough Corporation and
Roche are major suppliers of interferons. The Company cannot predict the extent
to which it will maintain its share or further penetrate this market.
Interferon Sciences, Inc. could be a potential competitor in this arena.
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Research and Development
The Company's primary sources of new product candidates are internal
research and acquisition and licensing from third parties. Amgen's internal
research capabilities include an expertise in secreted protein therapeutics.
The Company's discovery program may yield targets that lead to the development
of therapeutics delivered as proteins, small molecules or monoclonal
antibodies. Amgen has only recently entered the small molecule field. To
supplement its small molecule discovery program, in December 2000, Amgen
acquired Kinetix Pharmaceuticals, Inc. ("Kinetix"), a privately held company
that focused on the discovery of small molecule drugs that inhibit protein
kinases, a key class of biological regulators (see Note 11 to the Consolidated
Financial Statements). Research and development expenses for the years ended
December 31, 2000, 1999 and 1998 were $845.0 million, $822.8 million and $663.3
million, respectively. Additionally, the Company recorded a $30.1 million
write-off of acquired in-process research and development during the year ended
December 31, 2000 arising from the acquisition of Kinetix (see Note 4 to the
Consolidated Financial Statements).
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 (see
"Factors That May Affect Amgen--Our operations are significantly regulated.").
In order to clinically test, manufacture and market products for therapeutic
use, Amgen must satisfy mandatory procedures and safety and effectiveness
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 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 laboratory analysis and preclinical testing in
animals, an investigational new drug application is filed with the FDA to begin
human testing. Typically, a three-phase human clinical testing program is then
undertaken. In phase 1, small clinical trials are conducted to determine the
safety of the product. In phase 2, clinical trials are conducted to assess
safety, acceptable dose and gain preliminary evidence of the efficacy of the
product. In phase 3, clinical trials are conducted to provide sufficient data
for the statistically valid proof of safety and efficacy. The time and expense
required to perform this clinical testing can vary and is substantial. No
action can be taken to market any new drug or biologic product in the United
States until an appropriate marketing application has been approved by the FDA.
Even after initial FDA approval has been obtained, further clinical trials may
be required to provide additional data on safety and effectiveness and are
required to gain clearance for the use of a product as a treatment for
indications other than those initially approved. In addition, side effects or
adverse events that are reported during clinical trials can delay, impede, or
prevent marketing approval. Similarly, adverse events that are reported after
marketing approval can result in additional limitations being placed on the
product's use and, potentially, withdrawal of the product from the market. Any
adverse event, either before or after marketing approval, can result in product
liability claims against the Company.
In addition to regulating and auditing human clinical trials, the FDA
regulates and inspects equipment, facilities and processes 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
Practice and product-specific regulations enforced by the FDA through its
facilities inspection program. The FDA also conducts regular, periodic visits
to re-inspect equipment, facilities and processes following the initial
approval. If, as a result of these inspections, the FDA determines that the
Company's equipment, facilities or processes do not comply with applicable FDA
regulations and conditions of product approval, the FDA may seek civil,
criminal, or administrative sanctions and/or remedies against Amgen, including
the suspension of the Company's manufacturing operations.
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In the EU countries, Canada and Australia, regulatory requirements and
approval processes are similar in principle to those in the United States.
Additionally, depending on the type of drug for which approval is sought, there
are currently two potential tracks for marketing approval in the EU countries:
mutual recognition and the centralized procedure. These review mechanisms may
ultimately lead to approval in all EU countries, but each method grants all
participating countries some decision making authority in product approval.
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 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, as well as the
possibility of exclusion from federal health care programs (including Medicare
and Medicaid). If the government were to allege against or convict the Company
of violating these laws, there could be a material adverse effect on the
Company, including its stock price. The Company's activities could 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 PHS, as well as hospitals that
serve a disproportionate share of poor Medicare and Medicaid beneficiaries. The
rebate amount 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 product prices for purchases by the Veterans
Administration, the Department of Defense, Coast Guard and the PHS (including
the Indian Health Service) be discounted by a minimum of 24 percent off the AMP
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 government under
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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 and 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 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 or licensed. 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 Amgen--Intellectual property and legal matters can
affect our business.".
The Company has filed applications for a number of patents and has been
granted patents relating to its erythropoietin, G-CSF, darbepoetin alfa,
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 generally cover DNA and host cells
(issued in 1987); processes for making erythropoietin (issued in 1995 and
1997); certain product claims to erythropoietin (issued in 1996 and 1997);
cells that make certain levels of erythropoietin (issued in 1998); and
pharmaceutical compositions of erythropoietin (issued in 1999). These patents
have varying expiration dates, with the latest erythropoietin related patents
expiring in 2015; all other patents expire earlier. The USPTO has also issued
to the Company patents relating to aspects of DNAs, vectors, cells and
processes relating to recombinant G-CSF (issued in 1989); other aspects of
DNAs, vectors, cells and processes relating to recombinant G-CSF (issued in
1991); G-CSF polypeptides (issued in 1996); methods of treatment using G-CSF
polypeptides (issued in 1996); methods of enhancing bone marrow transplantation
and treating burn wounds (issued in 1997); methods for recombinant production
of G-CSF (issued in 1998); and analogs of G-CSF (issued in 1999). The last to
issue G-CSF patents expire in 2014; all other patents expire earlier.
Additionally, U.S. patents pertaining to pegylated G-CSF (SD/01) expire in
2015. The patent relating to erythropoietin for the EU expires in 2004. The
patent relating to G-CSF for the EU expires in 2006. The Company has two
patents in the EU relating to darbepoetin alfa and hyperglycosylated
erythropoietic proteins which expire in 2010 and 2014, respectively.
There can be no assurance that Amgen's patents or licensed patents will
afford legal protection against competitors or provide significant proprietary
protection or competitive advantage. In addition, Amgen's patents or licensed
patents could be held invalid or unenforceable by a court, or infringed or
circumvented by others, or others could 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, small molecules, compounds
or processes competitive with those of the
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Company. Additionally, for certain of the Company's product candidates,
competitors or potential competitors may claim that their existing or pending
patents prevent the Company from commercializing such product candidates in
certain territories.
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 license 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, material consultants, scientific advisors and
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. However, others
could 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 other countries.
Manufacturing and Raw Materials
Amgen has manufacturing facilities which produce commercial quantities of
Epoetin alfa, NEUPOGEN(R) (Filgrastim), INFERGEN(R) (Interferon alfacon-1) and
STEMGEN(R) (Ancestim) (see "Item 2. Properties"). The Company additionally
supplies Epoetin alfa to Johnson & Johnson under a supply agreement. There can
be no assurance that the Company will be able to accurately anticipate future
demand for Epoetin alfa, NEUPOGEN(R), INFERGEN(R) and STEMGEN(R) or maintain
adequate manufacturing capacity (see "Factors That May Affect Amgen--We plan to
grow rapidly.").
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 and alternate
source development, where feasible. 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. The Company is investigating
screening procedures with respect to certain biological sources and
alternatives to them. Raw materials may be subject to contamination and/or
recall. A material shortage, contamination and/or recall could adversely impact
or disrupt Amgen's commercial manufacturing of its products.
Human Resources
As of December 31, 2000, the Company had approximately 7,300 employees, of
which approximately 3,800 were engaged in research and development,
approximately 1,500 were engaged in sales and marketing and approximately 2,000
were engaged in other activities. 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.
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Executive Officers of the Registrant
The executive officers of the Company, their ages as of March 1, 2001 and
positions are as follows:
Mr. Kevin W. Sharer, age 52, has served as a director of the Company since
November 1992. He became Chief Executive Officer and President in May 2000 and
Chairman of the Board in December 2000, having 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.
Mr. Stan M. Benson, age 49, 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 June 1976 to June 1995.
Dr. Fabrizio Bonanni, age 54, has served as Senior Vice President, Quality
and Compliance, since joining the Company in April 1999. Prior to joining the
Company, Dr. Bonanni had been the Corporate Vice President for
Regulatory/Clinical Affairs for Baxter International Inc. ("Baxter"), a
pharmaceutical company, from December 1997 to April 1999, Corporate Vice
President, Quality System from November 1994 to December 1997, and has held a
variety of quality, regulatory and manufacturing positions with Baxter in
Europe and in the U.S. since 1974.
Ms. Kathryn E. Falberg, age 40, became Senior Vice President, Finance and
Corporate Development, and Chief Financial Officer in August 2000, having
served as Senior Vice President, Finance and Chief Financial Officer since
December 1998, as Vice President, Finance, Chief Financial Officer and Chief
Accounting Officer since May 1998 and as Vice President, Corporate Controller
and Chief Accounting Officer from June 1997 to May 1998. Previously, Ms.
Falberg had served as Vice President and Treasurer from December 1996 to June
1997, and as Treasurer since joining the Company in January 1995.
Dr. Dennis M. Fenton, age 49, became Executive Vice President, in March
2000, having served as Senior Vice President, Operations, since January 1995,
having served as Senior Vice President, Sales and Marketing, from August 1992
to January 1995, 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. George J. Morrow, age 48, became Executive Vice President of Worldwide
Sales and Marketing, in January 2001. Prior to joining the Company, from
January 1999 until December 2000, Mr. Morrow was President and Chief Executive
Officer of Glaxo Wellcome Inc. ("Glaxo"), a subsidiary of GlaxoSmithKline plc.
From January 1997 until December 1998, Mr. Morrow was Managing Director of
Glaxo Wellcome U.K., also a subsidiary GlaxoSmithKline plc. From May 1993 until
December 1996, Mr. Morrow was Group Vice President for Commercial Operations of
Glaxo.
Dr. George Morstyn, age 50, became Senior Vice President, Development and
Chief Medical Officer in October 1999, having served as Vice President, Product
Development and Chief Medical Officer since June 1998 and as Vice President,
Clinical Development and Chief Medical Officer from September 1993 to June
1998. Dr. Morstyn previously served as Vice President, Clinical and Medical
Affairs from July 1991 to September 1993.
Mr. Steven M. Odre, age 51, became Senior Vice President, General Counsel
and Secretary in March 2000, having served as Vice President, Intellectual
Property, and Associate General Counsel since October 1988, and having served
as Associate General Counsel from March 1988 to October 1988. From May 1986 to
March 1988, he served as Director of Intellectual Property.
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Dr. Roger M. Perlmutter, age 48, became Executive Vice President of Research
and Development in January 2001. Prior to joining the Company, from July 1999
until December 2000, Dr. Perlmutter was Executive Vice President, Worldwide
Basic Research and Preclinical Development of Merck Research Laboratories
("Merck"). From February 1999 until July 1999, Dr. Perlmutter was Executive
Vice President of Merck. From February 1997 until January 1999, Dr. Perlmutter
was Senior Vice President of Merck. Prior to February 1997, Dr. Perlmutter was
Chairman of the Department of Immunology, University of Washington from May
1989 until January 1997, Professor in the Departments of Immunology,
Biochemistry and Medicine, University of Washington from January 1991 until
January 1997 and Investigator, the Howard Hughes Medical Institute at the
University of Washington from October 1991 until January 1997.
Mr. Barry D. Schehr, age 45, became Vice President, Financial Operations and
Chief Accounting Officer in May 2000, having served as Vice President,
Accounting and Financial Operations since March 2000 and as Director of
Internal Audit from February 1997 to February 2000. Prior to joining the
Company, Mr. Schehr had been a partner with Ernst & Young LLP, an accounting
firm, from October 1989 to January 1997.
Geographic Area Financial Information
For financial information concerning the geographic areas in which the
Company operates, see Note 10 to the Consolidated Financial Statements.
Factors That May Affect Amgen
Amgen operates in a rapidly changing environment that involves a number of
risks, some of which are beyond our control. The following discussion
highlights some of these risks and others are discussed elsewhere in this Form
10-K.
Results of our product development are uncertain.
We intend to continue an aggressive product development program. Successful
product development in the biotechnology industry is highly uncertain, and very
few research and development projects produce a commercial product. Product
candidates that appear promising in the early phases of development, such as in
early human clinical trials, may fail to reach the market for a number of
reasons, such as:
-- the product candidate did not demonstrate acceptable clinical trial
results even though it demonstrated positive preclinical trial results
-- the product candidate was not effective in treating a specified
condition or illness
-- the product candidate had harmful side effects on humans
-- the necessary regulatory bodies (such as the FDA) did not approve our
product candidate for an indicated use
-- the product candidate was not economical for us to manufacture it
-- other companies or people have or may have proprietary rights to our
product candidate (e.g. patent rights) and will not let us sell it on
reasonable terms, or at all
-- the product candidate is not cost effective in light of existing
therapeutics
Several of our product candidates have failed at various stages in the
product development process, including BDNF, Megakaryocyte Growth and
Development Factor (MGDF) and glial cell-line derived neurotrophic factor
(GDNF). For example, in 1997, we announced the failure of BDNF (for the
treatment of ALS by subcutaneous injection administration route), because the
product candidate, as administered, did not produce acceptable clinical results
in a specific indication after a phase 3 trial, even though BDNF had progressed
successfully through preclinical and earlier clinical trials. In addition, some
of our other product
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candidates have failed in clinical trials. Of course, there may be other
factors that prevent us from marketing a product. We cannot guarantee we will
be able to produce commercially successful products. Further, clinical trial
results are frequently susceptible to varying interpretations by scientists,
medical personnel, regulatory personnel, statisticians and others which may
delay, limit or prevent further clinical development or regulatory approvals of
a product candidate. Also, the length of time that it takes for us to complete
clinical trials and obtain regulatory approval for product marketing has in the
past varied by product and by the indicated use of a product. We expect that
this will likely be the case with future product candidates and we cannot
predict the length of time to complete necessary clinical trials and obtain
regulatory approval. See "--Our operations are significantly regulated."
Our operations are significantly regulated.
Our research, preclinical testing, clinical trials, facilities,
manufacturing, pricing and sales and marketing are subject to extensive
regulation by numerous state and federal governmental authorities in the U.S.,
such as the FDA and the Health Care Financing Administration ("HCFA"), as well
as by foreign countries and the European Union (the "EU"). Currently, we are
required in the U.S. and in foreign countries to obtain approval from those
countries' regulatory authorities before we can market and sell our products in
those countries. The success of our current and future products will depend in
part upon obtaining and maintaining regulatory approval to market products in
approved indications in the U.S. and foreign markets. In our experience, the
regulatory approval process is a lengthy and complex process, both in the U.S.
and in foreign countries, including countries in the EU. Even if we obtain
regulatory approval, both our manufacturing processes and our marketed products
are subject to continued review. Later discovery of previously unknown problems
with our products or manufacturing processes may result in restrictions on such
products or manufacturing processes, including withdrawal of the products from
the market. If we fail to obtain necessary approvals, or if any prior approvals
are restricted, suspended or revoked, or if we fail to comply with regulatory
requirements, then regulatory authorities could prevent us from manufacturing
or selling our products which could have a material adverse effect on us and
our results of operations.
Our sales depend on reimbursement and third party payors.
In both domestic and foreign markets, sales of our products are dependent,
in part, on the availability of reimbursement from third party payors such as
state and federal governments (for example, under Medicare and Medicaid
programs in the U.S.) and private insurance plans. In certain foreign markets,
the pricing and profitability of our products generally are subject to
government controls. In the U.S., there have been, and we expect there will
continue to be, a number of state and federal proposals that limit the amount
that state or federal governments will pay to reimburse the cost of drugs. In
addition, we believe the increasing emphasis on managed care in the U.S. has
and will continue to put pressure on the price and usage of our products, which
may impact product sales. Further, when a new therapeutic is approved, the
reimbursement status and rate of such a product is uncertain. For example, we
believe that sales of ARANESP(TM) will be affected by government and private
payor reimbursement policies. In addition, current reimbursement policies for
existing products may change at any time. Changes in reimbursement or our
failure to obtain reimbursement for our products may reduce the demand for, or
the price of, our products, which could result in lower product sales or
revenues which could have a material adverse effect on us and our results of
operations. For example, in the U.S. the use of EPOGEN(R) in connection with
treatment for end stage renal disease is funded primarily by the U.S. federal
government. Therefore, as in the past, EPOGEN(R) sales could be affected by
future changes in reimbursement rates or the basis for reimbursement by the
federal government. For example, in early 1997, HCFA instituted a reimbursement
change for EPOGEN(R) which adversely affected the Company's EPOGEN(R) sales,
until the policies were revised.
Guidelines and recommendations can affect the use of our products.
Government agencies promulgate regulations and guidelines directly
applicable to us and to our products. However, professional societies, practice
management groups, private health/science foundations and
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organizations involved in various diseases from time to time may also publish
guidelines or recommendations to the health care and patient communities.
Recommendations of government agencies or these other groups/organizations may
relate to such matters as usage, dosage, route of administration and use of
concomitant therapies. Organizations like these have in the past made
recommendations about our products. Recommendations or guidelines that are
followed by patients and health care providers could result in decreased use of
our products. In addition, the perception by the investment community or
stockholders that such recommendations or guidelines will be followed could
adversely affect prevailing market prices for our common stock.
Intellectual property and legal matters can affect our business.
The patent positions of pharmaceutical and biotechnology companies can be
highly uncertain and often involve complex legal, scientific and factual
questions. To date, there has emerged no consistent policy regarding breadth of
claims allowed in such companies' patents. Accordingly, the patents and patent
applications relating to our products, product candidates and technologies may
be challenged, invalidated or circumvented by third parties and might not
protect us against competitors with similar products or technology. For certain
of our product candidates, there are third parties who have patents or pending
patents that they may claim prevent us from commercializing these product
candidates in certain territories. Patent disputes are frequent and can
preclude commercialization of products. We are currently, and in the future may
be, involved in patent litigation. For example, we are involved in ongoing
patent infringement lawsuits against Transkaryotic Therapies, Inc. and Aventis
with respect to our erythropoietin patents. If we ultimately lose these
litigations, we could be subject to competition and/or significant liabilities,
we could be required to enter into third party licenses or we could be required
to cease using the technology or product in dispute. In addition, we cannot
guarantee that such licenses will be available on terms acceptable to us.
We face competition.
We operate in a highly competitive environment. Our principal competitors
are pharmaceutical and biotechnology companies. Some of our competitors, mainly
large pharmaceutical corporations, have greater clinical, research, regulatory
and marketing resources than we do. In addition, some of our competitors may
have technical or competitive advantages over us for the development of
technologies and processes and may acquire technology from academic
institutions, government agencies and other private and public research
organizations. We cannot guarantee that we will be able to produce or acquire
rights to products that have commercial potential. In addition, even if we
achieve successful product commercialization, it is possible that one or more
of our competitors will achieve product commercialization earlier than we do,
obtain patent protection that dominates or adversely affects our activities, or
have significantly greater marketing capabilities.
Our operating results may fluctuate.
Our operating results may fluctuate from period to period for a number of
reasons. In budgeting our operating expenses, we assume that revenues will
continue to grow; however, some of our operating expenses are fixed in the
short term. Because of this, even a relatively small revenue shortfall may
cause a period's results to be below our expectations or projections. A revenue
shortfall could arise from any number of factors, such as:
-- lower than expected demand for our products
-- changes in the government's or private payors' reimbursement policies
for our products
-- changes in wholesaler buying patterns
-- increased competition from new or existing products
-- fluctuations in foreign currency exchange rates
-- changes in our product pricing strategies
Of course, there may be other factors that affect the Company's revenues in any
given period.
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We plan to grow rapidly.
We have an aggressive growth plan that includes substantial and increasing
investments in research and development, sales and marketing and facilities.
Our plan has a number of risks, for example:
-- we may need to generate higher revenues to cover a higher level of
operating expenses
-- we may need to attract and assimilate a large number of new employees
-- we may need to manage complexities associated with a larger and faster
growing organization
-- we may need to accurately anticipate demand for the products we
manufacture and maintain adequate manufacturing capacity
Of course, there may be other risks and we cannot guarantee that we will be
able to successfully manage these or other risks.
Our stock price is volatile.
Our stock price, like that of other biotechnology companies, is highly
volatile. Our stock price may be affected by such factors as:
-- clinical trial results
-- product-development announcements by us or our competitors
-- regulatory matters
-- announcements in the scientific and research community
-- intellectual property and legal matters
-- changes in reimbursement policies or medical practices
-- broader industry and market trends unrelated to our performance
In addition, if our revenues or earnings in any period fail to meet the
investment community's expectations, there could be an immediate adverse impact
on our stock price.
Item 2. PROPERTIES
Amgen's principal executive offices and a majority of its administrative,
manufacturing and research and development facilities are located in thirty-
nine buildings in Thousand Oaks, California. Thirty-five of the buildings are
owned and four are leased. Adjacent to these buildings are facilities that are
under construction and additional property for future expansion. The Thousand
Oaks, California properties include manufacturing facilities licensed by
various regulatory bodies that produce commercial quantities of Epoetin alfa,
NEUPOGEN(R) (Filgrastim), INFERGEN(R) (Interferon alfacon-1) and STEMGEN(R)
(Ancestim). These properties also include a manufacturing facility capable of
producing commercial quantities of ARANESP(TM) (darbepoetin alfa).
Amgen owns two buildings and leases four buildings in Boulder, Colorado,
housing research facilities and a manufacturing facility capable of producing
commercial quantities of anakinra. The Company has a manufacturing complex in
Longmont, Colorado, that is licensed to produce commercial quantities of
Epoetin alfa. Amgen also plans on using the Longmont facility to produce
commercial quantities of ARANESP(TM) (darbepoetin alfa). The Company has
acquired approximately 159 acres of undeveloped land adjacent to the Longmont
site to accommodate future expansion.
Elsewhere in North America, the Company owns a distribution center in
Louisville, Kentucky, and leases a research facility and administrative offices
in Canada, a research facility in Medford Massachusetts, an
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administrative office in Washington, D.C. and five regional sales offices in
the U.S. The Company also owns land in Cambridge, Massachusetts, where a
research facility is currently being constructed.
Outside North America, the Company has a manufacturing 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 fourteen European countries, Australia, Japan, Taiwan and
the People's Republic of China for administration, marketing and/or 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. While it is
impossible to predict accurately or to determine the eventual outcome of these
matters, the Company believes that the outcome of these proceedings will not
have a material adverse effect on the annual financial statements of the
Company.
Biogen litigation
On March 10, 1995, Biogen, Inc. ("Biogen") filed suit in the United States
District Court for the District of Massachusetts (the "Massachusetts District
Court") alleging infringement by the Company of certain claims of U.S. Patent
No. 4,874,702 (the "'702 Patent"), relating to vectors for expressing cloned
genes. Biogen alleged that Amgen infringed its patent by manufacturing and
selling NEUPOGEN(R). On March 28, 1995, Biogen filed an amended complaint
further alleging that the Company also infringed the claims of two additional
patents allegedly assigned to Biogen, U.S. Patent No. 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, and host
cells. The amended complaint sought 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. The Massachusetts District Court exerted 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. On August 6, 1998, the
Massachusetts District Court issued a final claim construction order ruling
that, to be covered by claim 1 of the '702 Patent (the claim that forms the
crux of the asserted claims), a plasmid vector must contain the entire lambda
DNA sequence as represented in Figure 6 of the '702 Patent, as well as at least
one endonuclease recognition site inserted at the converted HaeIII site at
73.1% of bacteriophage lambda or at another site downstream of HaeIII, said
endonuclease recognition site being within 300 base pairs of the HincII site at
- -33, and prior to any sequences of lambda DNA downstream of the HaeIII site. On
November 17, 1999, a hearing was held on Amgen's motion for summary judgment of
non-infringement. At the hearing, the Massachusetts District Court orally ruled
that Amgen does not literally infringe. On September 25, 2000, the
Massachusetts District Court issued a Memorandum and Order finding no
infringement, literally or under the doctrine of equivalents regarding the
Company's manufacture and sale of NEUPOGEN(R). On October 12, 2000, the
Massachusetts District Court entered judgment in Amgen's favor. Biogen disputed
the finality of the Judgment and the correctness of the Massachusetts District
Court's Memorandum and Order. On December 19, 2000, Amgen filed a Motion to
Amend the Massachusetts District Court's September 25, 2000 Memorandum and
Order. On March 1, 2001, the Massachusetts District Court allowed in part
Amgen's Motion to Amend and ruled that the September 25, 2000 Order will be
amended to reflect the Massachusetts District Court's reliance on prosecution
history estoppel as a distinct and separate ground upon which to enter a
judgment of non-infringement for Amgen regarding the '702 Patent. Regarding
Amgen's Motion for Summary Judgment of Issue Preclusion, the Massachusetts
District Court ruled that its clerk will schedule a hearing on Amgen's Motion
for Summary Judgment of Issue Preclusion relating to Amgen's contention that
prosecution history estoppel and issue preclusion compel findings of non-
infringement of the '642 and '658 Patents and the dismissal of the Infergen
matter described below. It also allowed Biogen's Motion to Alter or Amend
Judgment
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to the extent that the October 12, 2000 Judgment was not final in that it did
not formally dispose of Amgen's pending counterclaims nor did it contain a
certification under Rule 54(b) of the Federal Rules of Civil Procedure. The
Massachusetts District Court ruled that it will vacate the October 12, 2000
Judgment and instructed its clerk to issue a substitute Judgment in favor of
Amgen as to any alleged infringement of the claims of the '702 Patent. The
Massachusetts District Court further ruled that Amgen's counterclaims are
dismissed without prejudice as moot. The remaining calendar of scheduled items
that were pending before the Massachusetts District Court, including trial, has
been eliminated and the Company's motions for lack of ownership and for
abandonment were dismissed as moot. The Company's motion for summary judgment
of invalidity on the basis of prior public use was denied on procedural
grounds.
In a separate matter, on July 30, 1997, Biogen filed a complaint in the
Massachusetts District Court alleging that Amgen infringes claims 9 and 17 of
the '702 Patent and the claims of the '642 and '658 Patents, identified above,
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. The
Massachusetts District Court ordered Amgen to file an answer to Biogen's
complaint and Amgen complied. All discovery in this case has been stayed. As
noted above, the Massachusetts District Court will be setting a date for a
hearing on Amgen's Motion for Summary Judgment of Issue Preclusion and for the
dismissal of this case.
INFERGEN(R) litigation
On December 3, 1996, Schering-Plough Corporation ("Schering") 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 sought
unspecified damages and injunctive relief. Biogen was added as a plaintiff in
the Delaware action. On July 30, 1998, the Delaware Court entered an order
construing the meaning of the claims of the '901 Patent. The Delaware Court
limited the scope of the claims to include DNAs that encode only "an immature,
fused, and/or incomplete form" of Interferon-alpha-1. On February 3, 1999, the
Delaware Court entered judgment of noninfringement in favor of Amgen that
INFERGEN(R) does not infringe the '901 Patent. Schering and Biogen appealed and
the appeal was argued in December 1999. The U.S. Court of Appeals affirmed the
Delaware Court's judgment of noninfringement in favor of Amgen in a decision
dated August 1, 2000.
Genentech litigation
On October 16, 1996, Genentech, Inc. ("Genentech") filed suit in the United
States District Court for the Northern District of California (the "California
Court") seeking an unspecified amount of compensatory damages, treble damages
and injunctive relief on its U.S. Patent Nos. 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 alleged
that Amgen 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 served Amgen with a reply to the counterclaim and an additional
counterclaim asserting U.S. Patent No. 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.
At a hearing held on May 29, 1998, the parties stipulated to: (i) the dismissal
with prejudice of Genentech's first claim for patent infringement against Amgen
with respect to the '832 Patent, as alleged in Genentech's complaint filed
October 16, 1996 and (ii) dismissal with prejudice of Amgen's first, second,
third and fourth claims for relief with respect to the '832 Patents as alleged
in Amgen's answer to complaint and counterclaims filed on January 21, 1997. The
judge issued a final claim construction ruling interpreting the '362, '619 and
'013 Patent
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claims which, among other things, essentially limited the claim term "control
region" to DNA taken from a single operon and not constructed from control
elements derived from various operons. It may not be constructed portion-by-
portion from multiple operons. On February 18, 2000, Amgen filed a motion to
amend its answer to allege inequitable conduct. On October 12, 2000, the
California Court entered Final Judgment in the Company's favor on the basis of
no infringement. Genentech has filed a notice of appeal. The parties are
currently briefing these issues before the Federal Circuit Court of Appeals.
Transkaryotic Therapies and Aventis S.A. litigation
On April 15, 1997, Amgen filed suit in the Massachusetts District Court
against Transkaryotic Therapies, Inc. ("TKT") and Hoechst Marion Roussel, Inc.
("HMR"--now Aventis S.A., together with TKT, the "Defendants") alleging
infringement of several U.S. patents owned by Amgen that claim an
erythropoietin product and processes for making erythropoietin. The suit sought
an injunction preventing the Defendants from making, importing, using or
selling erythropoietin in the U.S. On July 9, 1997, the Massachusetts District
Court denied TKT's motion to dismiss the lawsuit on the pleadings. On April 15,
1998, the Massachusetts District Court issued an order granting the Defendants'
motion for summary judgment of non-infringement on the grounds that Defendants'
activities to date were protected by the clinical trial exemption. The
Massachusetts District Court also ruled that the action would be
administratively closed to be re-opened upon motion of either party for good
cause shown. In June 1999, the Defendants filed a motion to reopen the case
with which Amgen concurred. On October 7, 1999, Amgen filed an amended
complaint which added two additional patents to the litigation. Defendants'
amended answer asserted that all five of the patents-in-suit were not
infringed, were invalid or were unenforceable due to inequitable conduct.
Discovery by both sides was completed in 1999. The Defendant's motion for
summary judgment of invalidity of three of the patents was denied on January
18, 2000. Amgen's motion for summary judgment of literal infringement was
granted by the Massachusetts District Court on April 26, 2000 with respect to
claim 1 of U.S. Patent No. 5,955,422 (the "'422 Patent"). Also on April 26,
2000, the Massachusetts District Court denied Amgen's motion for summary
judgment with respect to claims 1 and 4 of U.S. Patent No. 5,756,349 (the "'349
Patent") and deferred decision on the infringement of that patent until trial.
On May 15, 2000, trial began in the Massachusetts District Court. On June 9,
2000, the Massachusetts District Court granted motion for non-infringement of
U.S. Patent No. 5,618,698 (the "'698 Patent"), removing the '698 Patent from
this action. The Massachusetts District Court also held that, although the
Defendants' erythropoietin product does not literally fall within the scope of
U.S. Patent No. 5,621,080 (the "'080 Patent"), such product may infringe if it
is found to be equivalent to the product claimed by the '080 Patent.
Additionally, the Massachusetts District Court denied the Defendants' motion
for non-infringement of U.S. Patent No. 5,547,933 (the "'933 Patent"). On July
21, 2000, the Massachusetts District Court granted Amgen's motion for judgment
on the Defendants' defenses of invalidity based upon anticipation and
obviousness. On January 19, 2001, the Massachusetts District Court ruled that
claims 2-4 of the '080 Patent, claims 1-6 of the '349 Patent and claim 1 of the
'422 Patent were valid, enforceable and infringed by TKT's GA-EPO product and
the cells used to make such product. The Massachusetts District Court also held
that claim 7 of the '349 patent and claims 1, 2 and 9 of the '933 Patent were
not infringed, and that if infringed the claims of the '933 patent would be
invalid. On January 26, 2001, TKT and HMR filed a Notice of Appeal and on
February 14, 2001, Amgen filed a Notice of Cross-Appeal, to the U.S. Court of
Appeals for the Federal Circuit.
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, 2000.
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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 February 28, 2001, there were approximately 17,000 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 utilize 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 2000 and 1999:
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
2000
4th Quarter................................................ $71.38 $54.13
3rd Quarter................................................ 78.00 64.94
2nd Quarter................................................ 70.38 51.31
1st Quarter................................................ 74.69 52.25
1999
4th Quarter................................................ $64.88 $37.84
3rd Quarter................................................ 43.78 29.50
2nd Quarter................................................ 40.00 26.16
1st Quarter................................................ 39.53 26.14
</TABLE>
25
<PAGE>
Item 6. SELECTED FINANCIAL DATA
(in millions, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenues:
Product sales(1)............ $3,202.2 $3,042.8 $2,514.4 $2,219.8 $2,088.2
Other revenues.............. 427.2 297.3 203.8 181.2 151.6
Total revenues............ 3,629.4 3,340.1 2,718.2 2,401.0 2,239.8
Research and development
expenses..................... 845.0 822.8 663.3 630.8 528.3
Selling, general and
administrative expenses...... 826.9 654.3 515.4 483.8 470.6
Other items, net(2)........... (18.8) (49.0) (23.0) 157.0 --
Net income.................... 1,138.5 1,096.4 863.2 644.3 679.8
Diluted earnings per share.... 1.05 1.02 0.82 0.59 0.61
Cash dividends declared per
share........................ -- -- -- -- --
<CAPTION>
At December 31,
-----------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Total assets.................. $5,399.6 $4,077.6 $3,672.2 $3,110.2 $2,765.6
Long-term debt................ 223.0 223.0 223.0 229.0 59.0
Stockholders' equity.......... 4,314.5 3,023.5 2,562.2 2,139.3 1,906.3
</TABLE>
- --------
(1) Due to Year 2000 contingency planning in the fourth quarter of 1999, the
Company offered extended payment terms on limited shipments of EPOGEN(R)
and NEUPOGEN(R) to certain wholesalers. These Year 2000 related sales
totaled $45 million, or $0.02 per share, in 1999.
(2) Amounts primarily comprised of benefits and expenses related to various
legal proceedings. The amount in 2000 also includes a write-off of acquired
in-process research and development of $30.1 million and a charitable
contribution of $25 million to the Amgen Foundation. See Notes 4 and 11 to
the Consolidated Financial Statements for a discussion of the amounts in
2000, 1999 and 1998. Other items, net increased/(decreased) earnings per
share by $0.00 in 2000, $0.03 in 1999, $0.01 in 1998 and ($0.09) in 1997.
26
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
The Company had cash, cash equivalents and marketable securities of $2,028.1
million at December 31, 2000, compared with $1,333.0 million at December 31,
1999. Cash provided by operating activities has been and is expected to
continue to be the Company's primary source of funds. In 2000, operations
provided $1,634.6 million of cash compared with $1,226.9 million in 1999.
Capital expenditures totaled $437.7 million in 2000 compared with $304.2
million in 1999. The Company anticipates spending approximately $450 million to
$550 million in 2001 on capital projects and equipment to expand the Company's
operations.
The Company receives cash from the exercise of employee stock options and
proceeds from the sale of stock by Amgen pursuant to the employee stock
purchase plan. In 2000, employee stock option exercises and proceeds from the
sale of stock by Amgen pursuant to the employee stock purchase plan provided
$333.7 million of cash compared with $248.8 million in 1999. Proceeds from the
exercise of employee stock options will vary from period to period based upon,
among other factors, fluctuations in the market value of the Company's stock
relative to the exercise price of such options.
The Company has a stock repurchase program primarily to reduce the dilutive
effect of its employee stock option and stock purchase plans. In 2000, the
Company repurchased 12.2 million shares of its common stock at a total cost of
$799.9 million, and in 1999, the Company repurchased 27.1 million shares of
common stock at a cost of $1,024.7 million. In December 2000, the Board of
Directors authorized the Company to repurchase up to $2 billion of common stock
between January 1, 2001 and December 31, 2002. The amount the Company spends on
and the number of shares repurchased each quarter varies based on a variety of
factors, including the stock price and blackout periods in which the Company is
restricted from repurchasing shares.
To provide for financial flexibility and increased liquidity, the Company
has established several sources of debt financing. As of December 31, 2000, the
Company had $223 million of unsecured long-term debt securities outstanding.
These unsecured long-term debt securities consisted of: 1) $100 million of debt
securities that bear interest at a fixed rate of 6.5% and mature in 2007 under
a $500 million debt shelf registration (the "Shelf"), 2) $100 million of debt
securities that bear interest at a fixed rate of 8.1% and mature in 2097 and 3)
$23 million of debt securities that bear interest at a fixed rate of 6.2% and
mature in 2003. Under the Shelf, all of the remaining $400 million of debt
securities available for issuance may be offered under the Company's medium-
term note program with terms to be determined by market conditions.
The Company's sources of debt financing also include a commercial paper
program which provides for unsecured short-term borrowings up to an aggregate
face amount of $200 million. As of December 31, 2000, commercial paper with a
face amount of $100 million was outstanding. These borrowings had maturities of
less than two months and had effective interest rates averaging 6.7%. In
addition, the Company has an unsecured $150 million credit facility that
expires on May 28, 2003. This credit facility supports the Company's commercial
paper program. As of December 31, 2000, no amounts were outstanding under this
line of credit.
The primary objectives for the Company's investment portfolio are liquidity
and safety of principal. Investments are made to achieve the highest rate of
return to the Company, consistent with these two objectives. The Company's
investment policy limits investments to certain types of instruments issued by
institutions with investment grade credit ratings and places restrictions on
maturities and concentration by type and issuer.
The Company 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.
27
<PAGE>
Results of Operations
Product sales
Product sales were $3,202.2 million in 2000, an increase of $159.4 million
or 5% over the prior year. In 1999, product sales were $3,042.8 million, an
increase of $528.4 million or 21% over the prior year. Quarterly product sales
are influenced by a number of factors, including underlying demand, wholesaler
inventory management practices and foreign exchange effects.
EPOGEN(R) (Epoetin alfa)
EPOGEN(R) sales were $1,962.9 million in 2000, an increase of $203.8 million
or 12% over the prior year. This increase was primarily due to higher demand,
which was principally driven by growth in the U.S. dialysis patient population
and to a lesser extent, the effect of higher prices. Sales in 2000 were
adversely impacted by Year 2000-related sales to wholesalers in the fourth
quarter of 1999 for which the Company provided extended payment terms and, the
Company believes, by dialysis provider inventory drawdowns in 2000 of
additional 1999 year-end stockpiling. The Company believes that some of this
dialysis provider stockpiling may have been due to Year 2000 concerns and year-
end contract expirations. In 1999, EPOGEN(R) sales were $1,759.1 million, an
increase of $377.1 million or 27% over the prior year. This increase was
primarily due to higher demand, principally driven by the administration of
higher doses and growth in the U.S. dialysis patient population. The
administration of higher doses of EPOGEN(R) was principally due to dialysis
providers managing more patients into the hematocrit range of 33 to 36 percent
as recommended by the Dialysis Outcomes Quality Initiative, as well as the use
of hemoglobin instead of hematocrit to measure red blood cell volume.
NEUPOGEN(R) (Filgrastim)
Worldwide NEUPOGEN(R) sales were $1,223.7 million in 2000, a decrease of
$32.9 million or 3% from the prior year. This decrease was primarily due to the
adverse impact of wholesaler buying patterns, including Year 2000-related sales
to wholesalers in the fourth quarter of 1999 for which the Company provided
extended payment terms, as well as adverse foreign exchange effects. The
Company believes these factors were partially offset by a mid-single digit rate
increase in demand, which includes the effect of higher prices in the U.S. In
1999, worldwide NEUPOGEN(R) sales were $1,256.6 million, an increase of $140.0
million or 13% over the prior year. This increase was primarily due to higher
demand, which includes the effect of higher prices in the U.S., and the impact
of approximately $29 million of Year 2000-related sales to wholesalers in the
fourth quarter of 1999 for which the Company provided extended payment terms.
Other product sales
Other product sales primarily consist of INFERGEN(R) (Interferon alfacon-1).
INFERGEN(R) sales were $14.5 million in 2000, a decrease of $11.7 million or
45% from the prior year. In 1999, INFERGEN(R) sales were $26.2 million, an
increase of $10.4 million or 66% over the prior year. INFERGEN(R) was launched
in October 1997 for the treatment of chronic hepatitis C virus infection. There
are other treatments, including combination therapy, for this infection against
which INFERGEN(R) competes. The Company cannot predict the extent to which it
will maintain its share or further penetrate this market.
Corporate partner revenues
In 2000, corporate partner revenues increased $84.8 million or 53% over the
prior year. In 1999, corporate partner revenues increased $33.5 million or 26%
over the prior year. These increases were primarily due to amounts earned from
Kirin-Amgen, Inc. related to the development program for
ARANESP(TM)(darbepoetin alfa), the Company's novel erythropoiesis stimulating
protein.
28
<PAGE>
Cost of sales
Cost of sales as a percentage of product sales was 12.8%, 13.2% and 13.7%
for 2000, 1999 and 1998, respectively. The decreases in these percentages were
primarily due to increased manufacturing efficiencies.
Research and development
In 2000, research and development expenses increased $22.2 million or 3%
over the prior year. This increase was primarily due to higher staff-related
costs necessary to support ongoing research and product development activities
and higher clinical trial costs. These increases were substantially offset by a
reduction in clinical manufacturing and product licensing costs. In 1999,
research and development expenses increased $159.5 million or 24% over the
prior year. This increase was primarily due to product licensing and
development costs related to the collaboration with PRAECIS PHARMACEUTICALS
INCORPORATED and higher staff-related costs necessary to support ongoing
research and product development activities.
Selling, general and administrative
In 2000, selling, general and administrative ("SG&A") expenses increased
$172.6 million or 26% over the prior year. This increase was primarily due to
higher staff-related costs and outside marketing expenses as the Company
continues to support its existing products and prepares for anticipated new
product launches. In 1999, SG&A expenses increased $138.9 million or 27% over
the prior year primarily due to higher staff-related costs and outside
marketing expenses as the Company prepared for anticipated new product
launches.
Other items, net
Other items, net consisted of three non-recurring items: 1) legal awards
associated with the spillover arbitration with Johnson & Johnson, 2) a write-
off of acquired in-process research and development associated with the
acquisition of Kinetix Pharmaceuticals, Inc. and 3) a charitable contribution
to the Amgen Foundation. See Note 4 to the Consolidated Financial Statements.
Interest and other income
In 2000, interest and other income increased $57.9 million or 66% over the
prior year. This increase was primarily due to gains realized on the sale of
certain equity securities in the Company's portfolio and higher interest income
generated from the Company's investment portfolio as a result of higher average
cash balances and higher interest rates. In 1999, interest and other income
increased $42.6 million or 93% over the prior year. This increase was
principally due to the absence of write-downs recorded in 1998 of certain non-
current assets, primarily marketable equity securities.
Income taxes
The Company's effective tax rate was 32.0%, 30.0% and 29.5% for 2000, 1999
and 1998, respectively. The tax rate in all three years reflected the tax
benefits from the sale of products manufactured in the Company's Puerto Rico
manufacturing facility. The Company's tax rate has increased as a result of
increased taxable income combined with a provision in the federal tax law that
caps tax benefits associated with the Company's Puerto Rico operations at the
1995 income level. In addition, the 2000 tax rate increased as a result of the
write-off of acquired in-process research and development, which is not
deductible for tax purposes.
Financial Outlook
In December 1999 and early 2000, the Company filed regulatory submissions
for the use of ARANESP(TM) in patients with chronic renal insufficiency and
chronic renal failure in the U.S., the European Union, Canada, Australia and
New Zealand. The Company anticipates selling ARANESP(TM) if approved, in most
of these markets beginning in 2001. Because the Company is unable to predict
the timing and the extent
29
<PAGE>
to which health care providers in the U.S. may transition from administering
EPOGEN(R) to ARANESP(TM), 2001 sales guidance for EPOGEN(R) and ARANESP(TM)
will be provided on a combined basis. The Company expects the percentage
increase of 2001 sales of EPOGEN(R) and ARANESP(TM) combined over 2000
EPOGEN(R) sales to be in the range of high teens to low twenties. Patients
receiving treatment for end stage renal disease are covered primarily under
medical programs provided by the federal government. Therefore, EPOGEN(R) sales
may also be affected by future changes in reimbursement rates or a change in
the basis for reimbursement by the federal government. In addition, ARANESP(TM)
will be affected by government and private payor reimbursement policies.
In 2001, the Company expects the NEUPOGEN(R) sales growth rate to be in the
high single digits. The Company believes that there is a trend in some cancer
settings towards the use of chemotherapy treatments that are less
myelosuppressive. Chemotherapy treatments that are less myelosuppressive may
require less NEUPOGEN(R). Future NEUPOGEN(R) demand is dependent primarily upon
penetration of existing markets and the effects of competitive products.
NEUPOGEN(R) usage is expected to continue to be affected by cost containment
pressures from governments and private insurers on health care providers
worldwide. In addition, reported NEUPOGEN(R) sales will continue to be affected
by changes in foreign currency exchange rates. In both domestic and foreign
markets, sales of NEUPOGEN(R) are dependent, in part, on the availability of
reimbursement from third party payors such as governments (for example,
Medicare and Medicaid programs in the U.S.) and private insurance plans.
Therefore, NEUPOGEN(R) sales may also be affected by future changes in
reimbursement rates or changes in the bases for reimbursement.
INFERGEN(R) (Interferon alfacon-1) was launched in October 1997 for the
treatment of chronic hepatitis C virus infection. There are other treatments,
including combination therapy, for this infection against which INFERGEN(R)
competes. The Company cannot predict the extent to which it will maintain its
share or further penetrate this market.
For 2001, total product sales are expected to grow in the mid to high teens,
cost of sales is expected to be in the range of 11.5% to 12.5% of total product
sales, corporate partner revenues are expected to be approximately the same as
in 2000, research and development expenses and SG&A expenses are each estimated
to be in the range of 25% to 27% of total product sales, the effective tax rate
is expected to be approximately 34%, and earnings per share is expected to grow
in the mid teens.
Estimates of future product sales, operating expenses and earnings per share
are necessarily speculative in nature and are difficult to predict with
accuracy.
Except for the historical information contained herein, the matters
discussed herein are by their nature forward-looking. Investors are cautioned
that forward-looking statements or projections made by the Company, including
those made in this document, are subject to risks and uncertainties that may
cause actual results to differ materially from those projected. Reference is
made in particular to forward-looking statements regarding product sales,
earnings per share and expenses. Amgen operates in a rapidly changing
environment that involves a number of risks, some of which are beyond the
Company's control. Future operating results and the Company's stock price may
be affected by a number of factors, including, without limitation: (i) the
results of preclinical and clinical trials; (ii) regulatory approvals of
product candidates, new indications and manufacturing facilities; (iii)
reimbursement for Amgen's products by governments and private payors; (iv)
health care guidelines and policies relating to Amgen's products; (v)
intellectual property matters (patents) and the results of litigation; (vi)
competition; (vii) fluctuations in operating results and (viii) rapid growth of
the Company. These factors and others are discussed herein and in the sections
appearing under the heading "Business--Factors That May Affect Amgen" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000,
which sections are incorporated herein by reference.
30
<PAGE>
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. The Company's short-term
borrowings effectively bear interest at variable rates and therefore, changes
in U.S. interest rates affect interest expense incurred thereon. The Company
had reduced this exposure to interest rate changes by entering into an interest
rate swap agreement, which expired during 2000, that effectively changed the
interest expense incurred on a portion of its short-term borrowings to a fixed
rate. Changes in interest rates do not affect interest expense incurred on the
Company's long-term borrowings because they all bear interest at fixed rates.
The following tables provide 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 tables present 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. For the
interest rate swap, the tables present the notional amount and weighted-average
interest rates by contractual maturity date. The notional amount is used to
calculate the contractual cash flows to be exchanged under the contract.
Interest Rate Sensitivity
Principal Amount by Expected Maturity as of 12/31/99
Average Interest Rate
(Dollars in millions)
<TABLE>
<CAPTION>
Fair Value
2000 2001 2002 2003 2004 Thereafter Total 12/31/99
------ ------ ------ ----- ---- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale debt
securities............. $376.8 $721.8 $177.7 $17.0 $5.0 -- $1,298.3 $1,293.6
Interest rate........... 6.3% 6.4% 6.5% 6.0% 5.6% --
Commercial paper........ $100.0 -- -- -- -- -- $ 100.0 $ 100.0
Interest rate........... 6.4% -- -- -- -- --
Long-term debt.......... -- -- -- $23.0 -- $200.0 $ 223.0 $ 216.6
Interest rate........... -- -- -- 6.2% -- 7.3%
Interest rate swap
related to commercial
paper issuances:
Pay fixed/receive
variable............... $ 50.0 -- -- -- -- -- $ 50.0 $ 0.3
Avg. pay rate........... 5.3% -- -- -- -- --
Avg. receive rate....... 6.0% -- -- -- -- --
</TABLE>
Interest Rate Sensitivity
Principal Amount by Expected Maturity as of 12/31/00
Average Interest Rate
(Dollars in millions)
<TABLE>
<CAPTION>
Fair Value
2001 2002 2003 2004 2005 Thereafter Total 12/31/00
------ ------ ------ ------ ----- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale debt
securities............. $780.4 $740.6 $232.3 $118.5 $60.0 -- $1,931.8 $1,950.2
Interest rate........... 6.6% 6.7% 7.0% 6.5% 7.0% --
Commercial paper........ $100.0 -- -- -- -- -- $ 100.0 $ 100.0
Interest rate........... 6.7% -- -- -- -- --
Long-term debt.......... -- -- $ 23.0 -- -- $200.0 $ 223.0 $ 222.0
Interest rate........... -- -- 6.2% -- -- 7.3%
</TABLE>
The Company is exposed to equity price risks on the marketable portion of
equity securities included in its portfolio of investments entered into for the
promotion of business and strategic objectives. These investments
31
<PAGE>
are generally in small capitalization stocks in the biotechnology industry
sector. The Company typically does not attempt to reduce or eliminate its
market exposure on these securities. An 80% adverse change in equity prices
would result in a decrease of approximately $178 million and $72 million in the
fair value of the Company's available-for-sale marketable equity securities at
December 31, 2000 and 1999, respectively.
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.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
32
<PAGE>
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 2001 Annual Meeting to
be filed with the Securities and Exchange Commission within 120 days of
December 31, 2000 (the "Proxy Statement"). For information concerning the
executive officers of the Company, see "Item 1. Business--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 and Exchange Commission.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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.
33
<PAGE>
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:
<TABLE>
<CAPTION>
Page
Number
----------
<S> <C>
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, 2000............................. F-2
Consolidated Balance Sheets at December 31, 2000 and 1999.......... F-3
Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended December 31, 2000................. F-4
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 2000............................. F-5
Notes to Consolidated Financial Statements......................... F-6 - F-22
</TABLE>
(a)2. Index to Financial Statement Schedules
The following Schedule is filed as part of this Form 10-K Annual Report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
II Valuation Accounts................................................... F-23
</TABLE>
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
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation as amended.(10)
3.2 Amended and Restated Bylaws of Amgen Inc. (as amended October 24,
2000).(20)
3.3 Certificate of Amendment of Restated Certificate of Incorporation.(19)
3.4* Certificate of Designations of Series A Junior Participating Preferred
Stock.
4.1 Indenture dated January 1, 1992 between the Company and Citibank N.A.,
as trustee.(4)
4.2 First Supplement to Indenture, dated February 26, 1997 between the
Company and Citibank N.A., as trustee.(7)
4.3 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, as supplemented, establishing a series of securities "8
1/8% Debentures due April 1, 2097."(9)
4.4 8 1/8% Debentures due April 1, 2097.(9)
4.5 Form of stock certificate for the common stock, par value $.0001 of
the Company.(10)
4.6 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, dated as of January 1, 1992, as supplemented by the First
supplemental Indenture, dated as of February 26, 1997, each between
the Company and Citibank, N.A., as Trustee, establishing a series of
securities entitled "6.50% Notes Due December 1, 2007".(12)
4.7 6.50% Notes Due December 1, 2007 described in Exhibit 4.6.(12)
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
4.8 Corporate Commercial Paper--Master Note between and among Amgen Inc.,
as Issuer, Cede & Co., as nominee of The Depository Trust Company and
Citibank, N.A. as Paying Agent.(14)
10.1*+ Company's Amended and Restated 1991 Equity Incentive Plan.
10.2*+ Company's Amended and Restated 1997 Special Non-Officer Equity
Incentive Plan.
10.3* Shareholder's Agreement of Kirin-Amgen, Inc., dated May 11, 1984,
between the Company and Kirin Brewery Company, Limited.
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.(19)
10.5 Product License Agreement, dated September 30, 1985, and Technology
License Agreement, dated, September 30, 1985 between the Company and
Ortho Pharmaceutical Corporation.(19)
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.(19)
10.7+ Company's Amended and Restated Employee Stock Purchase Plan.(19)
10.8 Research, Development Technology Disclosure and License Agreement PPO,
dated January 20, 1986, by and between the Company and Kirin Brewery
Co., Ltd.(1)
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.
10.10* Assignment and License Agreement, dated October 16, 1986, between the
Company and Kirin-Amgen, Inc.
10.11* G-CSF European License Agreement, dated December 30, 1986, between
Kirin-Amgen, Inc. and the Company.
10.12*+ Company's Retirement and Savings Plan (as amended and restated
effective October 23, 2000).
10.13+ Company's Amended and Restated 1988 Stock Option Plan.(6)
10.14*+ First Amendment to the Company's Retirement and Savings Plan (as
amended and restated effective October 23, 2000).
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.(2)
10.16 Agreement on G-CSF in Certain European Countries, dated January 1,
1989, between Amgen Inc. and F. Hoffmann-La Roche & Co. Limited
Company (with certain confidential information deleted therefrom).(3)
10.17 Partnership Purchase Agreement, dated March 12, 1993, between the
Company, Amgen Clinical Partners, L.P., Amgen Development
Corporation, the Class A limited partners and the Class B limited
partner.(5)
10.18+ Amgen Inc. Supplemental Retirement Plan (As Amended and Restated
Effective November 1, 1999).(18)
10.19+ First Amendment to Amgen Inc. Change of Control Severance Plan.(19)
10.20+ Amended and Restated Amgen Performance Based Management Incentive
Plan.(17)
10.21 Credit Agreement, dated as of May 28, 1998, among Amgen Inc., the
Borrowing Subsidiaries named therein, the Banks named therein,
Citibank, N.A., as Issuing Bank, and Citicorp USA, Inc., as
Administrative Agent.(15)
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.22* G-CSF United States License Agreement dated June 1, 1987 (effective
July 1, 1986) between Kirin-Amgen, Inc. and the Company.
10.23* Amendment No. 1 dated October 20, 1988 to Kirin-Amgen, Inc./Amgen G-
CSF United States License Agreement dated June 1, 1987 (effective
July 1, 1986).
10.24* Amendment No. 2 dated October 17, 1991 (effective November 13, 1990)
to Kirin-Amgen, Inc./Amgen G-CSF United States License Agreement
dated June 1, 1987 (effective July 1, 1986).
10.25* Amendment No. 10 dated March 1, 1996 to the Shareholders' Agreement of
Kirin-Amgen, Inc. dated May 11, 1984.
10.26+ Amgen Inc. Change of Control Severance Plan effective as of October
20, 1998.(16)
10.27 Preferred Share Rights Agreement, dated as of December 12, 2000,
between Amgen Inc. and American Stock Transfer and Trust Company, as
Rights Agent.(21)
10.28+ First Amendment, effective January 1, 1998, to the Company's Amended
and Restated Employee Stock Purchase Plan.(11)
10.29* Amendment No. 11 dated March 20, 2000 to the Shareholders' Agreement
of Kirin-Amgen, Inc. dated May 11, 1984.
10.30+ Agreement between Amgen Inc. and Dr. Fabrizio Bonanni, dated March 3,
1999.(18)
10.31* Amendment No. 1 dated June 1, 1987 to Kirin-Amgen, Inc./Amgen G-CSF
European License Agreement dated December 30, 1986.
10.32* Amendment No. 2 dated March 15, 1988 to Kirin-Amgen, Inc./Amgen G-CSF
European License Agreement dated December 30, 1986.
10.33* Amendment No. 3 dated October 20, 1988 to Kirin-Amgen, Inc./Amgen G-
CSF European License Agreement dated December 30, 1986.
10.34* Amendment No. 4 dated December 29, 1989 to Kirin-Amgen, Inc./Amgen G-
CSF European License Agreement dated December 30, 1986.
10.35+ Company's Amended and Restated 1987 Directors' Stock Option Plan.(8)
10.36 Amended and Restated Agreement on G-CSF in the EU between Amgen Inc.
and F. Hoffmann-La Roche Ltd (with certain confidential information
deleted therefrom).(14)
10.37 Collaboration and License Agreement, dated December 15, 1997, between
the Company, GPI NIL Holdings, Inc. and Guilford Pharmaceuticals Inc.
(with certain confidential information deleted therefrom).(13)
10.38+ Promissory Note of Dr. Fabrizio Bonanni, dated August 7, 1999.(18)
10.39 Promissory Note of Dr. Fabrizio Bonanni, dated October 29, 1999.(18)
10.40*+ Company's Amended and Restated 1997 Equity Incentive Plan.
10.41+ Agreement between Amgen Inc. and Mr. Gordon M. Binder, dated May 10,
2000.(19)
10.42* Amendment No. 6 dated May 11, 1984 to the Shareholders' Agreement of
Kirin-Amgen, Inc. dated May 11, 1984.
10.43* Amendment No. 7 dated July 17, 1987 (effective April 1, 1987) to the
Shareholders' Agreement of Kirin-Amgen, Inc. dated May 11, 1984.
10.44* Amendment No. 8 dated May 28, 1993 (effective November 13, 1990) to
the Shareholders' Agreement of Kirin-Amgen, Inc. dated May 11, 1984.
10.45* Amendment No. 9 dated December 9, 1994 (effective June 14, 1994) to
the Shareholders' Agreement of Kirin-Amgen, Inc. dated May 11, 1984.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
21* Subsidiaries of the Company.
23 Consent of Ernst & Young LLP, Independent Auditors. The consent set
forth as page 41 is incorporated herein by reference.
24 Power of Attorney. The Power of Attorney set forth on page 40 is
incorporated herein by reference.
</TABLE>
- --------
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
(1) 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.
(2) 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.
(3) Filed as an exhibit to the Form 8 dated November 8, 1989, amending the
Annual Report on Form 10-K for the year ended March 31, 1989 on June 28,
1989 and incorporated herein by reference.
(4) Filed as an exhibit to Form S-3 Registration Statement dated December 19,
1991 and incorporated herein by reference.
(5) Filed as an exhibit to the Form 8-A dated March 31, 1993 and incorporated
herein by reference.
(6) 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.
(7) Filed as an exhibit to the Form 8-K Current Report dated March 14, 1997 on
March 14, 1997 and incorporated herein by reference.
(8) 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.
(9) Filed as an exhibit to the Form 8-K Current Report dated April 8, 1997 on
April 8, 1997 and incorporated herein by reference.
(10) 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.
(11) 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.
(12) Filed as an exhibit to the Form 8-K Current Report dated and filed on
December 5, 1997 and incorporated herein by reference.
(13) Filed as Exhibit 10.40 to the Guilford Pharmaceuticals Inc. Form 10-K for
the year ended December 31, 1997 on March 27, 1998 and incorporated herein
by reference.
(14) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1998
on May 13, 1998 and incorporated herein by reference.
(15) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1998
on August 14, 1998 and incorporated herein by reference.
(16) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1998 on March 16, 1999 and incorporated herein by reference.
(17) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1999
on August 3, 1999 and incorporated herein by reference.
(18) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1999 on March 7, 2000 and incorporated herein by reference.
(19) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 2000
on August 1, 2000 and incorporated herein by reference.
(20) Filed as an exhibit to the Form 10-Q for the quarter ended September 30,
2000 on November 14, 2000 and incorporated herein by reference.
(21) Filed as an exhibit to the Form 8-K Current Report dated December 13, 2000
on December 18, 2000 and incorporated herein by reference.
37
<PAGE>
(b) Reports on Form 8-K
The Company filed three Current Reports on Form 8-K during the three months
ended December 31, 2000. The report filed on November 3, 2000 reported under
Item 5 that on October 26, 2000, the Company publicly disseminated a press
release announcing its third quarter of 2000 financial results. The report
filed on November 13, 2000 reported under Item 5 that on November 8, 2000, the
Company publicly disseminated a press release updating the investment community
on the Company's business and providing certain financial guidance. The report
filed on December 18, 2000 reported under Item 5 that on December 12, 2000, the
Company's Board of Directors amended and restated its stockholder rights
agreement and approved the Amended and Restated Rights Agreement, dated as of
December 12, 2000, between the Company and American Stock Transfer & Trust
Company.
38
<PAGE>
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)
/s/ Kathryn E. Falberg
Date: 3/6/01 By: _________________________________
Kathryn E. Falberg
Senior Vice President, Finance
and Chief Financial Officer
39
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kathryn E. Falberg and Barry D. Schehr,
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:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Kevin W. Sharer Chairman of the Board, Chief 3/6/01
____________________________________ Executive Officer and
Kevin W. Sharer Director (Principal
Executive Officer)
/s/ Kathryn E. Falberg Senior Vice President, 3/6/01
____________________________________ Finance and Chief Financial
Kathryn E. Falberg Officer
/s/ Barry D. Schehr Vice President, Financial 3/6/01
____________________________________ Operations, and Chief
Barry D. Schehr Accounting Officer
/s/ David Baltimore Director 3/6/01
____________________________________
David Baltimore
/s/ William K. Bowes, Jr. Director 3/6/01
____________________________________
William K. Bowes, Jr.
/s/ Jerry D. Choate Director 3/6/01
____________________________________
Jerry D. Choate
/s/ Frederick W. Gluck Director 3/6/01
____________________________________
Frederick W. Gluck
/s/ Franklin P. Johnson, Jr. Director 3/6/01
____________________________________
Franklin P. Johnson, Jr.
/s/ Steven Lazarus Director 3/6/01
____________________________________
Steven Lazarus
/s/ Gilbert S. Omenn Director 3/6/01
____________________________________
Gilbert S. Omenn
/s/ Judith C. Pelham Director 3/6/01
____________________________________
Judith C. Pelham
/s/ J. Paul Reason Director 3/6/01
____________________________________
J. Paul Reason
/s/ Donald B. Rice Director 3/6/01
____________________________________
Donald B. Rice
</TABLE>
40
<PAGE>
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, in
the Registration Statement (Form S-3 No. 333-19931) of Amgen Inc., in the
Registration Statement (Form S-3 No. 333-40405) of Amgen Inc., in the
Registration Statement (Form S-8 No. 333-62735) pertaining to the Amgen Inc.
Amended and Restated 1997 Special Non-Officer Equity Incentive Plan, in the
Registration Statement (Form S-3 No. 333-53929) pertaining to the Amgen Inc.
1997 Special Non-Officer Equity Incentive Plan, the Amgen Inc. Amended and
Restated 1991 Equity Incentive Plan, the Amended and Restated 1988 Stock Option
Plan of Amgen Inc. and the Amended and Restated 1987 Directors' Stock Option
Plan and in the Registration Statement (Form S-8 No. 333-74585) pertaining to
the Amgen Limited Sharesave Plan and in the related Prospectuses of our report
dated January 23, 2001, 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, 2000.
/s/ ERNST & YOUNG LLP
Los Angeles, California
March 6, 2001
41
<PAGE>
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, 2000 and 1999, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 2000. 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 based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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. as
of December 31, 2000 and 1999, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
2000, in accordance with accounting principles generally accepted in the United
States. 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 23, 2001
F-1
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2000, 1999 and 1998
(In millions, except per share data)
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Product sales............. $3,202.2 $3,042.8 $2,514.4
Corporate partner
revenues................. 246.2 161.4 127.9
Royalty income............ 181.0 135.9 75.9
-------- -------- --------
Total revenues.......... 3,629.4 3,340.1 2,718.2
-------- -------- --------
Operating expenses:
Cost of sales............. 408.4 402.1 345.2
Research and development.. 845.0 822.8 663.3
Selling, general and
administrative........... 826.9 654.3 515.4
Loss of affiliates, net... 23.9 16.8 28.6
Other items, net.......... (18.8) (49.0) (23.0)
-------- -------- --------
Total operating
expenses............... 2,085.4 1,847.0 1,529.5
-------- -------- --------
Operating income............ 1,544.0 1,493.1 1,188.7
Other income (expense):
Interest and other income,
net...................... 146.2 88.3 45.7
Interest expense, net..... (15.9) (15.2) (10.0)
-------- -------- --------
Total other income...... 130.3 73.1 35.7
-------- -------- --------
Income before income taxes.. 1,674.3 1,566.2 1,224.4
Provision for income taxes.. 535.8 469.8 361.2
-------- -------- --------
Net income.................. $1,138.5 $1,096.4 $ 863.2
======== ======== ========
Earnings per share:
Basic..................... $ 1.11 $ 1.07 $ 0.85
Diluted................... $ 1.05 $ 1.02 $ 0.82
Shares used in calculation
of earnings per share:
Basic..................... 1,029.6 1,021.7 1,020.2
Diluted................... 1,084.7 1,078.3 1,057.3
</TABLE>
See accompanying notes.
F-2
<PAGE>
AMGEN INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(In millions, except per share data)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents................................. $ 226.5 $ 130.9
Marketable securities..................................... 1,801.6 1,202.1
Trade receivables, net of allowance for doubtful accounts
of $21.2 in 2000 and $26.0 in 1999....................... 389.2 412.2
Inventories............................................... 305.2 184.3
Other current assets...................................... 214.6 135.8
-------- --------
Total current assets.................................... 2,937.1 2,065.3
Property, plant and equipment at cost, net.................. 1,781.5 1,553.6
Other assets................................................ 681.0 458.7
-------- --------
$5,399.6 $4,077.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable.......................................... $ 143.2 $ 83.4
Commercial paper.......................................... 99.7 99.5
Accrued liabilities....................................... 619.2 648.2
-------- --------
Total current liabilities............................... 862.1 831.1
Long-term debt.............................................. 223.0 223.0
Stockholders' equity:
Preferred stock; $0.0001 par value; 5.0 shares authorized;
none issued or outstanding............................... -- --
Common stock and additional paid-in capital; $0.0001 par
value; 2,750.0 shares authorized; outstanding--1,037.4
shares in 2000 and 1,017.9 shares in 1999................ 2,947.3 2,072.3
Retained earnings......................................... 1,304.6 966.0
Accumulated other comprehensive income (loss)............. 62.6 (14.8)
-------- --------
Total stockholders' equity.............................. 4,314.5 3,023.5
-------- --------
$5,399.6 $4,077.6
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2000, 1999 and 1998
(In millions)
<TABLE>
<CAPTION>
Common
stock and Accumulated
Number additional other
of paid-in Retained comprehensive
shares capital earnings income (loss) Total
------- ---------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1997.................. 1,033.1 $1,218.2 $ 943.2 $(22.1) $ 2,139.3
---------
Comprehensive Income:
Net income........... -- -- 863.2 -- 863.2
Other comprehensive
income, net of tax:
Unrealized gains on
securities,
net of
reclassification
adjustments........ -- -- -- 9.1 9.1
Foreign currency
translation
adjustments........ -- -- -- 9.0 9.0
---------
Total other
comprehensive
income........... -- -- -- -- 18.1
---------
Comprehensive income... -- -- -- -- 881.3
Issuance of common
stock upon the
exercise of employee
stock options and in
connection with an
employee stock
purchase plan......... 42.8 345.5 -- -- 345.5
Tax benefits related to
employee stock
options............... -- 108.2 -- -- 108.2
Repurchases of common
stock................. (57.4) -- (912.1) -- (912.1)
------- -------- --------- ------ ---------
Balance at December 31,
1998.................. 1,018.5 1,671.9 894.3 (4.0) 2,562.2
---------
Comprehensive Income:
Net income........... -- -- 1,096.4 -- 1,096.4
Other comprehensive
loss, net of tax:
Unrealized gains on
securities, net of
reclassification
adjustments........ -- -- -- 7.3 7.3
Foreign currency
translation
adjustments........ -- -- -- (18.1) (18.1)
---------
Total other
comprehensive
loss............. -- -- -- -- (10.8)
---------
Comprehensive income... -- -- -- -- 1,085.6
Issuance of common
stock upon the
exercise of employee
stock options......... 26.5 248.8 -- -- 248.8
Tax benefits related to
employee stock
options............... -- 151.6 -- -- 151.6
Repurchases of common
stock................. (27.1) -- (1,024.7) -- (1,024.7)
------- -------- --------- ------ ---------
Balance at December 31,
1999.................. 1,017.9 2,072.3 966.0 (14.8) 3,023.5
---------
Comprehensive Income:
Net income........... -- -- 1,138.5 -- 1,138.5
Other comprehensive
income, net of tax:
Unrealized gains on
securities, net of
reclassification
adjustments........ -- -- -- 99.0 99.0
Foreign currency
translation
adjustments........ -- -- -- (21.6) (21.6)
---------
Total other
comprehensive
income........... -- -- -- -- 77.4
---------
Comprehensive income... -- -- -- -- 1,215.9
Issuance of common
stock upon the
exercise of employee
stock options and in
connection with an
employee stock
purchase plan......... 29.1 333.7 -- -- 333.7
Tax benefits related to
employee stock
options............... -- 376.6 -- -- 376.6
Issuance of common
stock for the
acquisition of Kinetix
Pharmaceuticals,
Inc. ................. 2.6 164.7 -- -- 164.7
Repurchases of common
stock................. (12.2) -- (799.9) -- (799.9)
------- -------- --------- ------ ---------
Balance at December 31,
2000.................. 1,037.4 $2,947.3 $ 1,304.6 $ 62.6 $ 4,314.5
======= ======== ========= ====== =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, 1999 and 1998
(In millions)
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 1,138.5 $ 1,096.4 $ 863.2
Write-off of acquired in-process research and
development................................. 30.1 -- --
Depreciation and amortization................ 211.8 176.8 143.8
Tax benefits related to employee stock
options..................................... 376.6 151.6 108.2
Gain on equity investments................... (31.8) -- (17.3)
Other non-cash expenses...................... 6.2 9.8 27.5
Loss of affiliates, net...................... 23.9 16.8 28.6
Cash provided by (used in):
Trade receivables, net..................... 23.0 (92.3) (50.9)
Inventories................................ (120.9) (73.5) (1.6)
Other current assets....................... (51.4) (9.0) (21.2)
Accounts payable........................... 59.8 (38.2) 17.7
Accrued liabilities........................ (31.2) (11.5) 51.7
--------- --------- --------
Net cash provided by operating
activities.............................. 1,634.6 1,226.9 1,149.7
--------- --------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment... (437.7) (304.2) (407.8)
Proceeds from maturities of marketable
securities.................................. -- 40.0 20.1
Proceeds from sales of marketable
securities.................................. 1,067.8 843.5 466.2
Purchases of marketable securities........... (1,638.7) (1,032.7) (766.3)
Other........................................ (27.7) (10.1) 14.1
--------- --------- --------
Net cash used in investing activities.... (1,036.3) (463.5) (673.7)
--------- --------- --------
Cash flows from financing activities:
Increase (decrease) in commercial paper...... 0.2 (0.2) 99.7
Net proceeds from issuance of common stock
upon the exercise of employee stock options
and in connection with an employee stock
purchase plan............................... 333.7 248.8 345.5
Repurchases of common stock.................. (799.9) (1,024.7) (912.1)
Other........................................ (36.7) (57.5) (47.1)
--------- --------- --------
Net cash used in financing activities.... (502.7) (833.6) (514.0)
--------- --------- --------
Increase (decrease) in cash and cash
equivalents................................... 95.6 (70.2) (38.0)
Cash and cash equivalents at beginning of
period........................................ 130.9 201.1 239.1
--------- --------- --------
Cash and cash equivalents at end of period..... $ 226.5 $ 130.9 $ 201.1
========= ========= ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
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.
Cash and cash equivalents
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. Under the Company's cash management system, the
bank notifies the Company daily of checks presented for payment against its
primary disbursement accounts. The Company transfers funds from short-term
investments to cover the checks presented for payment. This system results in a
book cash overdraft in the primary disbursement accounts as a result of checks
outstanding. The book overdraft, which was reclassified to accounts payable,
was $101.2 million and $43.9 million at December 31, 2000 and 1999,
respectively.
Available-for-sale securities
The Company considers its investment portfolio and marketable 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, "Fair values of financial instruments"). Realized gains
totaled $32.4 million, $2.8 million and $17.3 million for the years ended
December 31, 2000, 1999 and 1998, respectively. Realized losses totaled $2.5
million, $6.6 million and $33.1 million for the years ended December 31, 2000,
1999 and 1998, respectively. 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 sheets are as follows (in millions):
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 2000 Cost Gains Losses Value
- ----------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Type of security:
Corporate debt securities........... $1,054.7 $ 11.3 ($1.4) $1,064.6
U.S. Treasury securities and
obligations of U.S. government
agencies........................... 663.6 5.9 -- 669.5
Other interest bearing securities... 215.8 0.4 (0.1) 216.1
-------- ------ ----- --------
Total debt securities............. 1,934.1 17.6 (1.5) 1,950.2
Equity securities................... 73.1 179.2 (7.0) 245.3
-------- ------ ----- --------
$2,007.2 $196.8 ($8.5) $2,195.5
======== ====== ===== ========
</TABLE>
F-6
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1999 Cost Gains Losses Value
- ----------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Type of security:
Corporate debt securities........... $ 963.8 $ 0.4 $(10.8) $ 953.4
U.S. Treasury securities and
obligations of U.S. government
agencies........................... 209.9 -- (1.6) 208.3
Other interest bearing securities... 132.4 -- (0.5) 131.9
-------- ----- ------ --------
Total debt securities............. 1,306.1 0.4 (12.9) 1,293.6
Equity securities................... 66.8 46.7 (8.9) 104.6
-------- ----- ------ --------
$1,372.9 $47.1 $(21.8) $1,398.2
======== ===== ====== ========
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------
2000 1999
-------- --------
<S> <C> <C>
Contractual maturity:
Maturing in one year or less........................... $ 783.6 $ 376.4
Maturing after one year through three years............ 986.1 896.0
Maturing after three years............................. 180.5 21.2
-------- --------
Total debt securities................................ 1,950.2 1,293.6
Equity securities...................................... 245.3 104.6
-------- --------
$2,195.5 $1,398.2
======== ========
Classification in balance sheets:
Cash and cash equivalents.............................. $ 226.5 $ 130.9
Marketable securities.................................. 1,801.6 1,202.1
Other assets--noncurrent............................... 285.3 144.6
-------- --------
2,313.4 1,477.6
Less cash.............................................. (117.9) (79.4)
-------- --------
$2,195.5 $1,398.2
======== ========
</TABLE>
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.
F-7
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
consist of currently marketed products and product candidates which the Company
expects to commercialize. The inventory balance of such product candidates
totaled $112.7 million and $20.3 million as of December 31, 2000 and 1999,
respectively. Inventories are shown net of applicable reserves and allowances.
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
-------------
2000 1999
------ ------
<S> <C> <C>
Raw materials.................................................. $ 29.4 $ 37.5
Work in process................................................ 238.7 96.6
Finished goods................................................. 37.1 50.2
------ ------
$305.2 $184.3
====== ======
</TABLE>
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:
<TABLE>
<CAPTION>
Asset category Years
-------------- -----
<S> <C>
Buildings and building improvements.................................. 10-30
Manufacturing equipment.............................................. 5-10
Laboratory equipment................................................. 5-10
Furniture and office equipment....................................... 3-10
</TABLE>
Long-lived assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
Product sales
Product sales primarily consist of sales of EPOGEN(R) (Epoetin alfa) and
NEUPOGEN(R) (Filgrastim) (see Note 10, "Segment information").
The Company has the exclusive right to sell Epoetin alfa for dialysis,
diagnostics and all non-human uses in the United States. The Company sells
Epoetin alfa under the brand name EPOGEN(R). Amgen has granted to Ortho
Pharmaceutical Corporation (which has assigned its rights under the product
license agreement to Ortho Biotech Products, L.P.), 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, "Other
items, net--Legal award"). Sales of the Company's other products are recognized
when shipped and title has passed.
F-8
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Research and development costs
Research and development costs are expensed as incurred, including the cost
to acquire in-process research and development (see Note 11, "Business
combination").
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. At December 31, 2000,
the Company had option contracts and forward contracts to exchange foreign
currencies for U.S. dollars of $10.0 million and $150.6 million, respectively,
all having maturities of eleven months or less. The option contracts, which
have only nominal intrinsic value at the time of purchase, are designated as
effective hedges of anticipated foreign currency transactions for financial
reporting purposes and, accordingly, the net gains on such contracts are
deferred and recognized in the same period as the hedged transactions. The
forward contracts do not qualify as hedges for financial reporting purposes
and, accordingly, are marked-to-market. Net gains realized on option contracts
and changes in market values of forward contracts are reflected in "Interest
and other income, net" in the accompanying consolidated statements of
operations. The deferred premiums on option contracts and fair values of
forward contracts are included in "Other current assets" in the accompanying
consolidated balance sheets.
The Company has additional foreign currency forward contracts to hedge
exposures to foreign currency fluctuations of certain assets and liabilities
denominated in foreign currencies. At December 31, 2000, the Company had
forward contracts to exchange foreign currencies for U.S. dollars of $37.8
million, all having maturities of less than one month. These contracts are
designated as effective hedges and, accordingly, gains and losses on these
forward contracts are recognized in the same period the offsetting gains and
losses of hedged assets and liabilities are realized and recognized. The fair
values of the forward contracts are included in the corresponding captions of
the hedged assets and liabilities. Gains and losses on forward contracts and
the related hedged assets and liabilities are included in "Interest and other
income, net" in the accompanying consolidated statements of operations.
Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards requiring that all derivatives
be recorded in the balance sheet as either an asset or liability measured at
fair value and that changes in fair value be recognized currently in earnings,
unless specific hedge accounting criteria are met. Certain provisions of SFAS
No. 133, including its required implementation date, were subsequently amended.
The Company will adopt SFAS No. 133, as amended, in the first quarter of 2001
and its adoption will not have a material effect on the Company's results of
operations or financial position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements.
The Company adopted SAB 101 in the fourth quarter of 2000 and its adoption has
not had a material effect on the Company's results of operations or financial
position.
In July 2000, the Emerging Issues Task Force ("EITF") issued EITF 00-15,
"Classification in the Statement of Cash Flows of the Income Tax Benefit
Realized by a Company upon Employee Exercise of a Nonqualified Stock Option",
which requires companies to classify the income tax benefits related to
employee
F-9
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
exercises of nonqualified stock options as an operating activity in the
statement of cash flows for both current and prior periods. Prior to the
adoption of EITF 00-15 in the third quarter of 2000, Amgen had classified these
amounts in financing activities in the consolidated statements of cash flows.
In addition, the Company has included the income tax benefits related to
disqualifying dispositions of incentive stock options within this
reclassification.
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, 2000, 1999 and
1998, were $12.3 million, $11.6 million and $19.2 million, respectively.
Employee stock option and stock purchase plans
The Company's employee stock option and stock purchase plans are accounted
for under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). See Note 7, "Employee stock option, stock
purchase and defined contribution plans".
Earnings per share
Basic earnings per share is based upon the weighted-average number of common
shares outstanding. Diluted earnings per share is based upon the weighted-
average number of common shares and dilutive potential common shares
outstanding. Potential common shares are outstanding options under the
Company's employee stock option plans, restricted stock and potential issuances
of stock under the employee stock purchase plan which are included under the
treasury stock method.
The following table sets forth the computation for basic and diluted
earnings per share (in millions, except per share information):
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share--
net income.......................................... $1,138.5 $1,096.4 $ 863.2
======== ======== ========
Denominator:
Denominator for basic earnings per share--weighted-
average shares.................................... 1,029.6 1,021.7 1,020.2
Effect of dilutive securities--employee stock
options, restricted stock and potential stock
issuances under the employee stock purchase plan.. 55.1 56.6 37.1
-------- -------- --------
Denominator for diluted earnings per share--
adjusted weighted-average shares.................. 1,084.7 1,078.3 1,057.3
======== ======== ========
Basic earnings per share............................. $ 1.11 $ 1.07 $ 0.85
======== ======== ========
Diluted earnings per share........................... $ 1.05 $ 1.02 $ 0.82
======== ======== ========
</TABLE>
Options to purchase 10.6 million, 1.6 million and 3.0 million shares with
exercise prices greater than the average market prices of common stock were
outstanding at December 31, 2000, 1999 and 1998, respectively. These options
were excluded from the respective computations of diluted earnings per share
because their effect would be anti-dilutive.
F-10
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. During the years ended December 31, 2000, 1999 and 1998,
Amgen earned revenues from Kirin-Amgen of $221.0 million, $138.5 million and
$121.0 million, respectively, under such agreements, which are included in
"Corporate partner revenues" in the accompanying consolidated statements of
operations.
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 pays Kirin-Amgen royalties based on sales. During the
years ended December 31, 2000, 1999 and 1998, Kirin-Amgen earned royalties from
Amgen of $140.8 million, $128.1 million and $105.0 million, respectively, under
such agreements, which are included in "Cost of sales" in the accompanying
consolidated statements of operations.
At December 31, 2000, Amgen's share of Kirin-Amgen's undistributed retained
earnings was approximately $75.9 million.
3. Debt
The Company has a commercial paper program which provides for unsecured
short-term borrowings up to an aggregate of $200 million. As of December 31,
2000, commercial paper with a face amount of $100 million was outstanding.
These borrowings had maturities of less than two months and had effective
interest rates averaging 6.7%. Commercial paper with a face amount of $100
million and with effective interest rates averaging 6.0% was outstanding at
December 31, 1999.
The Company has 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 2007 (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.
The Company had $100 million of debt securities outstanding at December 31,
2000 and 1999 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.
F-11
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In addition to the Notes and the Century Notes, debt securities outstanding
at December 31, 2000 and 1999 include $23 million of debt securities that bear
interest at a fixed rate of 6.2% and mature in 2003. 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 has an unsecured credit facility (the "credit facility") that
includes a commitment expiring on May 28, 2003 for up to $150 million of
borrowings under a revolving line of credit (the "revolving line commitment").
This credit facility supports the Company's commercial paper program. As of
December 31, 2000, $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.
The aggregate stated maturities of all long-term obligations due subsequent
to December 31, 2000, are as follows: none in 2001 and 2002; $23 million in
2003; none in 2004 and 2005; and $200 million after 2005.
4. Other items, net
Other items, net in the accompanying consolidated statements of operations
consists of the following (income) and expense items (in millions):
<TABLE>
<CAPTION>
Years ended December
31,
----------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Legal award, net................................... $(73.9) $(49.0) $(23.0)
Write-off of acquired in-process research and
development (see Note 11)......................... 30.1 -- --
Amgen Foundation contribution...................... 25.0 -- --
------ ------ ------
Other items, net................................... $(18.8) $(49.0) $(23.0)
====== ====== ======
</TABLE>
Legal award
In September 1985, the Company granted Johnson & Johnson's affiliate, Ortho
Pharmaceutical Corporation, a license relating to certain patented technology
and know-how of the Company to sell a genetically engineered form of
recombinant human erythropoietin, called Epoetin alfa, throughout the United
States for all human uses except dialysis and diagnostics. A number of disputes
have arisen 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 had been the subject of
an arbitration proceeding related to the audit methodology currently employed
by the Company to account for Epoetin alfa sales. Under the License Agreement,
the Company and Johnson & Johnson are required to compensate each other for
Epoetin alfa sales that either party makes into the other party's exclusive
market, sometimes described as "spillover" sales. The Company has established
and is employing an audit methodology to measure each party's spillover sales
and to allocate the net profits from those sales to the appropriate party. The
arbitrator in this dispute (the "Arbitrator") issued a final order adopting the
Company's audit methodology with certain adjustments and also found that the
Company was the successful party in the arbitration. Pursuant to the final
order in the arbitration, an independent panel was formed principally (i) to
address ongoing challenges to the
F-12
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
survey results for the years 1995 through 1999 and (ii) to refine the
procedures for measuring the erythropoietin market as may be necessary. As a
result of decisions made by this independent panel regarding certain challenges
by Johnson & Johnson as well as other reduced uncertainties, the Company
reduced amounts previously provided for potential spillover liabilities by $49
million in the third quarter of 1999 and $23 million in the fourth quarter of
1998.
Because the Arbitrator ruled that the Company was the successful party in
the arbitration, Johnson & Johnson was ordered to pay to the Company all costs
and expenses, including reasonable attorneys' fees, that the Company incurred
in the arbitration as well as one-half of the audit costs. On July 17, 2000,
the Arbitrator issued a final order awarding the Company approximately $78
million in costs and expenses, including reasonable attorneys' fees, that the
Company incurred in the arbitration as well as one-half of the audit costs (the
"Fee Award"). As a result, the Company recorded a net $73.9 million legal
award, which represents the Fee Award reduced by minor amounts related to other
miscellaneous disputes with Johnson & Johnson, in the third quarter of 2000.
Amgen Foundation contribution
During the fourth quarter of 2000, the Company contributed $25.0 million to
the Amgen Foundation. This contribution will allow the Amgen Foundation to
increase its support of non-profit organizations that focus on issues in health
and medicine, science education and other activities that strengthen local
communities over the next several years.
5. Income taxes
The provision for income taxes includes the following (in millions):
<TABLE>
<CAPTION>
Years ended December
31,
---------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Current provision:
Federal (including U.S. possessions)................ $481.7 $422.8 $339.6
State............................................... 47.5 37.2 27.2
------ ------ ------
Total current provision........................... 529.2 460.0 366.8
------ ------ ------
Deferred provision (benefit):
Federal (including U.S. possessions)................ 9.6 5.3 (4.7)
State............................................... (3.0) 4.5 (0.9)
------ ------ ------
Total deferred provision (benefit)................ 6.6 9.8 (5.6)
------ ------ ------
$535.8 $469.8 $361.2
====== ====== ======
</TABLE>
F-13
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred income taxes reflect the net tax effects of net operating loss and
credit 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):
<TABLE>
<CAPTION>
December 31,
----------------
2000 1999
------- -------
<S> <C> <C>
Deferred tax assets:
Acquired net operating loss and credit carryforwards.... $ 66.0 $ 64.3
Expenses capitalized for tax purposes................... 58.9 27.9
Fixed assets............................................ 46.0 22.9
Expense accruals........................................ 32.9 84.0
Other................................................... 20.0 27.4
------- -------
Total deferred tax assets............................. 223.8 226.5
Valuation allowance..................................... (25.4) (46.0)
------- -------
Net deferred tax assets............................... 198.4 180.5
------- -------
Deferred tax liabilities:
Purchase of technology rights........................... (95.9) (78.1)
Marketable securities and investments................... (62.6) (10.0)
Other................................................... (39.3) (13.9)
------- -------
Total deferred tax liabilities........................ (197.8) (102.0)
------- -------
$ 0.6 $ 78.5
======= =======
</TABLE>
At December 31, 2000, the Company had operating loss carryforwards available
to reduce future federal taxable income of which $29.3 million expire in 2008,
$84.0 million expire in 2009 and $16.8 million expire thereafter. These
operating loss carryforwards relate to the acquisition of companies.
Utilization of these operating loss carryforwards is limited to approximately
$26 million in 2001, $23 million in 2002 and $16 million per year thereafter.
The provision for income taxes varies from income taxes provided based on
the federal statutory rate as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
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......................................... (2.0)% (2.3)% (3.2)%
Utilization of tax credits, primarily research and
experimentation...................................... (1.4)% (2.1)% (2.4)%
Other, net............................................ 0.4 % (0.6)% 0.1 %
---- ---- ----
32.0 % 30.0 % 29.5 %
==== ==== ====
</TABLE>
Income taxes paid during the years ended December 31, 2000, 1999 and 1998,
totaled $141.3 million, $318.7 million and $251.3 million, respectively.
F-14
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 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 were distributed to stockholders of record on March
21, 1997. On December 12, 2000, the Board of Directors of the Company amended
and restated the preferred stock rights plan governing the Rights (the "Amended
and Restated Rights Plan") to, among other things: (i) provide that, as a
result of two-for-one splits of the Company's common stock effected in February
and November 1999 (the "Stock Splits"), each Right shall represent the right to
purchase one four-thousandth of a share of Series A Junior Participating
Preferred Stock ("Series A Preferred Stock") of the Company (which one four-
thousandth gives effect to the Stock Splits); (ii) increase the exercise price
of each Right to $350.00 from $56.25 (as adjusted for the Stock Splits); (iii)
extend the term of the rights agreement to December 12, 2010 from March 21,
2007 and (iv) amend the definition of "Outside Director".
Pursuant to the Amended and Restated Rights Plan, each share of common stock
outstanding has attached to it one whole Right. One Right represents the right
to purchase one four-thousandth (1/4000) of a share of Series A Preferred Stock
of the Company at $350.00. The Rights will expire on December 12, 2010.
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 of Directors, 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 of Directors 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 $0.00025 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 reduce the dilutive
effect of its employee stock option and stock purchase plans. Stock repurchased
under the program is intended to be retired. The amount the Company spends on
and the number of shares repurchased varies based on a variety of factors,
including the stock price and blackout periods in which the Company is
restricted from repurchasing shares. In December 2000, the Board of Directors
authorized the Company to repurchase up to $2 billion of common stock between
January 1, 2001 and December 31, 2002.
Other comprehensive income/(loss)
SFAS No. 130, "Reporting Comprehensive Income", requires unrealized gains
and losses on the Company's available-for-sale securities and foreign currency
translation adjustments to be included in other comprehensive income/(loss).
F-15
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Information regarding the components of accumulated other comprehensive
income/(loss) are as follows (in millions):
<TABLE>
<CAPTION>
Accumulated
Unrealized Foreign Other
Gains on Currency Comprehensive
Securities Translation Income/(Loss)
---------- ----------- -------------
<S> <C> <C> <C>
Balance at December 31, 1999.......... $ 15.3 $(30.1) $(14.8)
Current year other comprehensive
income/(loss)........................ 99.0 (21.6) 77.4
------ ------ ------
Balance at December 31, 2000.......... $114.3 $(51.7) $ 62.6
====== ====== ======
</TABLE>
Information regarding the income tax effects for items of other
comprehensive income/(loss) are as follows (in millions):
<TABLE>
<CAPTION>
Tax
Before-Tax Benefit/ After-Tax
Amount (Expense) Amount
---------- -------- ---------
<S> <C> <C> <C>
For the year ended December 31, 1998:
Unrealized losses on available-for-sale
securities................................. $ (1.8) $ 0.7 $ (1.1)
Less: Reclassification adjustments for
losses realized in net income.............. (15.8) 5.6 (10.2)
------ ------ ------
Net unrealized gains on available-for-sale
securities................................. 14.0 (4.9) 9.1
Foreign currency translation adjustments.... 9.0 -- 9.0
------ ------ ------
Other comprehensive income.................. $ 23.0 $ (4.9) $ 18.1
====== ====== ======
For the year ended December 31, 1999:
Unrealized gains on available-for-sale
securities................................. $ 12.0 $ (5.3) $ 6.7
Less: Reclassification adjustments for
losses realized in net income.............. (1.0) 0.4 (0.6)
------ ------ ------
Net unrealized gains on available-for-sale
securities................................. 13.0 (5.7) 7.3
Foreign currency translation adjustments.... (18.1) -- (18.1)
------ ------ ------
Other comprehensive loss.................... $ (5.1) $ (5.7) $(10.8)
====== ====== ======
For the year ended December 31, 2000:
Unrealized gains on available-for-sale
securities................................. $193.0 $(75.8) $117.2
Less: Reclassification adjustments for gains
realized in net income..................... 30.0 (11.8) 18.2
------ ------ ------
Net unrealized gains on available-for-sale
securities................................. 163.0 (64.0) 99.0
Foreign currency translation adjustments.... (21.6) -- (21.6)
------ ------ ------
Other comprehensive income.................. $141.4 $(64.0) $ 77.4
====== ====== ======
</TABLE>
Other
In addition to common stock, the Company's authorized capital includes 5.0
million shares of preferred stock, $0.0001 par value, of which 0.7 million
shares have been designated Series A Preferred Stock. At December 31, 2000 and
1999, no shares of preferred stock were issued or outstanding.
At December 31, 2000, the Company had reserved 183.1 million shares of its
common stock which may be issued through its employee stock option and stock
purchase plans and had reserved 0.7 million shares of Series A Preferred Stock.
F-16
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Employee stock option, stock purchase and defined contribution plans
Employee stock option plans
The Company's employee stock option plans provide for option grants
designated as either nonqualified or incentive stock options. Option grants to
employees 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. As of December 31, 2000, the Company had 67.8
million shares of common stock available for future grant under its employee
stock option plans.
Stock option information with respect to all of the Company's employee stock
option plans follows (shares in millions):
<TABLE>
<CAPTION>
Exercise Price
-----------------------
Weighted-
Shares Low High Average
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Balance unexercised at December 31, 1997....... 141.9 $ 0.58 $16.97 $10.02
Granted...................................... 33.5 $11.78 $26.22 $16.53
Exercised.................................... (42.4) $ 0.58 $20.77 $ 8.14
Forfeited.................................... (6.8) $ 4.48 $18.52 $13.57
-----
Balance unexercised at December 31, 1998....... 126.2 $ 0.66 $26.22 $12.18
Granted...................................... 19.0 $26.25 $57.69 $31.48
Exercised.................................... (26.9) $ 0.66 $39.44 $ 9.45
Forfeited.................................... (2.5) $ 5.48 $44.97 $17.76
-----
Balance unexercised at December 31, 1999....... 115.8 $ 0.92 $57.69 $15.88
Granted...................................... 13.1 $51.31 $78.00 $67.40
Exercised.................................... (28.2) $ 0.92 $72.75 $11.03
Forfeited.................................... (2.0) $ 4.48 $74.86 $26.02
-----
Balance unexercised at December 31, 2000....... 98.7 $ 2.55 $78.00 $23.89
=====
</TABLE>
At December 31, 2000, 1999 and 1998, employee stock options to purchase 55.5
million, 61.7 million and 66.1 million shares were exercisable at weighted-
average prices of $15.35, $11.80 and $9.76, respectively.
Fair value disclosures of employee stock options
Employee 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 25, the
Company does not recognize compensation expense associated with the grant of
employee 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 stock options and
shares sold under its employee 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 2000, 1999 and 1998, respectively: risk-free interest rates of
5.9%, 5.8% and 5.4%; dividend yields of 0%, 0% and 0%; volatility factors of
the expected
F-17
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
market price of the Company's common stock of 45%, 38% and 34%; and expected
life of the options of 3.4 years, 3.4 years and 3.4 years. These assumptions
resulted in weighted-average fair values of $25.87, $10.55 and $5.11 per share
for employee stock options granted in 2000, 1999 and 1998, 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 values of the
options are amortized over the options' vesting periods. The Company's pro
forma information is as follows (in millions, except per share information):
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
2000 1999 1998
-------- -------- ------
<S> <C> <C> <C>
Pro forma net income............................... $1,035.4 $1,030.0 $735.9
Pro forma earnings per share:
Basic............................................ $ 1.01 $ 1.01 $ 0.72
Diluted.......................................... $ 0.95 $ 0.95 $ 0.70
</TABLE>
Information regarding employee stock options outstanding as of December 31,
2000 is as follows (shares in millions):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------- --------------------
Weighted-
Weighted- Average Weighted-
Average Remaining Average
Exercise Contractual Exercise
Price Range Shares Price Life Shares Price
----------- ------ --------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
$10.00 and under........... 11.4 $ 7.83 1.1 years 11.4 $ 7.83
Over $10.00 to $15.00...... 32.4 $13.77 3.4 years 26.7 $13.72
Over $15.00 to $30.00...... 25.2 $16.94 4.5 years 12.0 $17.22
Over $30.00 to $60.00...... 18.2 $33.59 5.5 years 4.9 $32.44
Over $60.00................ 11.5 $68.38 6.5 years 0.5 $66.48
</TABLE>
Employee stock purchase plan
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 the years ended
December 31, 2000 and 1998, employees purchased 1.3 million and 1.0 million
shares at weighted-average prices of approximately $30.33 and $11.46 per share,
respectively. No shares were purchased under the employee stock purchase plan
during 1999 because the Company had a 15 month offering period which extended
from January 1, 1999 to March 31, 2000. At December 31, 2000, the Company had
16.2 million shares available for future issuance under this plan.
F-18
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Defined contribution plans
The Company has defined contribution plans covering substantially all
employees in the United States and its possessions. Under these plans, the
Company makes certain amounts of matching contributions for those employees who
elect to contribute to the plans and makes additional contributions based upon
the compensation of eligible employees regardless of whether or not the
employees contribute to the plans. In addition, the Company has other defined
contribution plans covering certain employees of the Company and employees of
its foreign affiliates. The Company's expense for its defined contribution
plans totaled $42.6 million, $34.3 million and $26.7 million for the years
ended December 31, 2000, 1999 and 1998, respectively.
8. Balance sheet accounts
Property, plant and equipment consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
------------------
2000 1999
-------- --------
<S> <C> <C>
Land..................................................... $ 120.0 $ 110.1
Buildings and building improvements...................... 901.7 841.4
Manufacturing equipment.................................. 287.6 251.8
Laboratory equipment..................................... 338.1 306.3
Furniture and office equipment........................... 672.6 577.8
Leasehold improvements................................... 53.7 50.8
Construction in progress................................. 345.5 177.0
-------- --------
2,719.2 2,315.2
Less accumulated depreciation and amortization........... (937.7) (761.6)
-------- --------
$1,781.5 $1,553.6
======== ========
</TABLE>
Accrued liabilities consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
-------------
2000 1999
------ ------
<S> <C> <C>
Employee compensation and benefits............................ $151.9 $149.1
Income taxes.................................................. 116.7 87.5
Sales incentives, royalties and allowances.................... 107.6 135.7
Due to affiliated companies and corporate partners............ 92.8 160.8
Clinical development costs.................................... 50.5 35.4
Other......................................................... 99.7 79.7
------ ------
$619.2 $648.2
====== ======
</TABLE>
9. Fair values of financial instruments
The carrying amounts of cash, cash equivalents, marketable securities and
marketable equity investments approximated their fair values. Fair values of
cash equivalents, marketable securities and marketable equity investments are
based on quoted market prices.
The carrying amount of commercial paper approximated its fair value as of
December 31, 2000 and 1999. The fair values of long-term debt at December 31,
2000 and 1999 totaled approximately $222.0 million and $216.6 million,
respectively. The fair values of commercial paper and long-term debt were
estimated based on quoted market rates for instruments with similar terms and
remaining maturities.
F-19
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The fair values of the foreign currency forward contracts and purchased
foreign currency option contracts were not significant based on the estimated
amounts at which the contracts could be settled taking into account current
market exchange rates.
10. Segment information
Enterprise-wide disclosures about revenues by product, revenues and long-
lived assets by geographic area and revenues from major customers are presented
below.
Revenues
Revenues consisted of the following (in millions):
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
EPOGEN(R)......................................... $1,962.9 $1,759.1 $1,382.0
NEUPOGEN(R)....................................... 1,223.7 1,256.6 1,116.6
Other product sales............................... 15.6 27.1 15.8
-------- -------- --------
Total product sales............................... 3,202.2 3,042.8 2,514.4
Other revenues.................................... 427.2 297.3 203.8
-------- -------- --------
Total revenues.................................... $3,629.4 $3,340.1 $2,718.2
======== ======== ========
</TABLE>
Geographic information
The Company sells NEUPOGEN(R) through its foreign affiliates in countries of
the European Union, Canada and Australia. Information regarding revenues and
long-lived assets (consisting of property, plant and equipment) attributable to
the United States and to all foreign countries collectively is stated below.
The geographic classification of product sales was based upon the location of
the customer. The geographic classification of all other revenues was based
upon the domicile of the entity from which the revenues were earned.
Information is as follows (in millions):
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues:
United States and possessions.................. $3,343.0 $3,024.5 $2,441.6
Foreign countries.............................. 286.4 315.6 276.6
-------- -------- --------
Total revenues............................... $3,629.4 $3,340.1 $2,718.2
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Long-lived assets:
United States and possessions.................. $1,706.5 $1,475.7 $1,360.8
Foreign countries.............................. 75.0 77.9 89.4
-------- -------- --------
Total long-lived assets...................... $1,781.5 $1,553.6 $1,450.2
======== ======== ========
</TABLE>
F-20
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 customers. Sales to two large
wholesalers accounted for more than 10% of the total revenues for the years
ended December 31, 2000, 1999 and 1998. Sales to one wholesaler were $1,233.4
million, $1,078.0 million and $856.2 million for the years ended December 31,
2000, 1999 and 1998, respectively. Sales to another wholesaler were $445.2
million, $438.2 million and $366.5 million for the years ended December 31,
2000, 1999 and 1998, respectively. At December 31, 2000 and 1999, amounts due
from four large wholesalers accounted for 51% and 59%, respectively, of gross
trade receivables.
11. Business combination
On December 14, 2000, Amgen acquired Kinetix Pharmaceuticals, Inc.
("Kinetix"), a privately held company with expertise in the discovery of small
molecules in the field of protein kinase inhibition. Amgen acquired all the
outstanding shares of Kinetix common stock in a tax-free exchange for 2.6
million shares of Amgen common stock. The acquisition has been accounted for
under the purchase method of accounting, and accordingly, the operating results
of Kinetix are included in the accompanying consolidated financial statements
starting from December 14, 2000. The acquisition was valued at $172.2 million,
including $1.0 million of related acquisition costs and $6.5 million of Amgen
restricted common stock issued in exchange for Kinetix restricted common stock
held by employees retained from Kinetix. The $6.5 million will be recognized as
compensation expense over the vesting period of the restricted common stock.
The preliminary assignment of the purchase price among identifiable tangible
and intangible assets and liabilities of Kinetix was based upon an analysis of
their fair values. The excess of the purchase price over the fair values of
assets and liabilities acquired of $103.3 million was allocated to goodwill and
will be amortized on a straight-line basis over a 15 year period.
The assets acquired included in-process research and development. The value
assigned to this asset was determined by an analysis of data concerning four
substantive in-process research projects. The values of these research projects
were determined based on analyses of cash flows to be generated by the products
that are expected to result from the in-process projects. These cash flows were
estimated by forecasting total revenues expected from these products and then
deducting appropriate operating expenses, cash flow adjustments and
contributory asset returns to establish a forecast of net returns on the in-
process technology. These net returns were substantially reduced to take into
account the time value of money and the risks associated with the inherent
difficulties and uncertainties in developing specific molecules into viable
human therapeutics given the stage of development of these projects at the date
of the acquisition. Finally, these net returns were multiplied by the estimated
percentage completed of each project, based upon analysis of three factors--
time, cost and complexity. The above analysis resulted in $30.1 million of
value assigned to acquired in-process research and development, which was
expensed on the acquisition date in accordance with generally accepted
accounting principles. A discounted, risk-adjusted cash flow analysis was also
performed to value the technology platform of Kinetix that is expected to
generate future molecules that may be developed into human therapeutics. This
analysis resulted in valuing the acquired base technology at $36.6 million,
which was capitalized and will be amortized on a straight-line basis over a 15
year period. Amgen management believes the assumptions used in valuing these
acquired technologies are reasonable, but are inherently uncertain, and no
assurance can be given that the assumptions made will occur.
This business combination would not have had a material impact on Amgen's
revenues, net income or earnings per share in either 2000 or 1999.
F-21
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Quarterly financial data (unaudited)
(in millions, except per share data)
<TABLE>
<CAPTION>
June
2000 Quarter Ended Dec. 31(1) Sept. 30(2) 30 Mar. 31(3)
- ------------------ ---------- ----------- ------ ----------
<S> <C> <C> <C> <C>
Product sales......................... $846.8 $851.0 $806.8 $697.6
Gross margin from product sales....... 735.3 741.5 705.1 611.9
Net income............................ 210.8 358.9 302.6 266.2
Earnings per share:
Basic............................... 0.20 0.35 0.29 0.26
Diluted............................. 0.19 0.33 0.28 0.25
<CAPTION>
June
1999 Quarter Ended Dec. 31(4) Sept. 30(5) 30 Mar. 31
- ------------------ ---------- ----------- ------ ----------
<S> <C> <C> <C> <C>
Product sales......................... $847.4 $769.2 $737.9 $688.3
Gross margin from product sales....... 735.4 670.3 639.1 595.9
Net income............................ 281.6 300.0 267.6 247.2
Earnings per share:
Basic............................... 0.28 0.29 0.26 0.24
Diluted............................. 0.26 0.28 0.25 0.23
</TABLE>
- --------
(1) During the fourth quarter of 2000, the Company recorded an after-tax charge
of $30.1 million to write off acquired in-process research and development
related to the acquisition of Kinetix Pharmaceuticals, Inc. (see Note 11,
"Business combination"). In addition, the Company made a contribution of
$25 million to the Amgen Foundation (see Note 4, "Other items, net--Amgen
Foundation contribution"). After applicable tax effects, these amounts
combined with the legal award discussed in item 2 below had no impact on
net income for the year ended December 31, 2000.
(2) During the third quarter of 2000, the Company recorded a net legal award of
$73.9 million, which primarily represents an award for certain costs and
expenses, including attorney's fees, associated with the spillover
arbitration with Johnson & Johnson (see Note 4, "Other items, net--Legal
award").
(3) During the first quarter of 2000, sales were adversely impacted by Year
2000-related sales totaling $45 million (see item 4 below). In addition,
the Company believes sales were adversely impacted by additional 1999 year-
end stockpiling of EPOGEN(R) by dialysis providers and by wholesalers
reducing their inventories of NEUPOGEN(R).
(4) Due to Year 2000 contingency planning in the fourth quarter of 1999, the
Company offered extended payment terms on limited shipments of EPOGEN(R)
and NEUPOGEN(R) to certain wholesalers totaling $45 million. Sales in the
first quarter of 2000 were adversely impacted by these Year 2000-related
sales (see item 3 above).
(5) During the third quarter of 1999, due to reduced uncertainties, the Company
reduced its potential spillover liabilities to Johnson & Johnson by $49
million (see Note 4, "Other items, net--Legal award").
F-22
<PAGE>
SCHEDULE II
AMGEN INC.
VALUATION ACCOUNTS
Years ended December 31, 2000, 1999 and 1998
(In millions)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Period Expenses Deductions of Period
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 2000:
Allowance for doubtful accounts.... $26.0 $ 0.1 $4.9 $21.2
Year ended December 31, 1999:
Allowance for doubtful accounts.... $17.1 $10.1 $1.2 $26.0
Year ended December 31, 1998:
Allowance for doubtful accounts.... $14.2 $ 3.6 $0.7 $17.1
</TABLE>
F-23
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.4
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>CERTIFICATE OF DESIGNATION OF PREFERRED STOCK
<TEXT>
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
AMGEN INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
_____________________________
Amgen Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law at a meeting duly called and held on December 12, 2000.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Certificate of
Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, par value $.0001 per share (the "Preferred Stock"), of the Corporation
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 687,500. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
<PAGE>
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares
of Series A Preferred Stock, in preference to the holders of Common Stock,
par value $.0001 per share (the "Common Stock"), of the Corporation, and of
any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provision for adjustment hereinafter set forth, 4,000 times
the aggregate per share amount of all cash dividends, and 4,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series A Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares
2
<PAGE>
shall begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to
the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
-------------
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
4,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series A Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all
3
<PAGE>
accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking
on a parity with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any Subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
--------------------------------------
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock
4
<PAGE>
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $4,000 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that the holders
of shares of Series A Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 4,000 times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that are
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 4,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
-------------
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to
----
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Corporation's Preferred Stock, except to the extent that
any such other series specifically provides that it shall rank on a parity with
or junior to the Series A Preferred Stock.
5
<PAGE>
Section 10. Amendment. The Certificate of Incorporation of the
---------
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
6
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Senior Vice President, Finance and Corporate
Development, and Chief Financial Officer and attested by its Secretary this 13th
day of December, 2000.
/s/ Kathryn E. Falberg
----------------------------------------
Senior Vice President, Finance and
Corporate Development, and Chief Financial Officer
Attest:
/s/ Steve M. Odre
- -----------------
Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>AMENDED AND RESTATED 1991 EQUITY INCENTIVE PLAN
<TEXT>
<PAGE>
EXHIBIT 10.1
AMGEN INC.
AMENDED AND RESTATED 1991 EQUITY INCENTIVE PLAN
-----------------------------------------------
1. PURPOSE.
-------
(a) The purpose of the Amended and Restated 1991 Equity Incentive Plan
as amended and restated in February 1999 (the "Plan") is to provide a means by
which employees or directors of and consultants to Amgen Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in paragraph 1(b),
directly, or indirectly through Trusts, may be given an opportunity to benefit
from increases in value of the stock of the Company through the granting of (i)
incentive stock options, (ii) nonqualified stock options, (iii) stock bonuses,
and (iv) rights to purchase restricted stock, all as defined below. For
purposes of the incentive stock option rules of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Plan is a new plan.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Code.
(c) The Company, by means of the Plan, seeks to retain the services of
persons now employed by or serving as directors or consultants to the Company,
to secure and retain the services of persons capable of filling such positions,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
(d) The Company intends that the rights issued under the Plan ("Stock
Awards") shall, in the discretion of the Board of Directors of the Company (the
"Board") or any committee to which responsibility for administration of the Plan
has been delegated pursuant to paragraph 2(c), be either (i) stock 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.
<PAGE>
2. ADMINISTRATION.
--------------
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a committee, as provided in paragraph 2(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a Nonqualified
Stock Option, a stock bonus, a right to purchase restricted stock, or a
combination of the foregoing; the provisions of each Stock Award granted (which
need not be identical), including the time or times when a person shall be
permitted to purchase or receive stock pursuant to a Stock Award; and the number
of shares with respect to which Stock Awards shall be granted to each such
person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award, in a manner
and to the extent it shall deem necessary or expedient to make the Plan fully
effective.
(3) To amend the Plan as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). One
or more of these members may be non-employee directors and outside directors, if
required and as defined by the provisions of paragraphs 2(d) and 2(e). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board (except amendment of Section 6 or the options granted thereunder
shall only be by action taken by the Board or a committee of one or more members
of the Board to which such authority has been specifically delegated by the
Board), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.
Notwithstanding anything else in this paragraph 2(c) to the contrary, at any
time the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant or amend options to all employees,
directors or consultants or any portion or class thereof.
(d) The term "non-employee director" shall mean a member of the Board
who (i) is not currently an officer of the Company or a parent or subsidiary of
the Company (as defined in Rule 16a-1(f) promulgated by the Securities and
Exchange Commission under
2
<PAGE>
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 disclosed under
Rule 404, as all of these provisions are interpreted by the Securities and
Exchange Commission under Rule 16b-3 promulgated under the Exchange Act.
(e) The term "outside director," as used in this Plan, shall mean an
administrator of the Plan, whether a member of the Board or of any Committee to
which responsibility for administration of the Plan has been delegated pursuant
to paragraph 2(c), who is considered to be an "outside director" in accordance
with the rules, regulations or interpretations of Section 162(m) of the Code.
(f) Any requirement that an administrator of the Plan be a "non-
employee director" or "outside director" shall not apply if the Board or the
Committee expressly declares that such requirement shall not apply.
3. SHARES SUBJECT TO THE PLAN.
--------------------------
(a) Subject to the provisions of Section 11 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
granted under the Plan shall not exceed in the aggregate One Hundred Ninety-Two
Million (192,000,000) 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
3
<PAGE>
($100,000). If it is determined that an entire Option or any portion thereof
does not qualify for treatment as an Incentive Stock Option by reason of
exceeding such maximum, such Option or the applicable portion shall be
considered a Nonqualified Stock Option.
4. ELIGIBILITY.
-----------
(a) Incentive Stock Options may be granted only to employees
(including officers) of the Company or its Affiliates. A director of the
Company shall not be eligible to receive Incentive Stock Options unless such
director is also an employee of the Company or any Affiliate. Stock Awards
other than Incentive Stock Options may be granted to employees (including
officers) or directors of or consultants to the Company or any Affiliate or to
Trusts of any such employee, director or consultant.
(b) A director shall in no event be eligible for the benefits of the
Plan (other than from a Director NQSO under Section 6 of the Plan) unless and
until such director is expressly declared eligible to participate in the Plan by
action of the Board or the Committee, and only if, at any time discretion is
exercised by the Board or the Committee in the selection of a director as a
person to whom Stock Awards may be granted, or in the determination of the
number of shares which may be covered by Stock Awards granted to a director, the
Plan complies with the requirements of Rule 16b-3 promulgated under the Exchange
Act, as from time to time in effect. The Board shall otherwise comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act, as from time to
time in 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 2,000,000 shares of
Common Stock per person per calendar year.
5. TERMS OF DISCRETIONARY STOCK OPTIONS.
------------------------------------
An option granted pursuant to this Section 5 (a "Discretionary Stock
Option") shall be in such form and shall contain such terms and conditions as
the Board or the Committee shall deem appropriate. The provisions of separate
Options need not be identical,
4
<PAGE>
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 is transferred pursuant to paragraph
5(d), or (C) in any other form of legal consideration that may be acceptable to
the Board or the Committee in their discretion; including but not limited to
payment of the purchase price pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which results in the receipt of cash
(or a check) by the Company before Common Stock is issued or the receipt of
irrevocable instruction to pay the aggregate exercise price to the Company from
the sales proceeds before Common Stock is issued.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at not less than the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) An Option granted to a natural person shall be exercisable during
the lifetime of such person only by such person, provided that such person
during such person's lifetime may designate a Trust to be such person's
beneficiary with respect to any Incentive Stock Options granted after February
25, 1992 and with respect to any Nonqualified Stock Options, and such
beneficiary shall, after the death of the person to whom the Option was granted,
have all the rights that such person has while living, including the right to
exercise the Option. In the absence of such designation, after the death of the
person to whom the Option is granted, the Option shall be exercisable by the
person or persons to whom the optionee's rights under such Option pass by will
or by the laws of descent and distribution.
(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
5
<PAGE>
time to time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to that
period, and may be exercised with respect to some or all of the shares allotted
to such period and/or any prior period as to which the Option was not fully
exercised. During the remainder of the term of the Option (if its term extends
beyond the end of the installment periods), the Option may be exercised from
time to time with respect to any shares then remaining subject to the Option.
The provisions of this paragraph 5(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(f) The Company may require any optionee, or any person to whom an
Option is transferred under paragraph 5(d), as a condition of exercising any
such Option: (i) to give written assurances satisfactory to the Company as to
such person's knowledge and experience in financial and business matters and/or
to employ a purchaser representative who has such knowledge and experience in
financial and business matters, and that such person is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (ii) to give written assurances satisfactory to the
Company stating that such person is acquiring the Common Stock subject to the
Option for such person's own account and not with any present intention of
selling or otherwise distributing the Common Stock. These requirements, and any
assurances given pursuant to such requirements, shall be inoperative if: (x) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"); or (y) as to any particular
requirement, a determination is made by 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 and with such permanent and total disability being certified by the Social
Security Administration prior to such termination, 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
6
<PAGE>
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 Company's required minimum
statutory withholding; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock having a fair market value less than or equal to the
amount of the Company's required minimum statutory withholding.
(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
7
<PAGE>
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, 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 sixteen thousand (16,000) shares of Common Stock on
the terms and conditions set forth herein. An Eligible Director may designate
that such Director NQSO be granted in the name of a Trust instead of in the name
of such Eligible Director. The Director NQSO shall be on the terms and
conditions set forth herein and should the date of grant set forth above be a
Saturday, Sunday or legal holiday, such grant shall be made on the next business
day.
(b) Each person who becomes an Eligible Director, shall, upon the date
such person first becomes an Eligible Director, automatically be granted under
the Plan, without further action by the Company, the Board, or the Company's
stockholders, a Director NQSO to purchase sixty thousand (60,000) shares of
Common Stock on the terms and conditions set forth herein. An Eligible Director
may designate that such Director NQSO be granted in the name of a Trust instead
of in the name of such Eligible Director. The Director NQSO shall be on the
terms and conditions set forth herein and should the date of grant set forth
above be a Saturday, Sunday or legal holiday, such grant shall be made on the
next business day.
(c) Each Director NQSO granted pursuant to this Section 6 (or any
Director Re-Load Option granted pursuant to paragraph 6(j)) shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The provisions of separate Director NQSO's need not be
identical, but each
8
<PAGE>
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 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
9
<PAGE>
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. Notwithstanding anything else in the Plan
to the contrary, this paragraph 6(j) shall be of no force and effect from and
after June 23, 1998.
(k) For purposes of this Section 6, the term "Eligible Director" shall
mean a member of the Board who is not an employee of the Company or any
Affiliate, and the term "affiliate" shall mean a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Eligible Director.
7. TERMS OF STOCK BONUSES AND PURCHASES OF
---------------------------------------
RESTRICTED STOCK.
----------------
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements
10
<PAGE>
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. COVENANTS OF THE COMPANY.
------------------------
(a) During the terms of the Stock Awards granted under the Plan, the
11
<PAGE>
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.
9. USE OF PROCEEDS FROM COMMON STOCK.
---------------------------------
Proceeds from the sale of Common Stock pursuant to Stock Awards
granted under the Plan shall constitute general funds of the Company.
10. MISCELLANEOUS.
-------------
(a) The Board or Committee shall have the power to accelerate the time
during which a Stock Award may be exercised or the time during which a Stock
Award or any part thereof will vest, notwithstanding the provisions in the Stock
Award stating the time during which it may be exercised or the time during which
it will vest. Each Discretionary Stock Option providing for vesting pursuant to
paragraph 5(e) shall also provide that if the employee's employment or a
director's or consultant's affiliation with the Company is terminated by reason
of death or disability (within the meaning of Title II or XVI of the Social
Security Act and with such permanent and total disability certified by the
Social Security Administration prior to such termination), then the vesting
schedule of Discretionary Stock Options granted to such employee, director or
consultant or to the Trusts of such employee, director or consultant shall be
accelerated by twelve months for each full year the employee has been employed
by or the director or consultant has been affiliated with the Company.
Discretionary Stock Options granted under the Plan that are outstanding on
February 25, 1992, shall be amended to include the accelerated vesting upon
death provided for in the preceding sentence of this paragraph 10(a) and
Discretionary Stock Options granted under the Plan that are outstanding on June
18, 1996, shall be amended to include the accelerated vesting upon disability
provided for in the preceding sentence of this paragraph 10(a).
12
<PAGE>
(b) Neither an optionee nor any person to whom an Option is
transferred under the provisions of the Plan shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such person has satisfied all requirements for
exercise of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any eligible employee, consultant,
director, optionee or holder of Stock Awards under the Plan any right to
continue in the employ of the Company or any Affiliate or to continue acting as
a consultant or director or shall affect the right of the Company or any
Affiliate to terminate the employment or consulting relationship or directorship
of any eligible employee, consultant, director, optionee or holder of Stock
Awards under the Plan with or without cause. In the event that a holder of
Stock Awards under the Plan is permitted or otherwise entitled to take a leave
of absence, the Company shall have the unilateral right to (i) determine whether
such leave of absence will be treated as a termination of employment or
relationship as consultant or director for purposes hereof, and (ii) suspend or
otherwise delay the time or times at which exercisability or vesting would
otherwise occur with respect to any outstanding Stock Awards under the Plan.
11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
----------------------------------------
If any change is made in the Common Stock subject to the Plan, or
subject to any Stock Award granted under the Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding Stock Awards will be appropriately adjusted in the class(es) and
maximum number of shares subject to the Plan, the maximum number of shares which
may be granted to a participant in a calendar year, the class(es) and number of
shares and price per share of stock subject to outstanding Stock Awards, and the
number of shares of Common Stock to be granted as provided for in paragraphs
6(a) and 6(b). Such adjustment shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration".)
13
<PAGE>
12. CHANGE OF CONTROL.
-----------------
(a) Notwithstanding anything to the contrary in this Plan, in the
event of a Change in Control (as hereinafter defined), then, to the extent
permitted by applicable law: (i) the time during which Stock Awards become
vested shall automatically be accelerated so that the unvested portions of all
Stock Awards shall be vested prior to the Change in Control and (ii) the time
during which the Options may be exercised shall automatically be accelerated to
prior to the Change in Control. Upon and following the acceleration of the
vesting and exercise periods, at the election of the holder of the Stock Award,
the Stock Award may be: (x) exercised (with respect to Options) or, if the
surviving or acquiring corporation agrees to assume the Stock Awards or
substitute similar stock awards, (y) assumed; or (z) replaced with substitute
stock awards. Options not exercised, substituted or assumed prior to or upon the
Change in Control shall be terminated.
(b) For purposes of the Plan, a "Change of Control" shall be deemed to
have occurred at any of the following times:
(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
14
<PAGE>
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. QUALIFIED DOMESTIC RELATIONS ORDERS
-----------------------------------
(a) Anything in the Plan to the contrary notwithstanding, rights
under Stock Awards may be assigned to an Alternate Payee to the extent that a
QDRO so provides. (The terms "Alternate Payee" and "QDRO" are defined in
paragraph 13(c) below.) The assignment of a Stock Award to an Alternate Payee
pursuant to a QDRO shall not be treated as having caused a new grant. The
transfer of an Incentive Stock Option to an Alternate Payee may, however, cause
it to fail to qualify as an Incentive Stock Option. If a Stock Award is
assigned to an Alternate Payee, the Alternate Payee generally has the same
rights as the grantee under the terms of the Plan; provided however, that (i)
the Stock Award shall be subject to the same vesting terms and exercise period
as if the Stock Award were still held by the grantee, (ii) an Alternate Payee
may not transfer a Stock Award and (iii) an Alternate Payee is ineligible for
Re-Load Options described at paragraph 5(j) or Director Re-Load Options
described at paragraph 6(j).
(b) In the event of the Plan administrator's receipt of a domestic
relations order or other notice of adverse claim by an Alternate Payee of a
grantee of a Stock Award, transfer of the proceeds of the exercise of such Stock
Award, whether in the form of cash, stock or other property, may be suspended.
Such proceeds shall thereafter be transferred pursuant to the terms of a QDRO or
other agreement between the grantee and Alternate Payee. A grantee's ability to
exercise a Stock Award may be barred if the Plan administrator receives a court
order directing the Plan administrator not to permit exercise.
(c) The word "QDRO" as used in the Plan shall mean a court order (i)
that creates or recognizes the right of the 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
<PAGE>
14. AMENDMENT OF THE PLAN.
---------------------
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in the Common Stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(i) increase the number of shares reserved for Stock Awards
under the Plan;
(ii) modify the requirements as to eligibility for participation
in the Plan (to the extent such modification requires stockholder approval in
order for the Plan to satisfy the requirements of Section 422(b) of the Code);
or
(iii) modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422(b) of the Code.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of performance-
based compensation from the limit on corporate deductibility of compensation to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee Incentive Stock
Options and/or to bring the Plan and/or Options granted under it into compliance
therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan,
unless: (i) the Company requests the consent of the person to whom the Stock
Award was granted; and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
-------------------------------------
(a) The Board may suspend or terminate the Plan at any time. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated. No Incentive Stock Options may be granted under the Plan after
February 22, 2009.
(b) Rights and obligations under any Stock Awards granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Stock Award was granted.
16
<PAGE>
16. EFFECTIVE DATE OF PLAN.
----------------------
The Plan shall become effective as determined by the Board.
17
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>AMENDED 1997 NON-OFFICER EQUITY INCENTIVE PLAN
<TEXT>
<PAGE>
EXHIBIT 10.2
AMGEN INC.
AMENDED AND RESTATED 1997 SPECIAL NON-OFFICER EQUITY INCENTIVE PLAN
1. PURPOSE.
-------
(a) The purpose of the 1997 Special Non-Officer Equity Incentive Plan
(the "Plan") is to provide a means by which non-Officer employees of and
consultants to Amgen Inc., a Delaware corporation (the "Company"), and employees
of and consultants to the Company's 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)
stock options, (ii) stock bonuses, and (iii) 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
non-Officer employees of the Company and persons serving as 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 Section 5 hereof, which option shall not qualify as
incentive stock options as that term is used in Section 422 of the Code
("Options") or (ii) stock bonuses or rights to purchase restricted stock granted
pursuant to Section 6 hereof.
(e) The word "Trust" as used in the Plan shall mean a trust created
for the benefit of the employee 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 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).
1
<PAGE>
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an 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 13.
(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") which
members may be non-employee directors and outside directors. 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,
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 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 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.
2
<PAGE>
(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.
3. SHARES SUBJECT TO THE PLAN.
--------------------------
(a) Subject to the provisions of Section 10 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 Eighty-Nine Million
(89,000,000) 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.
4. ELIGIBILITY.
-----------
(a) Stock Awards may be granted to non-Officer employees of the
Company, or employees of any Affiliate, or consultants to the Company or any
Affiliate, or to Trusts of any such employee or consultant. Notwithstanding any
other provisions in this Plan to the contrary, Officers of the Company shall not
be eligible to receive Stock Awards. The term "Officer" shall include any
natural person who is elected as a corporate officer of the Company by the
Board.
(b) Stock Awards shall be limited to a maximum of 2,000,000 shares of
Common Stock per person per calendar year.
5. TERMS OF OPTIONS.
----------------
An Option granted pursuant to this Section 5 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 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.
3
<PAGE>
(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 of the shares of Common
Stock on the date of exercise, (B) according to a deferred payment or other
arrangement with the person to whom the Option is granted or to whom the Option
is transferred pursuant to paragraph 5(d), or (C) in any other form of legal
consideration that may be acceptable to the Board or the Committee in their
discretion, including but not limited to payment of the purchase price pursuant
to a program developed under Regulation T as promulgated by the Federal Reserve
Board which results in the receipt of cash (or a check) by the Company before
Common Stock is issued or, prior to the issuance of Common Stock, receipt by the
Company of evidence from the person authorized to sell the underlying stock that
they have received irrevocable instructions from the option holder to pay to the
Company the aggregate exercise price of the Option from the sale proceeds.
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, and such beneficiary shall, after the death of the person to whom
the Option was granted, have all the rights that such person had 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
the employment of such person's purchaser
4
<PAGE>
representative who has such knowledge and experience in financial and business
matters, and that such person is capable of evaluating, alone or together with
the purchaser representative, the merits and risks of exercising the Option; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the Common Stock subject to the Option for such person's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if: (x) the issuance of the shares upon the
exercise of the Option has been registered under a then currently effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"); or (y) as to any particular requirement, a determination is
made by 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 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 and with
such permanent and total disability being certified by the Social Security
Administration prior to such termination, 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; (ii) the
optionee dies while in the employ of or while serving as a consultant to the
Company or an Affiliate, or within not more than three (3) months after
termination of such employment or relationship as a consultant, 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 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 with the Company or an Affiliate. Notwithstanding any other provision
in this Plan to the contrary, (x) no portion of an Option shall be exercisable
by any person to the extent that the Company's federal income tax deduction with
respect to the exercise of such portion of the Option would be subject to
disallowance pursuant to Section 162(m) of the Code, or any successor thereto,
and (y) subject to paragraph 5(a), if any portion of an Option is not
exercisable solely because of the preceding clause (x) on the date on which such
Option would otherwise terminate pursuant to the foregoing provisions of this
paragraph 5(g), such Option shall not terminate until three (3) months after
such Option thereafter ceases to be subject to the preceding clause (x). Subject
to the preceding sentence, any portion of an Option which is not exercisable on
the date on which an optionee's employment or relationship as a consultant with
the Company or an Affiliate ceases shall terminate immediately on such date.
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.
(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
5
<PAGE>
consultant 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 Company's required minimum
statutory withholding; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock having a fair market value less than or equal to the
amount of the Company's required minimum statutory withholding.
6. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
--------------------------------------------------------
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) The purchase price under each stock purchase agreement shall be
such amount as the Board or Committee shall determine and designate in such
agreement. Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(b) No rights under a stock bonus or restricted stock purchase
agreement shall be assignable by any participant under the Plan, either
voluntarily or by operation of law, except where such assignment is required by
law or expressly authorized by the terms of the applicable stock bonus or
restricted stock purchase agreement.
(c) The purchase price of stock acquired pursuant to a stock purchase
agreement shall be paid either: (i) in cash at the time of purchase; (ii) at
the discretion of the Board or the Committee, according to a deferred payment or
other arrangement 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
6
<PAGE>
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 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.
7. 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.
8. 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.
9. 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 Option providing for vesting pursuant to paragraph 5(e)
shall also provide that if the employee's employment or a 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 with such
permanent and total disability certified by the Social Security Administration
prior to such termination), then the
7
<PAGE>
vesting schedule of Options granted to such employee or consultant or to the
Trusts of such employee or consultant shall be accelerated as of the date of
such termination by twelve months for each full year the employee has been
employed by or the consultant has been affiliated with the Company.
(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,
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
shall affect the right of the Company or any Affiliate to terminate the
employment or consulting relationship of any eligible employee, consultant,
optionee or holder of Stock Awards under the Plan with or without cause, at any
time and with or without notice. 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 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.
10. ADJUSTMENTS UPON CERTAIN TRANSACTIONS.
-------------------------------------
(a) In the event that any dividend or other distribution (whether in
the form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company, or
exchange of Common Stock or other securities of the Company (other than pursuant
to the conversion of convertible securities), issuance of warrants or other
rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, in the Board's or the Committee's sole
discretion, affects the Common Stock such that an adjustment is determined by
the Board or the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to Stock Awards, then the Committee or the Board
shall, in such manner as it may deem equitable, may make the following
adjustments to the Plan and with respect to any or all of the outstanding Stock
Awards:
a. the number and kind of shares of Common Stock (or other
securities or property) with respect to which Stock Awards may be granted
under the Plan (including, but not limited to, adjustments of the
limitations in paragraph 3(a) on the maximum number and kind of shares
which may be issued under the Plan and in paragraph 4(b) on the maximum
number of shares subject to Stock Awards which can be granted any person in
a calendar year),
8
<PAGE>
b. the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Stock Awards, including by
providing, either by the terms of such Stock Awards or by action taken
prior to the occurrence of such transaction or event, that upon such event,
such Stock Award shall be assumed by a successor or survivor corporation,
or a parent or subsidiary thereof, or shall be substituted for by similar
Stock Awards covering the stock of a successor or survivor corporation, or
a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices, and
c. the grant or exercise price with respect to any Stock Award.
(b) In the event that the Board or Committee adjusts any or all of the
outstanding Stock Awards by providing that such Stock Awards shall be assumed by
a successor or survivor corporation, or a parent or subsidiary thereof, or shall
be substituted for by similar options, rights or awards covering the stock of a
successor or survivor corporation, or a parent or subsidiary thereof, the Board
or the Committee may, in its sole discretion, determine that the transfer of the
optionee's or other holder's employment or consulting relationship to such
successor or survivor corporation or a parent or subsidiary thereof shall not
constitute a cessation of the optionee's or holder's employment or consulting
relationship with the Company or an Affiliate for the purposes of paragraph
5(g).
(c) Any adjustments made by the Board or the Committee under
paragraphs 10(a) and 10(b) shall be final, binding and conclusive on all
persons.
11. CHANGE OF CONTROL.
-----------------
(a) Notwithstanding anything to the contrary in this Plan, in the
event of a Change in Control (as hereinafter defined), then, to the extent
permitted by applicable law: (i) the time during which Stock Awards become
vested shall automatically be accelerated so that the unvested portions of all
Stock Awards shall be vested prior to the Change in Control and (ii) the time
during which the Options may be exercised shall automatically be accelerated to
immediately 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
9
<PAGE>
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 December 9, 1997,
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 December 9, 1997, 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.
12. 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 12(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. 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, and (ii) an
Alternate Payee may not transfer a Stock Award.
(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.
10
<PAGE>
(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.
13. AMENDMENT OF THE PLAN.
---------------------
The Board at any time, and from time to time, may amend the Plan.
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.
14. 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 9, 2007. 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.
15. EFFECTIVE DATE OF PLAN.
----------------------
The Plan shall become effective as determined by the Board.
11
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>SHAREHOLDERS' AGREEMENT OF KIRIN-AMGEN, INC.
<TEXT>
<PAGE>
Exhibit 10.3
------------
SHAREHOLDERS' AGREEMENT
OF
KIRIN-AMGEN, INC.,
a California corporation
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS......................................................................... 1
1. CERTAIN DEFINITIONS........................................................ 3
1.01 Stock.............................................................. 3
1.02 EPO................................................................ 3
1.03 Field of Activity.................................................. 4
1.04 Expression Systems................................................. 4
1.05 Transferred Technology............................................. 4
1.06 EPO Technology..................................................... 5
1.07 EPO Organisms...................................................... 6
1.08 Core Technology.................................................... 6
1.09 Development Program................................................ 6
1.10 Party.............................................................. 7
2. FORMATION.................................................................. 7
2.01 Formation.......................................................... 7
2.02 Name............................................................... 7
2.03 Principal Office................................................... 8
2.04 Articles of Incorporation.......................................... 8
2.05 Bylaws............................................................. 8
2.06 Business Purpose................................................... 8
2.07 Fiscal Year ....................................................... 8
2.08 California Agent for Service of Process............................ 9
2.09 Counsel to Corporation ............................................ 9
2.10 Accountants to Corporation......................................... 9
2.11 Initial Capital.................................................... 9
2.12 Subscription....................................................... 10
2.13 Additional Capital................................................. 11
2.14 Withdrawals........................................................ 12
2.15 Default on Additional Capital Contribution Obligation.............. 12
2.16 Title to Property.................................................. 13
2.17 Occurrence of the Conversion Event................................. 13
3. CLOSING.................................................................... 14
4. CLOSING DOCUMENTS.......................................................... 14
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5. REPRESENTATIONS AND WARRANTIES OF AMGEN............................. 15
5.01 Good Standing............................................... 15
5.02 Authorization............................................... 15
5.03 No Breach................................................... 15
5.04 Title....................................................... 16
5.05 No Violations............................................... 17
5.06 No Litigation............................................... 18
5.07 Representations and Warranties.............................. 18
6. REPRESENTATIONS AND WARRANTIES OF KIRIN............................. 19
6.01 Good Standing............................................... 19
6.02 Authorization............................................... 19
6.03 No Breach................................................... 19
6.04 No Violations............................................... 20
6.05 No Litigation............................................... 20
6.06 Representations and Warranties.............................. 20
7. [INTENTIONALLY OMITTED]............................................. 21
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF KIRIN.................... 21
8.01 No Misrepresentations....................................... 21
8.02 Compliance with Agreement................................... 21
8.03 Delivery.................................................... 21
8.04 Opinion of Counsel.......................................... 23
8.05 No Litigation............................................... 24
8.06 Additional Documents........................................ 24
8.07 Hart-Scott-Rodino Clearance................................. 25
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF AMGEN.................... 25
9.01 No Misrepresentations....................................... 25
9.02 Compliance with Agreement................................... 25
9.03 Delivery.................................................... 25
9.04 Opinion of Counsel.......................................... 26
9.05 No Litigation............................................... 28
9.06 Additional Documents........................................ 28
10. SURVIVAL AND INDEMNIFICATION........................................ 28
10.01 Survival of Representations and Warranties.................. 28
10.02 Indemnification............................................. 28
10.03 Mechanism................................................... 29
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
11. BROKERS............................................................. 30
12. MANAGEMENT.......................................................... 31
12.01 Board of Directors.......................................... 31
12.02 Officers.................................................... 31
12.03 Actions Requiring Consent................................... 32
12.04 Accounting and Internal Controls............................ 33
12.05 Financial and Business Information and Tax Returns.......... 34
12.06 Bank Accounts............................................... 35
12.07 Independent Enterprise...................................... 35
12.08 Compensation of Officers and Directors...................... 35
12.09 Fiduciary Duty.............................................. 36
12.10 Other Activities............................................ 36
12.11 Non-Competition............................................. 36
13. BUSINESS MATTERS.................................................... 37
13.01 License Agreements.......................................... 37
13.02 Development Program......................................... 38
13.03 Services Agreements......................................... 39
14. RESTRICTIONS ON SHARES.............................................. 39
14.01 Overall Restrictions........................................ 39
14.02 Additional Restrictions..................................... 40
14.03 Purchase Price and Payment Date............................. 41
14.04 Delivery of Shares.......................................... 42
15. ADDITIONAL SHARES................................................... 42
16. ENDORSEMENT OF CERTIFICATE.......................................... 42
17. [INTENTIONALLY OMITTED]............................................. 43
18. COSTS AND EXPENSES.................................................. 43
19. EXPORT CONTROL LAWS................................................. 44
19.01 Export Law Compliance....................................... 44
19.02 Specific Authorization...................................... 44
20. DISTRIBUTIONS OF CASH............................................... 45
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
21. DISSOLUTION/LIQUIDATION............................................ 45
21.01 Event of Dissolution...................................... 45
21.02 Final Accounting and Tax Returns.......................... 46
21.03 Liquidation............................................... 46
21.04 Cancellation of Certificates.............................. 47
22. MISCELLANEOUS PROVISIONS........................................... 48
22.01 Notices................................................... 48
22.02 Publicity and Disclosure.................................. 49
22.03 Entire Agreement; Amendment............................... 49
22.04 Waiver.................................................... 50
22.05 Enforcement............................................... 50
22.06 Remedies.................................................. 51
22.07 Headings.................................................. 51
22.08 Effectiveness............................................. 51
22.09 Attorneys' Fees and Costs................................. 52
22.10 Governing Law............................................. 52
22.11 Binding Effect............................................ 52
22.12 Exhibits.................................................. 52
22.13 Number and Gender......................................... 53
22.14 Counterparts.............................................. 53
22.15 Agreement to Perform Necessary Acts....................... 53
22.16 Validity.................................................. 53
22.17 Representations........................................... 54
22.18 Force Majeure............................................. 54
22.19 Expansion of Business..................................... 55
SIGNATURES.................................................................... 55
</TABLE>
EXHIBIT SCHEDULE
-iv-
<PAGE>
SHAREHOLDERS' AGREEMENT
-----------------------
THIS SHAREHOLDERS' AGREEMENT ("Agreement") is made and entered into at Los
Angeles, California, U.S.A. this 11th day of May, 1984, by and among AMGEN, a
California corporation, having its principal office at 1900 Oak Terrace Lane,
Thousand Oaks, California 91320, U.S.A . ("Amgen"), KIRIN BREWERY COMPANY,
LIMITED, a Japanese corporation, having its principal office at 26-1, Jingumae,
6 Chome, Shibuya-Ku, Tokyo 150, Japan ("Kirin"), and KIRIN-AMGEN, INC., a
California corporation, having its principal office at 1900 Oak Terrace Lane,
Thousand Oaks, California 91320, U.S.A. ("Corporation").
R E C I T A L S
A. Amgen has conducted research, has developed and possesses certain
existing proprietary technical information, technology and know-how relating to
genetic engineering which has enabled it to clone and express the gene for human
erythropoietin, and Amgen is continuing to develop human erythropoietin.
B. Kirin and Amgen believe that the aforementioned genetic engineering
techniques will have important application to the development of human
therapeutic products.
<PAGE>
C. Kirin and Amgen desire to form Corporation for purposes of development,
manufacture, production and worldwide commercial sale of erythropoietin for
human therapeutic use.
D. Kirin and Amgen believe that a joint business effort between them
dedicated to such purposes would be of mutual benefit to the accomplishment
thereof and that the compatibility between Amgen and Kirin is such that
substantial economic returns may be gained by each through cooperative effort.
E. Amgen intends to contribute cash to Corporation, to assign to
Corporation, perpetually and irrevocably, all of its right, title and interest
in and to the Transferred Technology (as defined in Paragraph 1.05 below), and
to license to Corporation the Core Technology (as defined in Paragraph 1.08
below), exclusively with respect to its direct application to the Field of
Activity (as defined in Paragraph 1.03 below), as more fully set forth herein,
in consideration of the issuance to Amgen of capital stock in Corporation as
more fully set forth herein.
F. Kirin intends to contribute cash to Corporation in consideration of the
issuance to Kirin of capital stock in Corporation as more fully set forth
herein.
G. The simultaneous transfers and resultant issuances contemplated in
Recitals E. and F. above are intended to qualify as a tax-free incorporation of
Corporation pursuant to Section 351 of the Internal Revenue Code of 1954, as
amended.
-2-
<PAGE>
H. It is the desire of Kirin and Amgen to cooperate in other mutually
agreeable areas of business interest.
NOW, THEREFORE, it is agreed as follows:
1. CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms shall have the following
meanings:
1.01 Stock
-----
(a) The term Class A Common Stock shall mean the duly authorized no
par common stock of Corporation with no preference rights on liquidation.
(b) The term Class B Common Stock shall mean the duly authorized no
par common stock of Corporation which contains certain preference rights on
liquidation (as set forth in Para- graph 21 below), which preference rights
shall be in effect until the occurrence of the Conversion Event (as defined in
Paragraph 2.17 below), at which time all issued and outstanding Class B Common
Stock shall be automatically converted into Class A Common Stock on a share-for-
share basis eliminating any shareholder preference rights on liquidation of
Corporation.
1.02 EPO
The term EPO shall mean erythropoietin or a fragment thereof for use
in human therapeutic applications, whether
-3-
<PAGE>
manufactured or isolated from natural materials, and whether glycosylated or not
glycosylated.
1.03 Field of Activity
-----------------
The term Field of Activity shall mean- the areas of development,
manufacture, production and worldwide commercial sale of EPO, including EPO
pharmaceuticals, for human therapeutic use, but not for animal therapeutic use
nor- for commercial diagnostic use (collectively "EPO Products"), and shall
include but not be limited to, toxicology, dosage studies, pre-clinical studies,
clinical trials, product registration and government approvals, all relative to
the development, manufacture, production and worldwide commercial sale of such
EPO Products.
1.04 Expression Systems
------------------
The term Expression Systems shall mean any system of production of
EPO utilizing natural or synthetic genes or vectors or recombinant DNA
materials, including but not limited to, expression in e. coli, mammalian and/or
yeast cell systems.
1.05 Transferred Technology
----------------------
The term Transferred Technology shall mean all proprietary technical
information, technology and know-how, heretofore developed by Amgen, relating
specifically to EPO Products which are owned by Amgen, or which is covered or
protected by letters patent, patent applications, trademarks, service marks,
trade names, copyrights or licenses held by Amgen,
-4-
<PAGE>
as of the Closing Date, and which are required in the development, manufacture,
production, testing, assay, use or sale of EPO Products, including the EPO
Organisms (as defined in Paragraph 1.07 below) in existence as of the Closing
Date. By way of illustration, but not limitation, with respect to the foregoing,
Transferred Technology shall include the sequence of the EPO gene and
restriction map of the related vector and any information, know-how, data,
process, technique, algorithm, program, design, drawing, formula or test data
relating to any toxicology, dosage studies, pre-clinical studies, clinical
trials or testing in progress relating to EPO,as more fully set forth on Exhibit
"A" attached hereto. The Transferred Technology shall be assigned to Corporation
effective on the Closing Date pursuant to that certain Assignment and License
Agreement which is attached hereto as Exhibit "B" ("Amgen Assignment");
provided, however, that until such time as the Conversion Event occurs, Amgen
shall hold as custodian for Corporation and Kirin, the sequence of the EPO gene
and restriction map of the related vector.
1.06 EPO Technology
--------------
The term EPO Technology shall mean the Transferred Technology, as
well as all improvements and enhancements thereto developed by the Parties
hereafter- under the Development Program, and the Core Technology (as defined
in Paragraph 1.08 below), as well as all improvements and enhancements thereto
developed by the Parties hereafter which have been used in the development of
EPO Products whether within or without of the Development Program
-5-
<PAGE>
1.07 EPO Organisms
-------------
The term EPO Organisms shall mean any and all organisms developed by
Amgen which are assigned perpetually and irrevocably to Corporation pursuant to
the Amgen Assignment, and which have been genetically engineered to produce
biologically active EPO, as well as all improvements and enhancements thereto
developed by Amgen subsequent to the Closing Date pursuant to the Development
Program.
1.08 Core Technology
---------------
The term Core Technology shall mean Amgen's proprietary technical
information, technology and know-how, including without limitation, protein
purification, fermentation, process development and hybridomas, other than
Transferred Technology, which is required to conduct Corporation's business in
the Field of Activity. The Core Technology shall be licensed to Corporation
exclusively with respect to its direct application to the Field of Activity
pursuant to the Amgen Assignment.
1.09 Development Program
-------------------
The term Development Program, as more fully set forth in the
Development and Supply Agreement attached hereto as Exhibit "C," and which shall
have appended thereto the preliminary R&D Plan and Budget therefor, shall mean
any development conducted by Amgen, Kirin and/or Corporation and paid for by
Corporation relating to (i) toxicology, dosage studies, preclinical studies,
clinical trials and product registration of EPO
-6-
<PAGE>
in accordance with the laws, regulations and guidelines of the United States and
Japan, respectively, (ii) commercial manufacturing scale production of EPO in
one or more Expression Systems, and (iii) other mutually agreed upon development
activities related to the Field of Activity.
1.10 Party
-----
The term Party shall mean Kirin, Amgen or Corporation, as the
context shall indicate, or, when used in the plural, Kirin, Amgen and
Corporation, as the context shall indicate.
2. FORMATION
---------
2.01 Formation
---------
On or before the Closing Date (as defined in Paragraph 3 below),
Kirin and Amgen shall establish or cause to be established, "Kirin-Amgen, Inc.,"
which shall be a corporation organized under the laws of the State of
California. Immediately after its formation, Kirin-Amgen, Inc. shall become a
Party to this Agreement.
2.02 Name
----
The corporate designation of Corporation shall be "Kirin-Amgen,
Inc." or such other name as may be mutually agreed to by Kirin and Amgen.
-7-
<PAGE>
2.03 Principal Office
----------------
The principal office and place of business of Corporation shall be
located at 1900 Oak Terrace Lane, Thousand Oaks, California 91320, U.S.A., or at
such other place as may be mutually agreed to by Kirin and Amgen.
2.04 Articles of Incorporation
-------------------------
The Articles of Incorporation of Corporation ("Articles") shall be
as attached hereto as Exhibit "D," as may be amended from time to time as may be
mutually agreed to by Kirin and Amgen.
2.05 Bylaws
------
The Bylaws of Corporation ("Bylaws") shall be as attached hereto as
Exhibit "E", as may be amended from time to time as may be mutually agreed to by
Kirin and Amgen.
2.06 Business Purpose
----------------
The business of Corporation shall be to engage in the development,
manufacture, production and sale of EPO Products for human therapeutic use in
the Field of Activity and to otherwise exploit such EPO Technology for
commercial purposes by whatever means including, but not limited to, the license
or sale of such EPO Technology by mutual agreement of Kirin and Amgen, and to do
all things necessary, appropriate or advisable in furtherance thereof.
2.07 Fiscal Year
-----------
The fiscal year of Corporation shall be the calendar year
("Corporate Year").
-8-
<PAGE>
2.08 California Agent for Service of Process
---------------------------------------
The name of the initial agent for service of process on Corporation
in California is Joel S. Marcus, Esq., Musick, Peeler & Garrett, One Wilshire
Boulevard, Suite 2000, Los Angeles, California 90017.
2.09 Counsel to Corporation
----------------------
The law firm of Musick, Peeler and Garrett, One Wilshire Boulevard,
Suite 2000, Los Angeles, California 90017, shall act as general counsel for
Corporation until otherwise mutually agreed between Kirin and Amgen pursuant to
that certain Conflicts Letter of even date herewith which is attached hereto as
Exhibit "F".
2.10 Accountants to Corporation
--------------------------
The independent certified public accounting firm of Arthur Young and
Company, 515 South Flower Street, Suite 2600, Los Angeles, California 90071,
shall act as independent accountants to Corporation pursuant to that certain
engagement letter attached hereto as Exhibit "G".
2.11 Initial Capital
The initial capital of Corporation pursuant to the two (2)
subscriptions described in Paragraph 2.12 below, shall consist of a total of
twelve million (12,000,000) shares of no par value Class A Common Stock with the
right to one (1) vote per share ("Class A Common Stock"), and twelve million
(12,000,000) shares of no par value Class B Common Stock with the right to one
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<PAGE>
(1) vote per share ("Class B Common Stock"). Upon the occurrence of the
Conversion Event (as defined in Paragraph 2.17 below), Kirin's shares of Class B
Common Stock shall be automatically converted on a share-for-share basis into
shares of Class A common stock subject to the terms of Paragraph 2.17 below and
the provisions contained in Corporation's Articles.
2.12 Subscription
Kirin hereby subscribes for twelve million (12,000,000) shares of
Class B Common Stock of Corporation, and Amgen hereby subscribes for twelve
million shares (12,000,000) shares of Class A Common Stock of Corporation. The
subscription price for all shares, whether of Class A Common Stock or Class B
Common Stock, shall be ONE DOLLAR (U.S. $1.00) per share, and shall be payable
as follows:
2.12.1 Kirin shall pay its full subscription price for the Class B
Common Stock by cashiers or certified check or by wire transfer from Kirin to
Corporation's account at a bank to be designated by both Kirin and Amgen
("Corporate Bank Account") on the Closing Date of the full subscription price of
TWELVE MILLION DOLLARS (US $12,000,000.00).
2.12.2 Amgen shall pay its full subscription price for the Class A
Common Stock as follows: (i) FOUR MILLION DOLLARS (U.S. $4,000,000.00) by
cashiers or certified check or by wire transfer from Amgen to the Corporate Bank
Account on the Closing Date, and (ii) a contribution and complete assignment in
-10-
<PAGE>
kind to Corporation on the Closing Date of all of the Transferred Technology,
such transfer to be made pursuant to the Amgen Assignment. Kirin and Amgen
acknowledge that the fair market value of Amgen's capital contribution to
Corporation described in subparagraph (ii) above shall be EIGHT MILLION DOLLARS
(U.S. $8,000,000.00).
2.13 Additional Capital
------------------
2.13.1 Subject to Paragraph 2.15 below, no additional capital stock
may be issued by Corporation other than by the mutual written consent of Kirin
and Amgen. The Parties hereto shall meet no less frequently than annually
following the formation of Corporation to determine its capital needs and the
business and Development Program for the next succeeding year.
2.13.2 In the event that the initial capital contributions to
Corporation pursuant to Paragraph 2.11 above (together with interest earned by
Corporation on the cash so contributed) are insufficient to fund the activities
of Corporation and the Development Program until such time as all approvals
(governmental or otherwise) have been obtained for the manufacture and sale of
EPO Products in the Field of Activity in the Kirin Territory and the Amgen
Territory (as defined in Paragraph 13 below), then in such event, Kirin and
Amgen may, but shall not be obligated to, agree to make additional capital
contributions to Corporation. Any such agreed upon capital contributions shall
be made in the proportion to which each Party's total capital contribution bears
to the
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<PAGE>
aggregate capital contributions of Kirin and Amgen, from time to time existing.
Upon written notification by Corporation's Board of Directors to Kirin and Amgen
that Corporation does not have sufficient capital to complete the development of
the EPO Technology and to accomplish the business purposes of Corporation as
contemplated by this Agreement, Kirin and Amgen shall promptly meet with
management of Corporation to ascertain the amount of funding reasonably required
by Corporation under the circumstances. Kirin and Amgen shall thereafter enter
into a mutually acceptable agreement with respect to such additional capital
contributions, if any.
2.14 Withdrawals
-----------
Except as otherwise specifically provided in this Agreement, neither
Kirin nor Amgen shall have the right to withdraw or to demand a return of all or
any part of its capital contribution.
2.15 Default on Additional Capital Contribution Obligation
-----------------------------------------------------
To the extent that either Kirin or Amgen fails to contribute its
proportionate share of the additional capital called for under Paragraph 2.13
above, then from and after the date such capital was to have been contributed to
Corporation, the shareholding percentages of Kirin or Amgen shall promptly be
adjusted by Corporation to reflect the increase in capital contributed by either
Kirin or Amgen such that the shareholding interest of Kirin and Amgen shall
accurately reflect the percent-
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<PAGE>
age of each Party's total Capital contribution as it bears to the aggregate
capital contributions of both Kirin and Amgen.
2.16 Title to Property
-----------------
Legal title to any and all property of Corporation shall be taken
and at all times held in the name of "Kirin-Amgen, Inc."
2.17 Occurrence of the Conversion Event
----------------------------------
2.17.1 The "Conversion Event" shall occur when the EPO Organisms
produce biologically active EPO in sufficient levels, as set forth below, which
Kirin can reasonably verify within thirty (30) days after receiving written
notice of the attainment thereof, to enable Corporation to conduct pre-clinical
studies in the E. Coli (50 mg EPO/1), Mammalian (50 Units EPO/ml), or Yeast Cell
(50 mg EPO/1) systems, both in Japan and in the United States.
2.17.2 The occurrence of the Conversion Event as set forth in
Paragraph 2.17.1 above, shall give rise to the automatic conversion of all of
Kirin's Class B Common Stock into Class A Common Stock on a share-for-share
basis. All Class B Common Stock shall thereafter be promptly cancelled, the
Articles amended, and only one class of common stock (to be designated common
stock) of Corporation shall thereafter be issued and outstanding.
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<PAGE>
3. CLOSING
-------
The Closing hereunder shall take place at the offices of Musick, Peeler &
Garrett, One Wilshire Boulevard, Suite 2000, Los Angeles, California 90017, USA,
at 1:00 p.m. Pacific Daylight Time on June 15, 1984 ("Closing" and the "Closing
Date"), or such other date and/or place as shall be mutually agreed to by Kirin
and Amgen.
4. CLOSING DOCUMENTS
-----------------
At the Closing, each Party shall deliver such documents, instruments and
materials as are called for by this Agreement or as may be reasonably required
in order to carry out the provisions and purposes hereof, all of which shall be
satisfactory in substance and form to legal counsel for each Party. Without
limitation as to the foregoing and in addition to the various documents,
instruments and agreements contemplated in Paragraphs 8 and 9 below, the Parties
agree that, upon the request of any Party, each of them will from time to time
after the Closing Date execute, acknowledge and deliver or cause to be so done,
at their expense, any and all such further documents and instruments as may be
reasonably required for carrying out the purposes of this Agreement.
Simultaneously with such delivery and Closing, all steps shall be taken as may
be reasonably required to put
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<PAGE>
Corporation in actual possession and operating control of the Transferred
Technology.
5. REPRESENTATIONS AND WARRANTIES OF AMGEN
To induce Kirin to enter into this Agreement, Amgen represents and warrants
to Kirin as of the date hereof as follows:
5.01 Good Standing
-------------
Amgen is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all requisite power
and authority to: (i) own its assets to be conveyed in connection with this
Agreement; (ii) lawfully carry on its business as now being conducted; and (iii)
to make, execute, deliver and perform this Agreement and all contracts -and
documents to be executed in connection herewith.
5.02 Authorization
-------------
This Agreement has been duly authorized and, prior to the Closing
Date, will be approved by all necessary corporate action of Amgen and will be a
valid and legally binding obligation of Amgen in accordance with its terms.
5.03 No Breach
---------
Neither execution or delivery of this Agreement, the contracts and
instruments to be executed in connection herewith, nor its performance by Amgen
will conflict with, violate or
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<PAGE>
result in a breach of any term, condition or provision of, nor constitute a
material default under, or result in the acceleration of any material obligation
under, or permit the termination of any indenture, material contract or other
material agreement to which Amgen is a party or by which Amgen or its properties
is subject or bound; nor will such execution, delivery or performance by Amgen
conflict with or violate the provisions of any judgment, decree, order to which
Amgen is subject or Amgen's restated Articles of Incorporation or Bylaws, or to
the best of its knowledge, any law or regulation.
5.04 Title
-----
Amgen has valid legal title in and to all of the assets to be
transferred and/or licensed to Corporation on the Closing Date pursuant to the
Amgen Assignment, including but not limited to, the Transferred Technology, the
Core Technology, free and clear of all security interests, liens, charges and
encumbrances whatsoever, and to the best of Amgen's knowledge, tax or other
inchoate liens. Amgen owns and has the right to use the Transferred Technology
and Core Technology in existence as of the date hereof and to be in existence as
of the Closing Date. To the best of Amgen's knowledge: (i) the Transferred
Technology and Core Technology in existence as of the date hereof and to be in
existence as of the Closing Date do not conflict with the rights of others; (ii)
there are no infringements by third parties of any letters patent or patent
applications which are part of the Transferred Technology and Core Technology in
exis-
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<PAGE>
tence as of the date hereof and to be in existence as of the Closing Date; and
(iii) Amgen's operations and business as conducted as of and prior to the
Closing Date with respect to patent applications which are part of the
Transferred Technology and Core Technology in existence as of the date hereof
and to be in existence as of the Closing Date do not infringe upon the rights of
any person and/or entity not a Party hereto. No right, privilege, permission or
license, express or implied, under the Transferred Technology or Core Technology
in existence as of the date hereof and to be in existence as of the Closing
Date, has been granted or is in force pursuant to which any party, other than
Corporation, Kirin or Amgen, may make, have made, use or sell any Transferred
Technology or Core Technology in existence as of the date hereof and to be in
existence as of the Closing Date. No claims have been asserted by any person
relating to the EPO Technology in existence as of the date hereof and to be in
existence as of the Closing Date or challenging or questioning the validity or
effectiveness of any license or agreement related thereto, and there is no valid
basis for any such claim.
5.05 No Violations
-------------
Amgen is not in violation of any applicable ordinance or statute,
or, to the best of its knowledge, any law or regulation, with respect to its
ownership and operation of the Transferred Technology and Core Technology in
existence as of the date hereof and to be in existence as of the Closing Date,
nor has it received any notices or citations from any public or
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<PAGE>
quasi-public authority in respect thereto, including but not limited to, the
Food and Drug Administration.
5.06 No Litigation
-------------
Amgen is not a party to any pending or threatened suit, action or
legal, administrative, arbitration or other proceeding which might materially
and adversely affect the business of Corporation, the Transferred Technology or
the Core Technology, in existence as of the date hereof or to be in existence as
of the Closing Date, or the transactions contemplated by this Agreement, nor
does Amgen know of any facts which are likely with the passage of time to give
rise to such a suit, action or proceeding.
5.07 Representations and Warranties
------------------------------
No representation or warranty of Amgen, nor any exhibit, document,
statement, certificate or schedule furnished to Kirin pursuant hereto or in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make statements or facts contained therein not misleading. The representations
and warranties of Amgen set forth in this Agreement and in any exhibit,
document, statement, certificate or schedule furnished or to be furnished
pursuant hereto shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of Closing Date.
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<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF KIRIN
---------------------------------------
To induce Amgen to enter into and perform this Agreement, Kirin represents
and warrants to Amgen as of the date hereof as follows:
6.01 Good Standing
-------------
Kirin is a corporation duly organized and validly existing and in
good standing under the laws of the country of Japan and has all requisite power
and authority to lawfully carry on its business as now being conducted and to
make, execute, deliver and perform this Agreement and all instruments and
documents to be executed in connection herewith.
6.02 Authorization
-------------
This Agreement has been duly authorized and, prior to the Closing
Date will be approved by all necessary corporate action of Kirin and will be a
valid and legally binding obligation of Kirin in accordance with its terms.
6.03 No Breach
---------
Neither execution or delivery of this Agreement, the contracts and
instruments to be executed in connection herewith, nor its performance by Kirin
will conflict with, violate or result in a breach of any term, condition or
provision of, nor constitute a material default under, or result in the
acceleration of any material obligation under, or permit the termination of any
indenture, material contract or other material agreement to which Kirin is a
party or by which Kirin or its properties is
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<PAGE>
subject or bound; nor will such execution, delivery or performance by Kirin
conflict with or violate the provisions of any judgment, decree, order to which
Kirin is subject or Kirin's Bylaws, or to the best of its knowledge, any law or
regulation.
6.04 No Violations
-------------
Kirin is not in violation of any applicable ordinance or statute, or
to the best of its knowledge, any law or regulation, nor has it received any
notices or citations from any public or quasi-public authority in respect
thereto.
6.05 No Litigation
-------------
Kirin is not a party to any pending or threatened suit, action or
legal, administrative, arbitration or other proceeding which might materially
and adversely affect the transactions contemplated by this Agreement, nor does
Kirin know of any facts which are likely with the passage of time to give rise
to such a suit, action or proceeding.
6.06 Representations and Warranties
------------------------------
No representation or warranty of Kirin, nor any exhibit, document,
statement, certificate or schedule furnished or to be furnished to Amgen
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make statements or facts
contained therein not misleading. The representations and warranties of Kirin
set forth in this Agreement and in any
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<PAGE>
exhibit, document, statement, certificate or schedule furnished or to be
furnished pursuant hereto shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of Closing Date.
7. [INTENTIONALLY OMITTED]
---------------------
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF KIRIN
------------------------------------------------
All of the obligations of Kirin under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions:
8.01 No Misrepresentations
Kirin shall not have discovered any material error, misstatement or
omission in the representations and warranties made by Amgen in Paragraph 5
above.
8.02 Compliance with Agreement
Amgen shall have performed and complied with all agreements,
covenants and conditions required by this Agreement prior to the Closing Date.
8.03 Delivery
Kirin shall have had delivered to it each of the following:
8.03.1 Confirmation in form and substance reasonably satisfactory
to Kirin evidencing receipt of Amgen's monetary
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capital contribution in the amount specified in Paragraph 2.12 above;
8.03.2 Duly executed counterpart of the Amgen Assignment effective
to (i) vest valid legal title to all Transferred Technology in Corporation, and
(ii) license the Core Technology exclusively to Corporation with respect to its
direct application to the Field of Activity, together with such other documents
and instruments as may be necessary to effectuate the assignments and licensing
contemplated by this Agreement;
8.03.3 Duly executed counterparts of the Bylaws and organizational
minutes of Corporation;
8.03.4 Duly executed, validly authorized and issued, fully paid and
non-assessable Class B Common Stock represented by Certificate No. 1, duly
issuing twelve million (12,000,000) shares thereof to Kirin;
8.03.5 Duly executed counterpart of the Development and Supply
Agreement;
8.03.6 Duly executed counterparts of the Kirin/ Kirin-Amgen, Inc.
and Amgen/Kirin-Amgen, Inc. Services Agreements which are attached hereto as
Exhibits "H" and "I", respectively ("Services Agreements");
8.03.7 Duly executed counterparts of the Kirin/ Kirin-Amgen, Inc.
and Amgen/Kirin-Amgen, Inc. License Agreements which are attached hereto as
Exhibits "J" and "K", respectively ("License Agreements"); and
8.03.8 Opinion of Amgen's counsel (as defined in Paragraph 8.04
below).
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<PAGE>
8.04 Opinion of Counsel
------------------
Amgen shall have delivered to Kirin an opinion of Cooley,
Godward, Castro, Huddleson & Tatum, legal counsel for Amgen, in a form
satisfactory to counsel for Kirin, dated as of the Closing Date, to the effect
that (i) Amgen is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, and Amgen has the corporate
power to conduct its business where such business is now conducted and to
execute and deliver the Agreement; (ii) the execution, delivery and performance
of this Agreement, together with all instruments and documents executed in
connection therewith, and the transactions contemplated hereby have been duly
authorized and approved by the Board of Directors of Amgen; (iii) the Agreement,
together with all instruments and documents executed in connection therewith,
constitute valid and binding obligations of Amgen, enforceable in accordance
with their terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of creditors'
rights; (iv) the execution, delivery and performance by Amgen, together with all
instruments and documents executed in connection therewith, and the consummation
of the transactions contemplated hereby will not result in any conflict with or
material breach or violation by Amgen of, or default by Amgen under, its
Articles of Incorporation, Bylaws, or any judgment, decree, order, or indenture,
material obligation or agreement, or other
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<PAGE>
material instrument or document of or applicable to them known to such legal
counsel; and (v) the Amgen Assignment has been duly authorized, executed and
delivered by and on behalf of Amgen and effectively transfers to and vests in
Corporation (i) valid legal title to the Transferred Technology, and (ii) a
valid license of the Core Technology, free and clear of all claims, liens,
encumbrances or security interests of any kind.
In rendering the foregoing opinion, Cooley, Godward, Castro,
Huddleson & Tatum may rely on opinions of other counsel, reasonably acceptable
to Kirin, and, as to matters of fact, on searches of public records and
certificates of officers and directors of Amgen.
8.05 No Litigation
-------------
No suit, action or proceeding against Amgen shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the transaction contemplated hereby.
8.06 Additional Documents
--------------------
Amgen shall have delivered to Kirin such other instruments and
documents as may be, in the opinion of counsel for Kirin, reasonably necessary
to effectuate the transactions contemplated by this Agreement, and all legal
matters in connection with this Agreement and the transactions contemplated
hereby shall have been approved by counsel for Kirin.
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<PAGE>
8.07 Hart-Scott-Rodino Clearance
---------------------------
The waiting period described in Section 7A of the Clayton Act, 15
U.S.C.ss.18a has expired without adverse action by the Federal Trade Commission
("FTC") or Department of Justice ("DJ") of the United States, or an affirmative
response has been received from the FTC or DJ which has the effect of shortening
the waiting period.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF AMGEN
All of the obligations of Amgen under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions:
9.01 No Misrepresentations
---------------------
Amgen shall not have discovered any material error, misstatement or
omission in the representations and warranties made by Kirin in Paragraph 6
above.
9.02 Compliance with Agreement
-------------------------
Kirin shall have performed and complied with all agreements,
covenants and conditions required by this Agreement prior to the Closing Date.
9.03 Delivery
--------
Amgen shall have had delivered to it each of the following:
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<PAGE>
9.03.1 Confirmation in form and substance reasonably satisfactory
to Amgen evidencing receipt of Kirin's monetary capital contribution in the
amount specified in Paragraph 2.12 above;
9.03.2 Duly executed counterparts of the Articles, Bylaws
and Organizational Minutes of Corporation;
9.03.3 Duly executed, validly authorized and issued, fully paid and
non-assessable Class A Common Stock represented by Certificate No. 1, duly
issuing twelve million (12,000,000) shares thereof to Amgen;
9.03.4 Duly executed counterpart of the Development and Supply
Agreement;
9.03.5 Duly executed counterparts of the Services Agreements;
9.03.6 Duly executed counterparts of the License Agreements; and
9.03.7 Opinion of Counsel to Kirin (as defined in Paragraph 9.04
below).
9.04 Opinion of Counsel
------------------
Kirin shall have delivered to Amgen an opinion of Musick, Peeler &
Garrett, legal counsel for Kirin, in a form satisfactory to counsel for Amgen,
dated as of the Closing Date, to the effect that (i) Kirin is a corporation duly
organized, validly existing and in good standing under the laws of Japan and
Kirin has the corporate power to conduct its business where such
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<PAGE>
business is now conducted and to execute and deliver the Agreement; (ii) the
execution, delivery and performance of this Agreement, together with all
instruments and documents executed in connection therewith, and the transactions
contemplated hereby have been duly authorized and approved by the Board of
Directors of Kirin; (iii) the Agreement, together with all instruments and
documents executed in connection therewith, constitute valid and binding
obligations of Kirin, enforceable in accordance with their terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights; and (iv) the execution,
delivery and performance by Kirin, together with all instruments and documents
executed in connection therewith, and the consummation of the transactions
contemplated hereby will not result in any conflict with or material breach or
violation by Kirin of, or default by Kirin under, its Articles of Incorporation,
Bylaws, or any judgment, decree, order, or indenture, material obligation or
agreement, or other material instrument or document of or applicable to them
known to such legal counsel.
In rendering the foregoing opinion, Musick, Peeler & Garrett may
rely on opinions of other counsel, reasonably acceptable to Amgen, and, as to
matters of fact, on searches of public records and certificates of officers and
directors of Kirin.
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<PAGE>
9.05 No Litigation
-------------
No suit, action or proceeding against Kirin shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the transaction contemplated hereby.
9.06 Additional Documents
--------------------
Kirin shall have delivered to Amgen such other instruments and
documents as may be, in the opinion of counsel for Amgen; reasonably necessary
to effectuate the transactions contemplated by this Agreement, and all legal
matters in connection with this Agreement and the transactions contemplated
hereby shall have been approved by counsel for Amgen.
10. SURVIVAL AND INDEMNIFICATION
----------------------------
10.01 Survival of Representations and Warranties
------------------------------------------
The respective representations and warranties of Kirin and of Amgen
shall survive the Closing and continue in full force and effect for a period
thereafter equal to the earlier of (i) five (5) years following the Closing
Date, or (ii) four (4) years after the Conversion Event.
10.02 Indemnification
---------------
Amgen shall indemnify and hold Kirin, Corporation and their
respective directors, officers, employees and agents harm-
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<PAGE>
less from and against any and all claims, liabilities, losses, costs, damages
and expenses, including costs of investigation, court costs, reasonable
attorneys' fees, to which any of them may become subject arising from or in any
manner connected with, directly or indirectly, any material misstatement, error
or omission in any representation or warranty of Amgen contained in this
Agreement (without effect upon Amgen's liability under the various instruments
and documents to be executed in connection herewith). Kirin agrees to indemnify
Amgen, Corporation and their respective directors, officers, employees and
agents, to the same extent that Kirin is being indemnified pursuant to the
immediately preceding section.
10.03 Mechanism
---------
The Party seeking indemnification hereunder ("Indemnified Party")
shall give written notice to the indemnifying party or parties ("Indemnifying
Party") of its indemnification claims hereunder, specifying the amount and
nature of the claim, and giving the Indemnifying Party the right to contest any
such claim represented by counsel of its choice; if any such claim is made
hereunder by the Indemnified Party and such claim arises from the claims of a
third party against the Indemnified Party and the Indemnifying Party does not
elect to undertake the defense thereof by written notice within fifteen (15)
days after receipt of the original notice from the Indemnified Party, the
Indemnified Party shall be entitled to indemnity pursuant to the
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<PAGE>
terms of this Agreement to the extent of its payment in respect of such claim.
To the extent that the Indemnifying Party undertakes the defense of such claim
in good faith by proceeding diligently at its expense, and without materially
impairing the financial conditions or operations of the Indemnified Party, the
Indemnified Party shall be entitled to indemnity hereunder only if, and to the
extent that, such defense is unsuccessful as determined by a final judgment of a
court of competent jurisdiction or is settled with the consent of the
Indemnifying Party. The Party defending a third party claim shall have the right
to choose its own counsel.
11. BROKERS
-------
Each of the Parties represents and warrants that it has dealt with no
broker or finder in connection with any of the transactions contemplated by this
Agreement, and, insofar as it knows, no broker or other person is entitled to
any commission or finder's fee in connection with any of these transactions. The
Parties hereto each agree to indemnify and hold harmless one another against any
loss, liability, damage, cost, claim, or expense, including reasonable
attorneys' fees, incurred by reason of any brokerage, commission, or finder's
fee alleged to be payable because of any act, omission, or statement of the
Indemnifying Party.
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12. MANAGEMENT
----------
12.01 Board of Directors
------------------
Corporation shall be managed by a Board of Directors consisting
initially of six (6) members. Kirin and Amgen shall each have the right to
nominate three (3) members of the Board of Directors. In the event of a default
in the payment of any additional capital contribution, as described in Paragraph
2.15 above, the authorized number of members of the Board of Directors shall be
increased to seven (7) and four (4) of such members shall be nominees of the
non-defaulting party. The number of members of the Board of Directors cannot be
decreased or otherwise increased without the mutual written consent of Kirin and
Amgen. All actions by the Board of Directors shall require the affirmative vote
of a majority of the total members of Board of Directors at a meeting at which a
quorum is present, except for such actions as to which a higher than majority
vote is required pursuant to the provisions of this Agreement, the Articles, the
Bylaws or applicable law.
12.02 Officers
--------
Corporation shall have a Chairman of the Board, a President, Vice
President - Amgen, Vice President - Kirin, a Secretary, an Assistant Secretary,
a Chief Financial Officer and such other officers with such titles and duties as
the Board of Directors may determine. Any two or more offices may be held by
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the same person. The Chairman of the Board, the Vice President - Kirin, the
Chief Financial Officer and the Assistant Secretary shall be nominees of Kirin.
The President, the Vice President - Amgen and the Secretary shall be nominees of
Amgen.
12.03 Actions Requiring Consent
-------------------------
In addition to any other items referred to in this Agreement
requiring consent of both of Kirin and Amgen, none of the following
actions shall be permitted to be taken by Corporation unless it shall
have obtained the consent of both Kirin and Amgen:
(i) The entry by Corporation into any business outside the Field
of Activity;
(ii) Any lending or borrowing of money by Corporation;
(iii) The acquisition, mortgage, pledge, sale, assignment,
transfer, or other disposition of any property of Corporation having a fair
market value in excess of ONE HUNDRED THOUSAND DOLLARS (US $100,000.00) by
Corporation (other than in connection with the sale of products and
services in the ordinary course of its business) or of any interest
(regardless of value) in the legal or beneficial ownership of any other
corporation or enterprise;
(iv) The adoption of a business plan, annual capital, operating
and development plans and budgets,
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<PAGE>
including any material modification thereof pursuant to Paragraph 12.07
below ("Business Documents");
(v) Any capital expenditure in excess of ONE HUNDRED THOUSAND
DOLLARS (US $100,000.00) by Corporation; and
(vi) Any material act in material contravention of this Agreement.
12.04 Accounting and Internal Controls
--------------------------------
Kirin and Amgen shall cause the management of Corporation to conduct
the business of Corporation at all times in accordance with high standards of
business ethics and to maintain Corporation's accounts in accordance with
generally accepted accounting principles consistently applied and, specifically,
to:
(i) Maintain full and accurate books, records, and accounts which
shall, in reasonable detail, accurately and fairly reflect all transactions
of Corporation; and
(ii) Devise and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are
executed in accordance with general or specific authorizations, and (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles, all
tax returns and to maintain accountability for assets.
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<PAGE>
12.05 Financial and Business Information and Tax Returns
--------------------------------------------------
Kirin and Amgen shall cause the management of Corporation to:
(i) Present Business Documents to the Board of Directors and
Kirin and Amgen for approval;
(ii) Make available to all members of the Board of Directors
together with Kirin and Amgen on a regular basis, and as reasonably
requested, all such information and/or documents as may be required to
permit the Board of Directors and/or Kirin and Amgen, as the case may be,
to make informed judgments with respect to such Business Documents and all
other matters of interest to them;
(iii) Prior to March 15 of each Corporate Year, provide to Kirin
and Amgen regular annual audited financial statements by Corporation's
independent certified public accountants which shall include a statement of
profits and losses, changes in financial position and a balance sheet for
the year then ended, and including such other appropriate financial
information reasonably requested by the Parties; and
(iv) Cause to be prepared all federal, state and local tax returns
of Corporation ("Returns").
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<PAGE>
12.06 Bank Accounts
-------------
All funds of Corporation shall be deposited in the name of
Corporation in such bank account or accounts as shall be determined by mutual
agreement of Kirin and Amgen. All withdrawals therefrom shall be made upon
checks signed on behalf of Corporation by any one officer, except for (i)
amounts in excess of FIVE THOUSAND DOLLARS (US $5,000.00), and (ii) any payments
to be made to Kirin and/or Amgen, in which case all such checks shall require
the signature of one (1) Kirin officer and one (1) Amgen officer. The Parties
hereto shall not make deposits in or issue any checks against the Corporation
bank account(s) without full, proper and complete supporting records.
12.07 Independent Enterprise
----------------------
Kirin and Amgen agree to cause Corporation at all times to be
conducted as an independent enterprise for profit. Except as otherwise provided
herein, all commercial transactions between Corporation and Kirin and/or Amgen
(or their affiliates) shall be conducted on an arm's-length basis with neither
granting to the other terms or conditions more favorable than would be accorded
non-related third-parties, except as Kirin and Amgen may otherwise mutually
agree prior to such transaction.
12.08 Compensation of Officers and Directors
--------------------------------------
The officers and directors of Corporation will serve in their
respective positions for no compensation or remuneration whatsoever.
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<PAGE>
12.09 Fiduciary Duty
--------------
Kirin, Amgen, the officers and members of the Board of Directors of
Corporation shall all have the fiduciary responsibility for the safekeeping and
use of all funds and assets (including records) of Corporation, whether or not
in immediate possession or control, for the exclusive benefit of Corporation and
its shareholders.
12.10 Other Activities
----------------
Kirin and Amgen may engage in or possess an interest in other
business ventures of any nature or description, independently or with others,
whether presently existing or hereafter created, other than for the purpose of
development, manufacture, production and sale of EPO Products.
12.11 Non-Competition
---------------
Kirin and Amgen agree that, except as specifically authorized by the
respective License Agreements, they shall not, directly or indirectly, nor shall
they permit any of their respective subsidiaries or affiliates, as applicable,
to engage in any business of a substantially similar nature to the business of
Corporation in the Field of Activity for a period of twenty (20) years from and
after the Closing Date, anywhere throughout the world, it being acknowledged
that the business of Corporation shall be worldwide.
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<PAGE>
13. BUSINESS MATTERS
----------------
13.01 License Agreements
------------------
As more fully set forth in those certain License Agreements, Kirin
and Amgen agree that:
(i) Kirin will have an exclusive right to manufacture and sell
EPO Products in the Field of Activity in the territory composed of the country
of Japan ("Kirin Territory") pursuant to the Kirin License Agreement and in no
other territory without the prior written consent of Amgen and Corporation.
(ii) Amgen will have an exclusive right to manufacture and sell
EPO Products in the Field of Activity in the territory composed of the fifty
(50) states of the United States of America, including the District of Columbia
and U.S. territories and possessions ("Amgen Territory") pursuant to the Amgen
License Agreement and in no other territory without the prior written consent of
Kirin and Corporation.
(iii) The Parties agree that Corporation may license one (1) other
entity in addition to Kirin and Amgen for the manufacture of EPO Products in the
Field of Activity outside of the Amgen Territory and Kirin Territory and may
license other entities in addition to Kirin and Amgen for the marketing of EPO
Products in the Field of Activity outside of the Amgen Territory and Kirin
Territory (that area of the world outside of the Amgen Territory and Kirin
Territory is herein referred to as
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<PAGE>
"Corporation Territory"); provided, however, that the Parties may mutually agree
to amend this Agreement and the appropriate License Agreement at any time to
permit Kirin and/or Amgen to manufacture and sell EPO Products in the Field of
Activity in parts of Corporation Territory. The rights of Corporation to grant
further licenses as set forth above shall not be diminished thereafter with
respect to the remainder of Corporation Territory.
13.02 Development Program
-------------------
As more fully set forth in the Development and Supply Agreement,
Kirin and Amgen agree to conduct on behalf of Corporation, on an accelerated and
coordinated basis, development, toxicology, dosage studies, pre-clinical
studies, clinical trials and/or product registration for the purpose of securing
all approvals (governmental or otherwise) necessary for Kirin and Amgen to
engage in the Field of Activity and manufacture and sell EPO Products in their
respective territories. Corporation will retain responsibility for (and with the
consent of both Kirin and Amgen may enter into agreements similar to those
contemplated hereunder) the conduct of toxicology, dosage studies, pre-clinical
studies, clinical trials and product registration for the purpose of securing
all approvals (governmental or otherwise) necessary for Corporation to engage in
the Field of Activity and manufacture and sell EPO Products in the Corporation
Territory.
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<PAGE>
13.03 Services Agreements
-------------------
As more fully set forth in those certain Service Agreements, Kirin
and Amgen agree that each will provide certain services to Corporation in order
to promote the business of Corporation in the Field of Activity.
14. RESTRICTIONS ON SHARES
----------------------
14.01 Overall Restrictions
--------------------
Corporation will be owned on the Closing Date by two (2) entities
which have the compatability and financial stability which are major elements
contributing toward the prospect of the future success of Corporation. Except in
accordance with the terms of this Agreement, neither Kirin nor Amgen shall sell,
transfer, assign, pledge, hypothecate or in any other way dispose of or
encumber, voluntarily or involuntarily, by bankruptcy, operation of law or
otherwise (any such event is referred to as a "Transfer") any of its shares or
any right or interest therein without the prior written consent of the other
("Nontransferring Shareholder"). Unless such prior written consent is given, the
proposed transfer may not take place, and any attempted Transfer in derogation
hereof shall be deemed null and void. If for any reason any clause or provision
of this Paragraph 14.01 should be held unenforceable, invalid or in violation of
law by any court or tribunal, then the Nontransferring Shareholder shall have
the
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<PAGE>
right, exercisable in writing within ninety (90) days of the date of final
determination of invalidity or unenforceability, to purchase all of the shares
of the transferring shareholder pursuant to the terms of Paragraph 14.03 below
which such transferring shareholder purported to Transfer.
14.02 Additional Restrictions
-----------------------
Upon the occurrence of any of the following events with respect to
Kirin or Amgen ("Occurrence Shareholder") (wherein there is not a continuity of
proprietary interest of the Shareholders of Kirin or Amgen who owned shares of
Kirin or Amgen, as the case may be, prior to the occurrence of such an event):
(i) any transfer of substantially all of its assets, (ii) any transfer of more
than fifty percent (50%) of the duly issued and outstanding stock, (iii) a
liquidation, dissolution, merger, consolidation or reorganization, or (iv) any
insolvency or bankruptcy proceeding, the Party which is not involved with such
an occurrence, shall have the right, exercisable in writing within sixty (60)
days after the later of (a) receipt of written notice of such occurrence, or (b)
the conclusion of the appraisal contemplated in Paragraph 14.03 below, to
purchase all of the shareholding interest in Corporation which is held directly
or indirectly by the Occurrence Shareholder pursuant to the terms of Paragraph
14.03 below. The Occurrence Shareholder shall notify the other Party in writing
of any occurrence described above in this Paragraph 14.02 at the very earliest
time practicable.
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<PAGE>
14.03 Purchase Price and Payment Date
-------------------------------
For purposes of Paragraphs 14.01 and 14.02 above, the purchase price
to be paid for each share of the Transferring or Occurrence Shareholder shall be
computed as follows:
(i) Prior to the occurrence of the Conversion Event, the purchase
price shall be the price originally paid to Corporation for such shares upon
initial issuance, i.e., ONE DOLLAR (US $1.00) per share, less an amount equal to
----
the pro rata (based upon the percentage relationship of one share to the total
number of shares outstanding to date) portion of the expenses paid by
Corporation through the end of the calendar quarter immediately preceding the
subject purchase.
(ii) After the occurrence of the Conversion Event, and within
sixty (60) days after the occurrence of an event described in Paragraphs 14.01
or 14.02 above, Kirin and Amgen either (a) shall jointly appoint an investment
banking firm, or (b) failing this joint action, each separately shall designate
an investment banking firm and, within thirty (30) days after their appointment,
the designated investment banking firms shall designate an investment banking
firm which shall make the final determination of value ("Neutral Investment
Banker"). The failure by either Kirin or Amgen to appoint an investment banking
firm within the time allowed shall be deemed equivalent to appointing the other
Party's investment banking firm as the Neutral Investment Banker. Within sixty
(60) days after the
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<PAGE>
appointment of the Neutral Investment Banker, the Neutral Investment Banker
shall render its appraisal of the fair market value of shares being purchased,
which appraisal shall be binding and conclusive. Corporation shall bear all
appraisal expenses.
(iii) The payment date of the purchase price pursuant to this
Paragraph 14 shall not be later than sixty (60) days after the sixty (60) day
period set forth in Paragraph 14.02 above.
14.04 Delivery of Shares
------------------
Any purchase of shares pursuant to this Agreement shall take place
on the payment date thereof. The certificates representing all of the shares so
purchased shall be duly endorsed and delivered to the purchaser(s) thereof on
the payment date.
15. ADDITIONAL SHARES
-----------------
In the event Kirin and/or Amgen acquire any additional shares of
Corporation, then any and all such shares shall be subject to the terms and
provisions of this Agreement.
16. ENDORSEMENT OF CERTIFICATES
---------------------------
Upon the execution of this Agreement, the certificates of stock subject
hereto shall be endorsed to read as follows:
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<PAGE>
"Any sale, assignment, transfer, pledge, bequest or other
disposition of the shares of stock represented by this
Certificate is restricted by and subject to the terms and
provisions of a Shareholders' Agreement dated May 11, 1984 by
and among this Corporation, Kirin and Amgen, a copy of which
Agreement is on file in the principal office of this
Corporation, which Agreement may from time to time hereafter
be amended. The shares of stock evidenced by this Certificate
have not been registered with the Securities and Exchange
Commission, but have been issued pursuant to the private
offering exemption under the Securities Act of 1933, as
amended." All certificates of stock hereafter issued to or
transferred to Kirin and Amgen shall bear the same endorsement.
17. [INTENTIONALLY OMITTED]
18. COSTS AND EXPENSES
------------------
Kirin and Amgen shall each bear and pay for their respective costs and
expenses regarding the negotiation and preparation of this Agreement and all
documents, instruments and agreements related thereto. The actual out-of-pocket
cost to form Corporation shall be reimbursed by Corporation to Musick, Peeler &
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<PAGE>
Garrett promptly after the Closing Date. Costs and expenses incurred by
Corporation after the Closing Date shall be paid by Corporation.
19. EXPORT CONTROL LAWS
-------------------
19.01 Export Law Compliance
---------------------
The Parties hereby agree that any Technical Data (as that term is
defined in Section 379.1 of the U.S. Export Administration Regulations) exported
from the United States pursuant to this Agreement and any other related
agreements, and any direct product thereof, shall not be shipped, either
directly or indirectly, to Afghanistan or any Group P, Q, S, W, Y or Z Countries
(as specified in Supplement No. 1 to Part 370 of the Export Administration
Regulations), unless (i) separate specific authorization to reexport such
Technical Data or such direct products is provided by the U.S. Office of Export
Administration or (ii) such specific authorization is not required pursuant to
Part 379.8 of the U.S. Export Administration Regulations. The Parties further
agree that the export and reexport of commodities pursuant to this Agreement and
any other related agreements shall be subject to the licensing requirements of
the U.S. Export Regulations.
19.02 Specific Authorization
----------------------
In the event that a specific authorization of, or a validated
license from, a government other than that of the
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<PAGE>
exporting party is required, Kirin and Amgen each agree that the Party,
including (if applicable) Corporation, within the jurisdiction of such other
government shall, upon the request of the Party proposing to make the export,
use its best efforts to obtain, as expeditiously as applicable, the requisite
authorization or license.
20. DISTRIBUTIONS OF CASH
---------------------
Subject to the terms of Paragraph 21 below, and upon the mutual
consent of Kirin and Amgen, distributions (as defined in Section 166 of the
California Corporate Securities Act of 1968, as amended) of cash shall be made
to Kirin and Amgen in accordance with their respective aggregate capital
contributions.
21. DISSOLUTION/LIQUIDATION
-----------------------
21.01 Events of Dissolution
---------------------
(i) Corporation shall be dissolved upon the mutual written
consent of Kirin and Amgen. (ii) Kirin shall have the unilateral right to cause
Corporation to be dissolved if the Conversion Event does not take place on or
before December 31, 1985. (iii) Corporation may be dissolved for federal and
California income tax purposes, but preserved in nominal form for California
state law purposes, by either Kirin or Amgen upon the
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<PAGE>
bankruptcy, receivership or insolvency of the other Party or Corporation, or
upon the material breach of this Agreement by the other Party.
21.02 Final Accounting and Tax Returns
--------------------------------
Upon the dissolution of Corporation, a complete and accurate
accounting shall be made by Corporation's independent certified public
accountants from the date of the last previous accounting to the date of
dissolution and all required tax returns shall be timely filed in connection
therewith.
21.03 Liquidation
-----------
Upon the dissolution of Corporation, Kirin and Amgen shall each
appoint three (3) individuals who shall jointly act as liquidator to wind up
Corporation (collectively "Liquidator"). The Liquidator shall have full power
and authority to take full account of Corporation's assets and liabilities and
to wind up and liquidate the affairs of Corporation in an orderly and business-
like manner as is consistent with obtaining the fair value thereof upon
dissolution. Corporation shall engage in no further business thereafter other
than as necessary to operate on an interim basis, collect its receivables, pay
its liabilities and liquidate its assets. All proceeds from liquidation shall be
distributed in the following order of priority: (i) first, to the payment of all
creditors of Corporation and the expenses of liquidation; (ii) second, to the
establishing of a reserve which the Liquidator deems reasonably necessary for
any contingent,
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<PAGE>
known or unforeseen liabilities or obligations of Corporation; and (iii) third,
the balance:
(a) If prior to the occurrence of the Conversion Event,
first to Kirin an amount of cash equal to the original price paid to
Corporation for its shares upon initial issuance, i.e., ONE DOLLAR (US
$1.00) per share, plus three-fourths (3/4ths) of the aggregate
interest income earned by Corporation from the Closing Date to the
date of such liquidation distribution. Kirin and Amgen agree that
Corporation shall not spend more than FOUR MILLION DOLLARS (US
$4,000,000.00) prior to the occurrence of the Conversion Event, unless
otherwise mutually agreed to in writing.
(b) If after the occurrence of the Conversion Event,
Corporation's net assets shall be valued in accordance with the
appraisal mechanism set forth in Paragraph 14.03(ii) above.
Thereafter, the net assets of Corporation shall be divided between
Kirin and Amgen in approximately equal value at the direction of the
Neutral Investment Banker.
21.04 Cancellation of Certificates
----------------------------
Upon the completion of the distributions in liquidation of
Corporation as provided in this Paragraph 21, Liquidator shall cause the
cancellation of all share certificates and shall take such other actions as may
be appropriate to finally dissolve and liquidate Corporation.
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<PAGE>
22. MISCELLANEOUS PROVISIONS
------------------------
22.01 Notices
-------
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
mailed to the Party to whom notice is to be given, by telex or facsimile, and
confirmed by first class mail, registered or certified, return receipt
requested, postage prepaid, and properly addressed as follows (in which case
such notice shall be deemed to have been duly given on the third (3rd) day
following the date of such sending):
"Kirin" Kirin Brewery Company, Limited
26-1, Jingumae 6-Chome
Shibuya-Ko, Tokyo 150
Japan
Telex No. 242-5401 Kirin B J
Attn: General Manager of R&D Department
With a copy to: Musick, Peeler & Garrett
One Wilshire Boulevard
Suite 2000
Los Angeles, CA 90017
U.S.A.
Telex No. 701357 (MPG LAW UD)
Attn: Joel S. Marcus, Esq.
"Amgen" Amgen
1900 Oak Terrace Lane
Thousand Oaks, CA 91320
U.S.A.
Telex No. 4994440 (AMGEN)
Attn: Corporate Secretary
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<PAGE>
With a copy to: Cooley, Godward, Castro,
Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
U.S.A.
Telex No. 910-372-7370 Cooley SFO
Attn: Alan C. Mendelson, Esq.
"Corporation" Kirin-Amgen, Inc.
1900 Oak Terrace Lane
Thousand Oaks, CA 91320
U.S.A.
Telex No. 4994440 (AMGEN)
Attn: Corporate Secretary
With a copy to: Musick, Peeler & Garrett
One Wilshire Boulevard
Suite 2000
Los Angeles, CA 90017
U.S.A.
Telex No. 701357 (MPG LAW UD)
Attn: Joel S. Marcus, Esq.
Any Party by giving notice to the others in the manner provided above may change
such Party's address for purposes of this Paragraph 22.01.
22.02 Publicity and Disclosure
------------------------
All notices to third parties and all other publicity concerning the
transactions contemplated by this agreement shall be jointly planned and
coordinated by and between the Parties hereto.
22.03 Entire Agreement; Amendment
---------------------------
This Agreement (together with all Exhibits attached hereto and all
documents and instruments delivered in connection
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<PAGE>
herewith) constitutes the full and complete agreement and understanding between
the Parties hereto and shall supersede any and all prior written and oral
agreements concerning the subject matter contained herein. This Agreement may
not be modified, amended nor may any provision hereof be waived without a
written instrument executed by Kirin, Amgen and Corporation.
22.04 Waiver
------
No failure or delay by any Party to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement, or
to exercise any right, power or remedy hereunder or thereunder or consequent
upon a breach hereof or thereof shall constitute a waiver of any such term,
condition, covenant, agreement, right, power or remedy or of any such breach or
preclude such Party from exercising any such right, power or remedy at any later
time or times.
22.05 Enforcement
-----------
The shares of stock of Corporation are unique and cannot be readily
purchased or sold in the open market. For this reason, among others, the Parties
hereto will be irreparably damaged in the event that this Agreement is not
deemed to be specifically enforceable, and the Parties hereby agree that this
Agreement shall be specifically enforceable. Such remedy shall be cumulative and
not exclusive and shall be in addition to any other remedy which the Parties may
have.
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22.06 Remedies
--------
No right, power or remedy herein conferred upon or reserved to any
Party is intended to be exclusive of any other right, power or remedy or
remedies, and each and every right, power and remedy of any Party pursuant to
this Agreement or now or hereafter existing at law or in equity or by statute or
otherwise shall to the extent permitted by law be cumulative and concurrent, and
shall be in addition to every other right, power or remedy pursuant to this
Agreement, or now or hereafter existing at law or in equity or by statute or
otherwise and the exercise or beginning of the exercise by any Party of any one
or more of such rights, powers or remedies shall not preclude the simultaneous
or later exercise by any Party of any or all such other rights, powers or
remedies.
22.07 Headings
--------
Headings in this Agreement are included herein for the convenience
of reference only and shall not constitute a part of this Agreement for any
purpose.
22.08 Effectiveness
-------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall as to such jurisdiction be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or effecting the validity or enforceability of such provision
in any other jurisdiction.
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<PAGE>
22.09 Attorneys' Fees and Costs
-------------------------
In the event of any action at law or in equity between the Parties
hereto to enforce any of the provisions hereof, the unsuccessful party or
parties to such litigation shall pay to the successful party or parties all
costs and expenses, including actual attorneys' fees, incurred therein by such
successful party or parties; and if such successful party or parties shall
recover judgment in any such action or proceeding, such costs, expenses and
attorneys' fees may be included in and as part of such judgment. The successful
party shall be the party who is entitled to recover his costs of suit, whether
or not the suit proceeds to final judgment. A party not entitled to recover his
costs shall not recover attorneys' fees.
22.10 Governing Law
-------------
This Agreement shall be construed in accordance with the internal
laws, and not the law of conflicts, of the State of California applicable to
agreements made and to be performed in such state.
22.11 Binding Effect
--------------
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, their successors and assigns.
22.12 Exhibits
--------
All exhibits attached hereto and referred to herein are hereby
incorporated herein as though fully set forth at length.
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<PAGE>
22.13 Number and Gender
-----------------
Words in the singular shall include the plural, and words in a
particular gender shall include either or both additional genders, when the
context in which such words are used indicates that such is the intent.
22.14 Counterparts
------------
This Agreement may be executed in one or more counterparts by the
Parties hereto. All counterparts shall be construed together and shall
constitute one agreement.
22.15 Agreement to Perform Necessary Acts
-----------------------------------
Each Party agrees to perform any further acts and execute and
deliver any and all further documents and/or instruments which may be reasonably
necessary to carry out the provisions of this Agreement and to carry out the
business purpose of Corporation.
22.16 Validity
--------
If for any reason any clause or provision of this Agreement, or
the application of any such clause or provision in a particular context or to a
particular situation, circumstance or person, should be held unenforceable,
invalid or in violation of law by any court or other tribunal, then the
application of such clause or provision in contexts or to situations,
circumstances or persons other than that in or to which it is held
unenforceable, invalid or in violation of law shall not be affected thereby, and
the remaining clauses and provisions hereof shall nevertheless remain in full
force and effect.
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<PAGE>
22.17 Representations
---------------
Each of the Parties hereto acknowledges and agrees (i) that no
representation or promise not expressly contained in this Agreement has been
made by any other Party hereto or by any of his or its agents, employees,
representatives or attorneys; (ii) that this Agreement is not being entered
into on the basis of, or in reliance on, any promise or representation,
expressed or implied, covering the subject matter hereof, other than those
which are set forth expressly in this Agreement; and (iii) that each has had
the opportunity to be represented by counsel of its own choice in this matter,
including the negotiations which preceded the execution of this Agreement.
22.18 Force Majeure
-------------
Any Party shall be excused for failures and delays in performance
of its respective obligations under this Agreement caused by war, riots or
insurrections, laws and regulations (including, without limitation, imposition
of export restrictions or controls), strikes, floods, fires, explosions or
other catastrophes beyond the control and without the fault of such Party. This
provision shall not, however, release such Party from using its best efforts to
avoid or remove such cause and such Party shall continue performance hereunder
with the utmost dispatch whenever such causes are removed. Upon claiming any
such excuse
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<PAGE>
or delay for non-performance, such Party shall give prompt written notice
thereof to the other Party.
22.19 Expansion of Business
---------------------
The Parties contemplate that there may be additional opportunities
for mutual development of other products or areas of interest by Corporation. At
any time either Amgen or Kirin may suggest that such other opportunities be
further discussed.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized representatives in the manner legally binding
upon them.
KIRIN BREWERY COMPANY, LIMITED, a
Japanese corporation
By /s/ Shinkichi Kubo
Shinkichi Kubo
Its Managing Director
AMGEN, a California corporation
By /s/ George B. Rathmann
George B. Rathmann
Its President
KIRIN-AMGEN, INC., a California
corporation
By
Its
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<PAGE>
EXHIBIT SCHEDULE
----------------
EXHIBIT DESCRIPTION PARAGRAPH
A Transferred Technology........................ 1.05
B Assignment and License Agreement.............. 1.05
C Development and
Supply Agreement............................ 1.09
D Articles of Incorporation..................... 2.04
E Bylaws of Corporation......................... 2.05
F Legal Conflicts Letter........................ 2.09
G Arthur Young and Company
Engagement Letter............................. 2.10
H Kirin/Kirin-Amgen, Inc
Services Agreement.......................... 8.03.6
I Amgen/Kirin-Amgen, Inc
Services Agreement.......................... 8.03.6
J Kirin/Kirin-Amgen, Inc
License Agreement........................... 8.03.7
K -- Amgen/Kirin-Amgen, Inc
License Agreement........................... 8.03.8
<PAGE>
TRANSFERRED TECHNOLOGY
----------------------
The Transferred Technology is embodied in at least the
following documents:
(1) The ASSIGNMENT relating to U.S. Patent
Application Ser. No. 561.024, filed December 13, 1983,
entitled "Recombinant Methods and Materials Applied to
Microbial Expression of Erythropoietin", recorded in the
Patent and Trademark Office on Reel 4217, Frame 916. [And
related know-how]
(2) The ASSIGNMENT relating to U.S. Patent
Application Ser. No. 463.724, filed February 4, 1983,
entitled "ATCC HB8209 and Its Monoclonal Antibody to
Erythropoietin", recorded in the Patent and Trademark
office on Reel 4110, Frame 763. [And related know-how]
[Full Description]
EXHIBIT "A"
<PAGE>
ASSIGNMENT AND LICENSE AGREEMENT
--------------------------------
THIS ASSIGNMENT AND LICENSE AGREEMENT ("Agreement") is made
this day of , 1984, by and between AMGEN, a California corporation
("Amgen"), in favor and for the benefit of, and with KIRIN-AMGEN, INC., a
California corporation ("Company") pursuant to to terms and conditions of that
certain Shareholders' Agreement, dated May 11, 1984, by and among Amgen, Company
and Kirin Brewery Company, Ltd., a Japanese corporation ("Shareholders'
Agreement").
RECITALS
--------
WHEREAS, Amgen, Kirin and the Company have entered into the
Shareholders' Agreement with respect to the formation of the Company to engage
in the development, manufacture, production and sale of EPO products (as defined
in the Shareholders' Agreement) for human therapeutic use in the Field of
Activity (as defined in the Shareholders' Agreement);
WHEREAS, in connection with the formation of the Company and
the issuance of certain Common Stock of the Company to Amgen under Section 351
of the Internal Revenue Code of 1954, as amended, Amgen is willing to transfer
certain technology (the "Transferred Technology", as hereinafter defined) to the
Company and license certain other technology (the "Core Technology", as
EXHIBIT "B"
<PAGE>
hereinafter defined) to the Company for use in the Field of Activity, as
hereinafter defined, all in accordance with the Shareholders' Agreement;
NOW, THEREFORE, in partial consideration (along with cash
payable by Amgen to the Company) of the sale and issuance to Amgen of twelve
million (12,000,000) shares of Common Stock of the Company pursuant to the
Shareholders' Agreement, Amgen and the Company hereby agree as follows:
ARTICLE I
---------
TRANSFER AND LICENSE OF TECHNOLOGY
----------------------------------
1.01 Assignment of Transferred Technology. Amgen hereby transfers and
------------------------------------
assigns to the Company, perpetually and irrevocably, all of its right, title and
interest in and to the Transferred Technology, as more specifically set forth in
Schedule A attached hereto, and agrees to execute all documents necessary to
effectuate such transfer and assignment to the Company, including but not
limited to an assignment of patents and intangibles to be recorded with the
United States Patent and Trademark Office. -
1.02 License of Core Technology. Amgen hereby grants to the Company a
--------------------------
royalty-free, exclusive right and licence throughout the world under all Core
Technology, as further
-2-
<PAGE>
defined below, solely with respect to its direct application to the Field of
Activity.
1.03 Right to Sublicense the Core Technology. Amgen also hereby grants
---------------------------------------
to the Company royalty-free the right to grant sublicenses within and limited to
the scope of the right and license granted to the Company in Section 1.02 only,
(a) to Kirin under that certain License Agreement between the Company and Kirin,
dated of even date herewith, (b) to any subsidiary of the Company, (c) to a
single manufacturer of EPO in addition to Kirin and Amgen for the account of the
Company outside of the Amgen Territory and Kirin Territory, and (d) to licensees
of the Company under patents, know-how or materials owned by the Company to the
extent such licensees require any such sublicense in order to practice the
patents or know-how or to use the materials that are the subject of the license
from the Company, provided, however, that no sublicense shall be granted under
clause (d) hereof without the prior written consent (not to be unreasonably
withheld) of Amgen. Any sublicensees of the Company shall undertake in writing
to be bound by the provisions of Sections 3.01 and 3.02 hereof to the same
extent the Company is bound. The Company shall notify Amgen of the identity of
each sublicensee to whom a sublicense is granted and provide Amgen a true and
correct copy of such sublicense. In the event that the license granted to the
Company is terminated at any time, Amgen shall have the option to terminate or
to have the Company assign
-3-
<PAGE>
to Amgen, retroactive to such termination, any sublicenses granted hereunder by
the Company to any subsidiary of the Company. The Company shall include in all
its sublicenses granted hereunder to any subsidiary of the Company provisions
for such termination and assignment.
1.04 Limitations. No right or license is granted to the Company
-----------
hereunder except as expressly specified in Sections 1.01, 1.02 and 1.03 hereof.
ARTICLE II
----------
DEFINITIONS
-----------
2.01 Incorporation by Reference. The definitions of terms contained
--------------------------
in the Shareholders' Agreement are hereby incorporated by reference.
ARTICLE III
-----------
DISCLOSURE OF CORE TECHNOLOGY
-----------------------------
3.01 Limitation on Usage. Except as expressly authorized by this
-------------------
Agreement or by other written consent of Amgen, for the term of this Agreement
and thereafter, the Company shall not deliver, transmit or provide to any person
other than to a sublicensee under a license granted in accord in Section 1.03,
and shall not use, any of the Core Technology owned by Amgen, or
-4-
<PAGE>
authorize, cause or aid anyone else to do so. Except as provided in Section 1.03
above, nothing in this Agreement shall be deemed to give the Company any right
or license to use or to replicate or reproduce any of the Core Technology owned
by Amgen, or to authorize, aid, or cause others so to do.
3.02 Survival. The obligation of confidentiality imposed by the
--------
foregoing Section 3.01 shall survive termination of this Agreement for any
reason whatsoever.
ARTICLE IV
----------
PATENT, COPYRIGHT AND TRADE SECRET ENFORCEMENT
----------------------------------------------
4.01 Enforcement. Amgen shall have the right to bring, defend and
-----------
maintain, and the Company shall have the right, but not the obligation, to join
in, any appropriate suit or action involving infringement of any patents or
copyrights, misappropriation of any trade secrets or interference with any Core
Technology licensed to the Company in the Field of Activity pursuant to this
Agreement. If Amgen declines to enforce any patent, trade secret or other right,
then in such event, the Company and Kirin shall each have the right, but not the
obligation to bring any such action.
-5-
<PAGE>
ARTICLE V
---------
PATENT APPLICATIONS AND COPYRIGHT REGISTRATIONS
-----------------------------------------------
5.01 Applications. Amgen shall have the obligation of prosecuting and
------------
maintaining in force patent applications or patents and copyright registrations
or copyrights, if any, of the Core Technology, and any costs thereby incurred
shall be borne by Amgen.
ARTICLE VI
----------
DISCLAIMER OF INDEMNIFICATION
-----------------------------
6.01 Disclaimer of Warranties. AMGEN EXPRESSLY DISCLAIMS ALL
------------------------
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE
TRANSFERRED TECHNOLOGY AND LICENSED TECHNOLOGY TO BE FURNISHED BY AMGEN TO THE
COMPANY HEREUNDER.
ARTICLE VII
-----------
TERM AND TERMINATION
--------------------
7.01 Term. This Agreement (including the license and rights granted
----
under Sections 1.02 and 1.03 hereof) shall come into effect as of the date
hereof and shall remain in full force
-6-
<PAGE>
and effect until the earlier of (a) the liquidation or dissolution of the
Company, or (b) termination pursuant to Section 7.02.
7.02 Default. In the event that the Company or Amgen (the "Defaulting
-------
Party") shall (a) default in a material obligation hereunder and fail to remedy
such default within sixty (60) days after such default shall have been called to
its attention by notice from the non-breaching party, (b) become bankrupt or
insolvent, or file a petition in bankruptcy or make a general assignment for the
benefit of creditors or otherwise acknowledge insolvency, or be adjudged
bankrupt, (c) go or be placed in a process of complete liquidation other than
for an amalgamation or reconstruction, or (d) suffer the appointment of a
receiver for any any substantial portion of its business who shall not be
discharged within sixty (60) days after his appointment, then, and in any such
event, the non-breaching party, at its option, may terminate its obligations to
and the rights of the Defaulting Party under the license to the Licensed
Technology granted under this Agreement upon ten (10) days' written notice to
the Defaulting Party, which termination shall be effective as of the occurrence
of the event giving rise to the option to terminate.
7.03 Continuing Obligations. Notwithstanding the termination of a
----------------------
party's obligations to or the rights of the Defaulting Party under this
Agreement in accordance with the provisions of Section 7.01 or 7.02, the
provisions of Sections 3.01 and 3.02, this Section 7.03 and Article VIII hereof
shall
-7-
<PAGE>
survive such termination and continue in full force and effect for an indefinite
term. Upon termination of this Agreement for any reason, and without limitation
of other remedies, the Company shall immediately return to Amgen (to the extent
such return is technically feasible) all materials relating to the Core
Technology in the possession of the Company or its subsidiaries, or of which the
Company shall have the right to regain possession or, at the sole election of
Amgen, shall destroy such material (to the extent technically feasible).
ARTICLE VIII
------------
CONSISTENCY WITH SHAREHOLDERS' AGREEMENT
----------------------------------------
8.01 Shareholders' Agreement. This assignment of the Transferred
-----------------------
Technology and license of the Licensed Technology is granted pursuant to the
Shareholders' Agreement and shall be governed by the provisions thereof to the
extent applicable.
ARTICLE IX
----------
CONSENTS AND APPROVALS
----------------------
9.01 Best Efforts. The parties hereto shall use their best efforts to
------------
obtain as soon as practicable any and all consents, approvals,-orders or
authorizations required to be obtained from any governmental authority with
respect to the provisions hereof.
-8-
<PAGE>
ARTICLE X
---------
NOTICE
------
10.01 Company Notice. All materials to the Company under this
--------------
Agreement shall be in writing and sent to:
Kirin-Amgen, Inc.
1900 Oak Terrace Lane
Thousand Oaks, CA 91320
Attn: Corporate Secretary
With a copy to: Musick, Peeler & Garrett
One Wilshire Boulevard, Suite 2000
Los Angeles, CA 90017
Attn: Joel S. Marcus, Esq.
10.02 Amgen Notice. All notices to Amgen under this Agreement shall
be in writing and sent to:
Amgen
1900 Oak Terrace Lane
Thousand Oaks, CA 91320
Attn: Corporate Secretary
With a copy to: Alan C. Mendelson, Esq.
Cooley, Godward, Castro,
Huddleson & Tatum
5 Palo Alto Square
Suite 400
Palo Alto, CA 94306
10.03 Changes. The addresses given above may be changed by notice as
specified above.
10.04 Notice Deemed Given. Notices required or permitted hereunder
-------------------
and sent as specified above shall be deemed given (a) immediately upon personal
delivery, (b) one (1) busi-
-9-
<PAGE>
ness day after notice given by telegram or telex, and (c) ten (10) business days
after the date of posting notice, sent by registered or certified mail.
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.01 Entire Agreement. This Agreement, together with any other
----------------
written agreements between the parties hereto, set forth the entire agreement of
the parties with respect to the subject matter hereof and may not be modified
except by a writing signed by authorized representatives of the parties hereto.
11.02 Headings. Article and section headings in this Agreement are
--------
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
11.03 Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts of this Agreement taken together shall constitute
but one and the same instrument.
11.04 Force Majeure. It is agreed that each of the parties hereto is
-------------
excused from performing such acts as are required hereunder as may be prevented
by or whose purpose is
-10-
<PAGE>
frustrated by Force Majeure. The party so affected shall give notice to the
other party in writing promptly and thereupon shall be excused from such of its
obligations hereunder as it is unable to perform on account of the Force Majeure
throughout the duration thereof plus a period of thirty (30) days.
11.05 Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California.
11.06 Assignment on Written Consent. This Agreement may not be
-----------------------------
assigned in whole or in part by Amgen or the Company, except with the prior
written consent of the other party.
11.07 Severability. In the event any one or more of the provisions
------------
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and/or enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. In such event, such invalid provision or provisions shall be validly
reformed to as nearly approximate the intent of the parties as possible and if
unreformable, shall be severed and deleted from this Agreement.
11.08 No Waiver. No failure or delay on the part of either party in
---------
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any
-11-
<PAGE>
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder or the remedies provided by law.
11.09 Trademarks and Tradenames. Amgen grants no rights to the
-------------------------
Company in any trademarks or tradenames of Amgen or of any of its respective
subsidiaries or affiliated companies.
11.10 Indemnity. The Company hereby (a) releases Amgen from any
---------
obligation to defend, indemnify or save the Company and its agents and employees
harmless from and (b) agrees to defend, indemnify and save Amgen harmless from
any and all cost, expenses (including attorneys' fees), liabilities, damages and
claims for any injury or death to persons or damage to or destruction of
property, or other loss, arising out of or in connection with any product made,
used or sold by the Company or the use by the Company of any Transferred or
Licensed Technology furnished pursuant to any provision hereunder.
11.11 Other Agreements. Any other provision of this Agreement
----------------
notwithstanding, nothing in this Agreement shall obligate Amgen to disclose to
the Company any information or to make available to the Company any materials in
violation of an obligation of secrecy or a limitation of use imposed by a third
party from whom such information or materials shall have been received.
IN WITNESS WHEREOF, Amgen and the Company have caused this Agreement
to be executed by their duly authorized represent-
-12-
<PAGE>
atives in the manner legally binding on them as of the date first above written.
AMGEN, a California corporation
By
Its
KIRIN-AMGEN, INC., a California corporation
By
Its
-13-
<PAGE>
TRANSFERRED TECHNOLOGY
Schedule "A"
<PAGE>
DEVELOPMENT AND SUPPLY AGREEMENT
--------------------------------
THIS DEVELOPMENT AND SUPPLY AGREEMENT ("Agreement") is made this - day
of -, 1984, by and among AMGEN, a California corporation, ("Amgen"), KIRIN
BREWERY COMPANY, LTD., a Japanese corporation, ("Kirin"), and KIRIN-AMGEN, INC.,
a California corporation ("Company").
RECITALS
--------
WHEREAS, Amgen, Kirin and the Company have entered into that certain
Shareholders' Agreement, dated May 11, 1984 ("Shareholders' Agreement"), with
respect to the formation of the Company to engage in the development,
manufacture, production and sale of EPO products (as defined in the
Shareholders' Agreement) for human therapeutic use in the Field of Activity (as
defined in the Shareholders' Agreement).
WHEREAS, Amgen has assigned to the Company, perpetually and
irrevocably, certain current proprietary technology possessed by Amgen relating
specifically to EPO;
EXHIBIT "C"
<PAGE>
WHEREAS, the Company desires to have Amgen and Kirin conduct further
development work with respect to the improvement and commercial development of
the EPO Technology, as hereinafter defined, and Amgen and Kirin desire to
conduct such development work;
WHEREAS, Amgen's and Kirin's research and development work within and
without the Development Program (as hereinafter defined) may provide certain EPO
Technology as hereinafter defined, relating to and useful in the Field of
Activity;
WHEREAS, Amgen, Kirin and the Company wish to provide for a means by
which they can jointly utilize the fruits of their activities in the Field of
Activity;
WHEREAS, the work to be conducted hereunder may require materials,
including the EPO Organisms (as hereinafter defined), which may be developed or
have previously been developed by Amgen, and Amgen is willing to furnish such
materials to the Company, the Company is willing to furnish such materials to
Kirin, and the Company and Kirin desire to receive such materials.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, IT IS HEREBY AGREED AS FOLLOWS:
-2-
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.01 Incorporation by Reference: The definitions of terms contained in
--------------------------
the Shareholders' Agreement are hereby incorporated by reference.
1.02 Term of Support. The period beginning on the date of the
---------------
Shareholders' Agreement, among Amgen, Kirin and the Company, and ending on the
earlier of (a) the date which is ten (10) years from the date of such
Shareholders' Agreement, (b) the liquidation of the Company, or (c) the earlier
completion of the Development Program as contemplated by Article II hereof.
ARTICLE II
DEVELOPMENT PROGRAM
-------------------
2.01 Development Program.
-------------------
(a) Amgen and Kirin hereby agree to conduct on behalf of the
Company, on an accelerated and coordinated basis, development, toxicology,
dosage studies, pre-clinical studies, clinical trials and product registration
for the purpose of securing all approvals (governmental or otherwise) necessary
for the Parties to engage in the Field of Activity and manufacture and sell EPO
in their respective Territories, as defined in the Shareholders' Agreement.
During the Term of Support, Amgen and
-3-
<PAGE>
Kirin shall each make reasonably available to the Company its technical
personnel and facilities required to perform such scientific and development
projects relating to the Field of Activity as the Company requests and as Amgen
and Kirin may agree from time to time. Amgen and Kirin may each have others
perform or assist in performing the work under the Development Program;
provided, however, that Amgen and Kirin shall cause such other parties to be
bound by all the provisions hereof as if they were parties hereto.
(b) Amgen hereby agrees to use its best efforts to complete, as
part of the Development Program, the development of commercial manufacturing
scale production of EPO in one Expression System; provided, however, that Amgen
may conduct work as part of the Development Program on the development of more
than one of such Expression Systems and shall be compensated by the Company for
all such work hereunder.
(c) Compensation for development work to be performed by Amgen
shall be paid in accordance with the provisions of-Section 2.03 hereof.
(d) Notwithstanding the foregoing, no research performed by Amgen
in developing the EPO Organisms shall be considered to be part of, or be
compensated under, the Development Program pursuant to this Agreement, unless
otherwise mutually agreed by Amgen and Kirin.
-4-
<PAGE>
2.02 Development Plan. Upon commencement of the Development Program
----------------
(no later than thirty (30) days after the date of this Agreement), and no less
frequently than quarterly thereafter, the Parties shall meet to formulate a
detailed plan for development projects to be performed by Amgen or Kirin, or
both, during the course of the Development Program. The plan shall identify the
technical problems involved and the general outline of experiments to be carried
out, an estimate of the personnel and equipment to be contributed by each of
Amgen and Kirin, a detailed budget setting forth the total estimated costs of
each required to perform the work and, where possible, the nature of the work to
be performed by each. Upon the agreement of Amgen and Kirin to such plan, a copy
of the plan agreed to shall be made a part of this Agreement, and the
preliminary outline of such plan is attached hereto; provided, that such plan
may be modified or amended at any time by mutual agreement of the Parties. If
any Party desires, at any time, to modify the development plan with respect to
an existing project or to establish a new project to be undertaken by the
Parties under the plan, it may notify the other Parties of such desire and the
Parties will promptly meet to consider such request in good faith; provided,
however, that any such modification or amendment shall be mutually agreed upon.
Amgen and Kirin shall diligently conduct the development projects agreed upon
and shall use their best efforts to reach the goals of the development projects
-5-
<PAGE>
agreed to. Amgen and Kirin shall each prepare and supply to the Company written
progress reports at the end of each three (3) month period. Each Party shall
consult with the other Parties from time to time on the progress of the
development projects and shall permit any other Party to visit its laboratories
to observe the development work, to the extent reasonably required to coordinate
and effectively conduct related development work. The Development Program shall
initially be conducted with respect to the Field of Activity; provided, however,
that the Parties may mutually agree upon additional activities and projects to
be carried out in the Development Program.
2.03 Expenses. The Company shall pay to Amgen and Kirin, respectively,
--------
a per hour unit amount calculated on the basis oftotal costs incurred by Amgen
and Kirin in conducting work under the Development Program plus a reasonable
profit not to exceed five percent (5%). The per hour rate shall be determined
for all research scientists and associates on an annual basis by mutual
agreement of Amgen and Kirin, and such agreed upon rate per man hour shall be
utilized by both Amgen and Kirin. For the period commencing on the date hereof
and ending December 31, 1984, the per hour rate for such research scientists and
associates shall be as set forth in the preliminary outline to be attached
hereto pursuant to Section 2.02 hereof. Thereafter, the mutually agreed upon
rate for such research scientists and associates of Amgen and Kirin shall be
determined for each year
-6-
<PAGE>
commencing January 1, 1985 not later than the 31st day of January of each such
year. At the end of each calendar month Amgen and Kirin shall each submit a
written statement to the Company setting forth the number of man hours of work
performed by such Party during such calendar month. Upon receipt of such
statement and after-a reasonable period to allow for review thereof, the Company
shall promptly pay Amgen and Kirin an amount equal to the total costs incurred
by such Party in conducting the development projects for such month. Amgen and
Kirin shall keep correct and complete records containing all information
required for deter mination of costs to be paid hereunder for periods of not
less than three (3) years and shall permit such books and records to be
inspected and audited during reasonable business hours by a certified public
accountant selected by the Company, to the extent necessary to verify such
report. The Parties hereby acknowledge that any such work under the Development
Program to be performed by Amgen and Kirin, respectively, for the Company shall
be as independent contractors, and the Company shall not incur any direct
obligations for the remuneration or other expenses (and relevant reporting
obligations) of any employee of Amgen or Kirin by virtue of such employee's
participation in the Development Program.
2.04 Disclosure of EPO Technology.
----------------------------
(a) For purposes of advancing the Development Program, Amgen and
Kirin shall disclose to each other and the Company such of their respective
information, including that on
-7-
<PAGE>
inventions, relative to the Field of Activity (whether or not previously
assigned or licensed to the Company by any Party hereunder and therefore already
included as part of the EPO Technology) and available prior to the undertaking
hereunder of the Development Program, as the disclosing Party in its reasonable
discretion believes will be useful in furtherance of the Development Program and
which it has the right to disclose. To further promote the purposes of the
Development Program, each Party shall actively collaborate with the other
Parties by disclosing to all other Parties on a regular and periodic basis such
technical and other information developed by such Party as may be included in
the definition of EPO Technology hereunder and the Company authorizes such
disclosure amongst the Parties hereunder without regard to the restrictions on
such disclosure which may otherwise be imposed by the License Agreements and
this Agreement. In order to further facilitate the effective commercial
development, registration, manufacture and marketing of EPO within the Field of
Activity, the Parties shall permit representatives of any other Party to inspect
its facilities and all technical reports, memoranda and other documents directly
relating to the Development Program, and to make copies of any and all such
reports, memoranda and other documents; provided, however, that the rights
hereunder shall not extend beyond the EPO Technology and shall be limited solely
to such information that has been actually used by a Party for the production
and further development of EPO. Each of Amgen and Kirin acknowledge
-8-
<PAGE>
that any such technical and other information disclosed hereunder shall be
included in the definition of EPO Technology and agree that any such technical
and other information so received shall not otherwise be disclosed except as
permitted by this Agreement or the aforementioned License Agreements.
(b) Upon commencement of the Development Program, Amgen agrees to
supply Kirin and the Company with sufficient technical information and
assistance to (i) assess the progress of its product and process development
work during the course of the Development Program, and (ii) instruct and assist
Kirin in utilizing its rights in the EPO Technology, and the Parties shall
establish mutually agreeable development milestones which shall be reviewed no
less frequently than annually during the term of the Development Program. Any
technical information supplied by any Party to another hereunder shall remain
confidential and shall thereafter be deemed EPO Technology for purposes hereof.
2.05 Technical Assistance.
--------------------
(a) Amgen shall furnish to Kirin at Kirin's request the services
of personnel of Amgen or its agents, hereinafter in this Section 2.06 referred
to Amgen's "personnel", to give technical assistance and information for the
start-up of a manufacturing facility for EPO. Such facility shall be constructed
and said EPO shall be manufactured by Kirin with the use of EPO Technology
furnished to Kirin hereunder and the use of which is authorized hereunder. It
will be Kirin's responsibility to provide Amgen's personnel with suitable
working quarters and
-9-
<PAGE>
adequate clerical and other assistance in order to facilitate the performance of
their services.
(b) Such service shall be available to Kirin at reasonable
locations and times and for reasonable intervals agreeable to Amgen.
(c) Amgen shall without charge and in addition to the provisions
set forth above, provide training, relating to the subject hereof, at Amgen's
plant to personnel of Kirin, at Kirin's request. Such training shall be
available to Kirin, at reasonable times, and for reasonable intervals, agreeable
to Amgen.
(d) Promptly after the date of this Agreement, Amgen and Kirin
shall each appoint an employee to administer activities and performance under
this Section 2.05 and will notify each other of the name, address and telephone
number of such employee. All requests for services under this Section 2.05 and
arrangements for providing services will be coordinated by such appointed
employees.
(e) Amgen and Kirin shall at all times retain the administrative
supervision of their respective personnel.
(f) Kirin shall pay to Amgen for the work performed pursuant to
Sections 2.04 (b) and this Section 2.05, including travel time outside of the
Continental United States, at the rate determined in accordance with the
provisions of Section 2.03 hereof. Kirin shall also reimburse Amgen for actual
-10-
<PAGE>
expenditures for travel, living and other expenses incurred by Amgen's personnel
performing services under Section 2.04 (b) and this Section 2.05(f). Amgen shall
render to Kirin invoices for all payments to be made under this Section 2.05,
and Kirin shall make payment of all amounts so billed within thirty (30) days
after date of invoice. Any information which may be disclosed to personnel of
Kirin by Amgen's personnel in the course of their performance under this Section
2.05 shall be deemed to be EPO Technology furnished to Kirin.
(g) All of Amgen's obligations under this Section 2.05 shall
terminate effective with any termination of the rights of Kirin pursuant to
Article VI of this Agreement without affecting any of Amgen's obligations under
any other Article.
2.06 Kirin Technical Assistance. To the extent that Amgen requests and
--------------------------
Kirin supplies Amgen with technical assistance, Amgen shall pay Kirin in
accordance with the provisions of Section 2.05 (f) and any information disclosed
to personnel of Amgen by Kirin's personnel hereunder shall be deemed to be EPO
Technology furnished to Amgen.
ARTICLE III
RECORDS; CONFIDENTIALITY
------------------------
3.01 Records. Amgen and Kirin shall each keep and maintain complete
-------
and accurate records of all work done in
-11-
<PAGE>
connection with the Development Program. All such records shall be available to
the Company at all reasonable times for examination and copying at the Company's
expense.
3.02 Confidentiality. Except to the extent expressly authorized by
---------------
this Agreement and as contemplated by the Shareholders' Agreement or by other
prior written consent of the disclosing Party, for the term of this Agreement
and thereafter, each receiving Party shall keep completely confidential and
shall not public or otherwise disclose to others and shall not use any secret or
confidential EPO Technology disclosed or provided to the receiving Party by the
disclosing or providing Party; provided, however, that each of Kirin and Amgen
shall have the right to use such EPO Technology provided by the other in course
of its participation in the Development Program. For the purposes of this
Agreement, EPO Technology shall be deemed not secret or confidential to the
extent, and only to the extent, that it:
(a) was known to the receiving Party at the time of its
disclosure and not previously subject to any obligation of
confidentiality;
(b) was generally available to the public or was otherwise part
of the public domain at the time of its disclosure;
(c) became generally available to the public or became otherwise
part of the public domain after its disclosure and other
than through
-12-
<PAGE>
any act or omission of the receiving Party in
breach of this Agreement; or
(d) became known to the receiving Party after its disclosure (i)
from a source other than the disclosing Party (including
from independent development by the receiving Party),
(ii) other than from a third party who had an obligation to
the disclosing Party not to disclose such information to
others, and
(iii) other than under an obligation of confidentiality.
Each receiving Party may disclose any EPO Technology to the extent such
disclosure is necessary to the receiving Party to comply with laws or
regulations, or to make, use or sell under any license under such EPO Technology
from the disclosing Party or to sublicense others to do so, provided that the
Party intending to make any such disclosure shall give the other Parties
reasonable advance notice of such proposed disclosure or delivery, shall use its
best efforts to secure confidential treatment of the EPO Technology to be
disclosed and shall advise the other parties in writing of the manner in which
that was done.
3.03 Employee Assignments. Amgen and Kirin each represent that with
--------------------
respect to each of its employees and agents who is or may be engaged in work
under the Development Program,
-13-
<PAGE>
it will use its best efforts to obtain (a) an agreement to disclose and assign
to the Company, or its nominee or nominees, without expense to the Company, all
inventions made by such employee or agent during the course of his employment or
association with the Development Program, and (b) execution, acknowledgment and
delivery by such employee or agent of all papers, including applications for
patents, that may be necessary to obtain patents for said inventions in any and
all countries and to vest title thereto in the Company (and an agreement by such
employee or agent to do all acts possible to assist the Company in establishing
and enforcing its aforementioned rights to such inventions).
ARTICLE IV
FILING AND MAINTENANCE OF PATENTS
---------------------------------
4.01 Filing and Maintenance of Patents. The Company shall, in
---------------------------------
consultation with Amgen and Kirin, file such patent applications as are
reasonably required to exploit any EPO Technology and thereafter shall use
reasonable diligence, under the circumstances, to prosecute and maintain in
force any resulting patent rights.
-14-
<PAGE>
ARTICLE V
PATENT SUITS AND ACTIONS
------------------------
5.01 Rights of the Company. The Company shall have the right to bring,
---------------------
defend and maintain any appropriate suit or action for infringement in the
Fieldof Activity of any EPO Technology patent covering only the making, use or
sale of products in the Field of Activity. If the Company finds it necessary to
join Amgen or Kirin in such suit or action, Amgen or Kirin shall execute all
papers and perform such other acts as may be reasonably required and may, at its
option, be represented by counsel of its choice. The Company shall pay to Amgen
and Kirin their reasonable expenses (excluding attorneys' fees) in connection
with any such suit or action. Any amount recovered in any such action or suit,
whether by judgment or settlement, shall be paid to or retained entirely by the
Company.
5.02 Maintenance of Action. The rights of the Parties with respect to
---------------------
the initiation or defense of any suit or action relating to any material
infringement in the Field of Activity of any patent within the EPO Technology
covering the making, use or sale of products both within and outside the Field
of Activity shall be governed by the applicable provisions of the License
Agreements.
-15-
<PAGE>
ARTICLE VI
TERM AND TERMINATION
--------------------
6.01 Term of Development Program. Unless sooner terminated, the
---------------------------
Development Program (including all rights and obligations of Article II hereof)
shall continue until expiration of the Term of Support.
6.02 Term of Agreement. This Agreement shall come into effect as of
-----------------
the date hereof and shall remain in full force and effect until the earlier of
(a) the liquidation or dissolution of the Company or (b) termination pursuant to
Section 6.03.
6.03 Default. In the event that a Party (the "Defaulting Party") shall
-------
(a) fail to make any payment under the License Agreement when and as due, after
notice to such defaulting Party and failure to cure within sixty (60) days of
such notice, or otherwise materially default in a material obligation hereunder
and fail to remedy such default within sixty (60) days after such default shall
have been called to its attention by notice of another Party, (b) become
bankrupt or insolvent, or file a petition in bankruptcy or make a general
assignment for the benefit of creditors or otherwise acknowledge insolvency, or
be adjudged bankrupt, (c) go or be placed in a process of complete liquidation
other than for an amalgamation or reconstruction, or (d) suffer the appointment
of a receiver for any substantial portion of its business who shall not be
discharged
-16-
<PAGE>
within sixty (60) days after his appointment, then, and in any such event, any
other Party, at its option, may terminate its obligations to and the rights of
the Defaulting Party under this Agreement upon ten (10) days' written notice to
the Defaulting Party, which termination shall be effective as of the occurrence
of the event giving rise to the option to terminate.
6.04 Survival. Notwithstanding the termination of a Party's
--------
obligations to or the rights of the Defaulting Party or other party under this
Agreement in accordance with the provisions of Sections 6.02 or 6.03, the
provisions of Section 3.02 and Article VIII hereof shall survive such
termination and continue in full force and effect for an indefinite term.
ARTICLE VII
SUPPLY ARRANGEMENTS
-------------------
7.01 Supply of EPO Organisms. Amgen agrees to supply to the Company
-----------------------
for the ultimate use by Kirin and the Company, as requested, with sufficient
amounts of EPO required for Kirin and the Company to carry out the goals and
purposes of the Development Program. The Company agrees to pay Amgen and/or
Kirin for the EPO that is to be supplied by Amgen and Kirin, respectively,
hereunder in the manner set forth in Article II above. Amgen and Kirin shall
also be free to produce sufficient
-17-
<PAGE>
amounts of EPO for its respective use in carrying out the goals and purposes of
the Development Program.
7.02 Delivery Specifications.
-----------------------
(a) The Company may, by letter, telex or other means, deliver to
Amgen delivery specifications providing specific information regarding EPO which
the Company is interested in obtaining. Each delivery specification shall
specify: (1) quantity; (2) requested delivery schedule; (3) packaging and
marking requirements; (4) method of shipment; (5) place of delivery and
acceptance; and (6) any other information necessary to prepare the proposal.
(b) Amgen shall, and after delivery of each such delivery
specification by the Company, furnish the Company with a written proposal
providing specific information regarding items which the Company is interested
in obtaining. Such proposal shall include: (i) unit and total price or fee for
use for items; (ii) delivery schedule; (iii) duration of the proposal; (iv)
terms and conditions regarding dissemination and use of the items; and (v) any
other information, requested by the Company and deemed essential to the proposal
by Amgen. Orders placed pursuant to a proposal are termed "Proposal Orders."
Issuance of a Proposal Order by Amgen and receipt by Amgen of written
notification of acceptance of the Proposal Order by the Company shall create a
binding agreement for furnishing the items specified therein.
-18-
<PAGE>
(c) On Proposal orders, the charges paid by the Company for
items shall be those charges set forth in the proposal under which such order is
being placed. Amgen shall exercise reasonable efforts to provide the Company
with thirty (30) days advance notice of changes in prices and use fees for
items.
(d) Charges quoted pursuant to this Article VII will be in
United States dollars and invoices shall be payable in United States currency
within thirty (30) days of delivery.
7.03 Limitations on Use. Any EPO and EPO Organisms supplied hereunder
------------------
shall be used solely for the pursuit of the goals and purposes of Development
Program and any limitation on such usage contained in the License Agreements
shall be construed consistent herewith.
ARTICLE VIII
MISCELLANEOUS
-------------
8.01 Assignment. This Agreement may not be assigned in whole or in
----------
part by any Party, except with the prior written consent of the other Parties.
8.02 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the Parties with respect to the subject matter hereof, and supersedes
all previous negotiations, commitments and writings.
-19-
<PAGE>
8.03 Amendment or Modification. This Agreement may not be modified
-------------------------
or amended except by a writing duly signed by the authorized representatives of
the Parties. Any condition or provision of or in any document or communication
whatsoever, other than a writing amending or modifying this Agreement in
accordance with the first sentence of this Section 8.03, shall be deemed
inapplicable to the obligations between the Parties hereto.
8.04 Severability. In the event any one or more of the provisions
------------
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and/or enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. In such event such provision or provisions shall be validly reformed to
as nearly approximate the intent of the Parties as possible and if unreformable,
shall be severed and deleted from this Agreement.
8.05 No Waiver. No failure or delay on the part of either Party in
---------
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder or provided by law.
8.06 Trademarks and Tradenames. No party grants any rights under
-------------------------
this Agreement to any other Party in any trademarks
-20-
<PAGE>
or tradenames of such Party, or of any of their respective Subsidiaries or
affiliated companies.
8.07 Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California.
8.08 Notices. All notices, requests, demands and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be mailed to the Party to whom notice is to be given, by
telex or facsimile, and confirmed by first class mail, registered or certified,
return receipt requested, postage prepaid, and properly addressed as follows (in
which case such notice shall be deemed to have been duly given on the third
(3rd) day following the date of such sending):
"Kirin" Kirin Brewery Company, Limited
26-1, Jingumae 6-Chome
Shibuya-Ko, Tokyo 150
Japan
Telex No. 242-5401 Kirin B J
Attn: General Manager of R&D Department
With a copy to: Musick, Peeler & Garrett
One Wilshire Boulevard
Suite 2000
Los Angeles, CA 90017
U.S.A.
Telex No. 701357 (MPG LAW UD)
Attn: Joel S. Marcus, Esq.
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<PAGE>
"Amgen" Amgen
1900 Oak Terrace Lane
Thousand Oaks, CA 91320
U.S.A.
Telex No. 499-9315 (AMGEN)
Attn: Corporate Secretary
With a copy to: Cooley, Godward, Castro,
Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, CA 94111 U.S.A.
Telex No. 910-372-7370 Cooley SFO
Attn: Alan C. Mendelson, Esq.
"Corporation" Kirin-Amgen, Inc.
1900 Oak Terrace Lane
Thousand Oaks, CA 91320 U.S.A.
Telex No. 499-9315 (AMGEN)
Attn: Corporate Secretary
With a copy to: Musick, Peeler & Garrett
One Wilshire Boulevard
Suite 2000
Los Angeles, CA 90017
U.S.A.
Telex No. 701357 (MPG LAW UD)
Attn: Joel S. Marcus, Esq.
Any Party by giving notice to the others in the manner provided above may change
such Party's address for purposes of this Paragraph 8.08.
8.9 Headings. Article and Section headings in this Agreement are
--------
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
-22-
<PAGE>
8.10 Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts and by different Parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts of this Agreement taken together shall
constitute but one and the same instrument.
8.11 No Warranties. THE PARTIES EXPRESSLY DISCLAIM ALL WARRANTIES,
-------------
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE.
8.12 Indemnity. The Company hereby (a) releases Amgen and Kirin
---------
from any obligation to defend, indemnify or save the Company and its agents and
employees harmless from and (b) agrees to defend, indemnify and save Amgen and
Kirin harmless from any and all costs, expenses (including attorneys' fees),
liabilities, damages and claims for any injury or death to persons or damage to
or destruction of property, or other loss arising out of or in connection with
any product made, used or sold by the Company or the use by the Company of any
EPO Technology or EPO Organisms furnished pursuant to any provision hereunder,
or otherwise arising out of or related to the performance of this Agreement.
8.13 Force Majeure. It is agreed that each of the Parties hereto
-------------
is excused from performing such acts as are required hereunder as may be
prevented by or whose purpose is frustrated by Force Majeure. The Party so
affected shall give notice to the other Party in writing promptly and thereupon
shall
-23-
<PAGE>
be excused from such of its obligations hereunder as it is unable to perform on
account of the Force Majeure throughout the duration there-of plus a period of
thirty (30) days.
8.14 Other Agreements. Any other provision of this Agreement
----------------
notwithstanding, nothing in this Agreement shall obligate Kirin or Amgen to
disclose to the Company any information or to make available to the Company any
materials in violation of an obligation of secrecy or a limitation of use
imposed by a third party from whom such information or materials shall have been
received.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives in the manner legally binding
upon them as of the date first above written.
AMGEN
By
President
KIRIN BREWERY COMPANY, LTD.
By
KIRIN-AMGEN, INC.
By
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<PAGE>
OUTLINE OF
----------
PRELIMINARY R & D PLAN FOR EPO
------------------------------
1. A reliable RIA will be established to be used for, but not
limited to, preclinical and clinical evaluation of EPO levels in patient's
serum. Estimated cost is $200,000. Period 1984.
2. A sufficient quantity of EPO will be purified from urine. This
EPO will be used as a standard for RIA, for iodination for the RIA and as
reference material for comparison with EPO produced by recombinant DNA
techniques. Estimated cost is $200,000. Period 1984.
3. Recombinant EPO will be prepared from mammalian cells, E.coli
and yeast. The biological properties of these three preparations will be
compared with urinary EPO to determine which system will be used to develop EPO
as a therapeutic. Fermentation and purification costs for materials for
evaluation will be paid for by the Corporation. Estimated cost is $300,000.
Period 1984.
4. Properties of recombinant EPO will be compared with natural
material to determine what criteria should be used for specifications of the
recombinant therapeutic material. Part of this work will be paid for by the
Corporation. Estimated cost is $100,000. Period 1984.
SCHEDULE "A"
<PAGE>
5. Research to be carried out to determine feasibility of using
antibody affinity columns for EPO purification.
Amgen will supply antibody, Kirin will supply urinary EPO and
serum, if necessary. Joint venture will pay for labor. Estimated cost is
$100,000. Period 1984.
6. Process development for fermentation and purification to
commercial levels will be carried out for recombinant EPO produced by E.coli.
Estimated cost is $1,000,000. The estimated cost will be modified if yeast or
mammalian cells are used as the production system. Period 1984-1985.
7. Studies to be carried out to determine the formulation of the
final product. This will include studies on product stability, method of
administration, etc. Estimated cost is $600,000. Period 1984-1985.
8. Pre-clinical tests including planning, production of samples,
toxicological test and pharmacological tests. Estimated cost is $2,000,000.
Period 1984-1986.
9. Clinical trials including planning, filing IND, production of
samples, clinical trials, organization of clinical doctors and submission of New
Drug Application. Estimated cost is $11,500,000. Period 1984-1987.
-2-
<PAGE>
10. Phase IV study will be carried out. Cost of this study will
be paid for from proceeds of commerical sales. No cost to joint venture.
-3-
<PAGE>
ARTICLES OF INCORPORATION
OF
KIRIN-AMGEN, INC.
I.
The name of this corporation is KIRIN-AMGEN, INC.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
The name and address in the State of California of this
corporation's initial agent for service of process is:
Joel S. Marcus, Esq.
Musick, Peeler & Garrett
One Wilshire Boulevard
Suite 2000
Los Angeles, California 90017
IV.
The corporation is authorized to issue two classes of shares: no
par value Class A Common Stock and no par value Class B Common Stock designated
"Class A Common Stock" and "Class B Common Stock," respectively. The total
number of shares of Class A Common Stock which this corporation is authorized to
issue is twenty-four million (24,000,000) shares. The total number of shares of
Class B Common Stock which this corporation is authorized to issue is twelve
million (12,000,000) shares.
V.
The rights, preferences, privileges and restrictions of Class A
Common Stock and Class B Common Stock shall be equal and identical in all
respects except that:
EXHIBIT "D"
<PAGE>
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of this corporation, the holder of the issued and
outstanding shares of Class B Common Stock shall be entitled to receive from the
assets of the corporation, cash equal to one dollar (US $1.00) per share, plus
three-quarters (3/4) of the aggregate interest earned by the corporation on such
amount from the date of purchase of such shares to the date of liquidation.
(b) The shares of Class B Common Stock shall be converted into
shares of Class A Common Stock on a share-forshare basis when the corporation
produces biologically active EPO at such levels as are agreed upon by the
holders of all of the shares of Class A Common Stock and Class B Common Stock.
VI.
(a) Any of the following actions shall require the prior approval
of the holders of all of the shares of Class A Common Stock and Class B Common
Stock, notwithstanding that applicable law would otherwise permit such action
without such approval:
(i) The entry by the corporation into any business outside
the areas of development, manufacture, production and worldwide
commercial sale of EPO and EPO pharmaceuticals for human therapeutic
use;
(ii) Any lending or borrowing of money by the corporation;
(iii) The acquisition, mortgage, pledge, sale, assignment,
transfer, or other disposition of any property of the corporation
having a fair market value in excess of one hundred thousand dollars
($100,000) by the corporation (other than in connection with the sale
of products and services in the ordinary course of its business) or of
any interest (regardless of value) in the legal or beneficial ownership
of any other corporation or enterprise;
(iv) The adoption of a business plan, annual capital,
operating and development plans, and budgets, including any material
modification thereof;
(v) Any capital expenditure in excess of one hundred
thousand dollars ($100,000).
(b) All actions of the Board of Directors shall require the
affirmative vote of a majority of the authorized
-2-
<PAGE>
number of Directors, notwithstanding that applicable law would otherwise permit
such action without such approval.
Dated: May 11, 1984
Signature
---------
/s/ Joel S. Marcus
Incorporator
I hereby declare that I am the person who executed the
foregoing Articles of Incorporation, which execution is my act and deed.
Signature
----------
/s/ Joel S. Marcus
-3-
<PAGE>
BYLAWS
OF
KIRIN-AMGEN, INC.
EXHIBIT "E"
<PAGE>
BYLAWS OF KIRIN-AMGEN, INC.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
OFFICES
Section 1. Principal Office........................................................................... 1
Section 2. Other Offices.............................................................................. 1
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal............................................................................. 2
ARTICLE III
SHAREHOLDERS' MEETINGS AND VOTING RIGHTS
Section 4. Place of Meetings.......................................................................... 2
Section 5. Annual Meetings............................................................................ 2
Section 6. Postponement of Annual Meeting............................................................. 3
Section 7. Special Meetings........................................................................... 3
Section 8. Notice of Meetings......................................................................... 4
Section 9. Manner of Giving Notice.................................................................... 7
Section 10. Quorum and Transaction of Business......................................................... 8
Section 11. Adjournment and Notice of
Adjourned Meetings....................................................................... 9
Section 12. Waiver of Notice, Consent to
Meeting or Approval of Minutes........................................................... 10
Section 13. Action by Written Consent
Without a Meeting........................................................................ 11
Section 14. Voting..................................................................................... 13
Section 15. Persons Entitled to Vote or Consent........................................................ 14
Section 16. Proxies.................................................................................... 16
Section 17. Inspectors of Election..................................................................... 16
17
ARTICLE IV
BOARD OF DIRECTORS
Section 18. Powers .................................................................................... 18
Section 19. Number of Directors........................................................................ 19
Section 20. Election of Directors, Term,
Qualifications........................................................................... 19
Section 21. Resignation................................................................................ 20
Section 22. Removal.................................................................................... 20
Section 23. Vacancies.................................................................................. 21
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 24. Regular Meetings.................................................................................. 22
Section 25. Participation by Telephone........................................................................ 23
Section 26. Special Meetings.................................................................................. 23
Section 27. Notice of Meetings................................................................................ 23
Section 28. Place of Meetings................................................................................. 24
Section 29. Action by Written Consent
Without a Meeting.............................................................................. 24
Section 30. Quorum and Transaction of Business................................................................ 25
Section 31. Adjournment....................................................................................... 25
Section 32. Organization...................................................................................... 26
Section 33. Compensation...................................................................................... 26
Section 34. Committees........................................................................................ 26
ARTICLE V
OFFICERS
Section 35. Officers.......................................................................................... 27
Section 36. Appointment....................................................................................... 27
Section 37. Inability to Act.................................................................................. 27
Section 38. Resignations...................................................................................... 28
Section 39. Removal........................................................................................... 28
Section 40. Vacancies......................................................................................... 29
Section 41. Chairman of the Board............................................................................. 29
Section 42. President.............................................................