-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FG9skYkwP4XVDQm7RvYYZPwbJNe6w8ARHBQRCgbZObxxoGPzWJDQmOCkOH2nErab YDnpjIUUFTHH+27qhqGAWA== 0000950135-99-003774.txt : 19990805 0000950135-99-003774.hdr.sgml : 19990805 ACCESSION NUMBER: 0000950135-99-003774 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOGEN INC CENTRAL INDEX KEY: 0000714655 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 043002117 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12042 FILM NUMBER: 99677577 BUSINESS ADDRESS: STREET 1: 14 CAMBRIDGE CTR CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6176792000 MAIL ADDRESS: STREET 1: 14 CAMBRIDGE CTR CITY: CAMBRIDGE STATE: MA ZIP: 02142 FORMER COMPANY: FORMER CONFORMED NAME: BIOGEN NV DATE OF NAME CHANGE: 19880622 10-Q 1 BIOGEN, INC. 1 SECURITIES AND EXCHANGE COMMISSION TOTAL PAGES - 17 WASHINGTON, D.C. 20549 EXHIBIT INDEX - 17 ------------------------------------------- FORM 10-Q (MARK ONE) [X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934. For the quarterly period ended JUNE 30, 1999 ------------------------------------------- OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from to ------------------- ------------------- Commission File Number 0-12042 ------------------------------ BIOGEN, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Massachusetts 04-3002117 ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 14 Cambridge Center, Cambridge, MA 02142 - ---------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617)679-2000 Former name, former address and former fiscal year, if changed since last report: Not Applicable. 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 ----- ----- Number of shares outstanding of each of the issuer's classes of common stock, as of July 26, 1999: Common Stock, par value $0.01 150,315,500 ----------------------------- ---------------- (Title of each class) Number of Shares 2 Page 2 BIOGEN, INC. INDEX PART I - FINANCIAL INFORMATION Page No. Condensed Consolidated Statements of Income - Three and six months ended June 30, 1999 and 1998 3 Condensed Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 4 Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION 16 Note concerning trademarks: AVONEX(R) is a registered trademark of Biogen, Inc. 3 Page 3 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 -------- -------- ------- -------- REVENUES: Product sales $145,852 $ 87,073 $277,172 $163,173 Royalties 43,077 41,739 83,477 80,111 -------- -------- -------- -------- Total revenues 188,929 128,812 360,649 243,284 -------- -------- -------- -------- COSTS and EXPENSES: Cost of sales 26,961 17,171 51,831 32,044 Research and development 50,941 42,135 101,928 79,255 Selling, general and administrative 36,999 28,481 70,860 54,484 -------- ------ -------- ------ Total costs and expenses 114,901 87,787 224,619 165,783 -------- -------- -------- -------- Income from operations 74,028 41,025 136,030 77,501 Other income (expense), net (9,270) 6,239 (3,086) 13,161 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 64,758 47,264 132,944 90,662 Income taxes 21,370 15,815 43,872 31,442 -------- -------- -------- -------- NET INCOME $ 43,388 $ 31,449 $ 89,072 $ 59,220 ======== ======== ======== ======== BASIC EARNINGS PER SHARE $ 0.29 $ 0.21 $ 0.59 $ 0.40 ======== ======== ======== ======== DILUTED EARNINGS PER SHARE $ 0.28 $ 0.20 $ 0.57 $ 0.39 ======== ======== ======== ======== SHARES USED IN CALCULATING: Basic earnings per share 150,047 147,544 149,722 147,708 ======== ======== ======== ======== Diluted earnings per share 157,575 153,528 157,553 153,618 ======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements. 4 Page 4 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
June 30, December 31, 1999 1998 ---------- ------------ (Unaudited) ASSETS Current assets Cash and cash equivalents $ 52,620 $ 25,445 Marketable securities 557,616 491,469 Accounts receivable, net 120,419 101,281 Deferred tax asset 24,465 26,584 Other current assets 61,457 49,365 ---------- ---------- Total current assets 816,577 694,144 ---------- ---------- Property, plant and equipment Cost 295,030 269,038 Less accumulated depreciation 98,556 86,487 ---------- ---------- Property, plant and equipment, net 196,474 182,551 ---------- ---------- Patents, net 14,047 15,869 Marketable securities 13,554 12,668 Other assets 14,775 19,483 ---------- ---------- $1,055,427 $ 924,715 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 23,588 $ 24,896 Current portion of long-term debt 4,888 4,888 Accrued expenses and other 90,571 105,305 ---------- ---------- Total current liabilities 119,047 135,089 ---------- ---------- Long-term debt, less current portion 54,516 56,960 Other long-term liabilities 15,013 14,053 Commitments and contingencies -- -- Shareholders' equity Common stock 1,507 741 Additional paid-in capital 624,068 538,847 Retained earnings 285,027 213,507 Accumulated other comprehensive income 4,940 (13,165) Treasury stock, at cost (48,691) (21,317) ---------- ---------- Total shareholders' equity 866,851 718,613 ---------- ---------- $1,055,427 $ 924,715 ========== ==========
See Notes to Condensed Consolidated Financial Statements. 5 Page 5 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Six Months Ended June 30, ------------------------------ 1999 1998 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 89,072 $ 59,220 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 15,496 11,630 Deferred income taxes 2,119 13,208 Write-down of non-current marketable securities 15,287 -- Other 379 23 Changes in: Accounts receivable (11,887) 1,179 Other current and other assets (7,384) (9,372) Accounts payable, accrued expenses and other current and long term liabilities (11,704) (7,383) --------- -------- Net cash provided from operating activities 91,378 68,505 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of marketable securities (329,515) (350,035) Proceeds from sales and maturities of marketable securities 258,276 331,810 Investment in collaborative partners -- (5,000) Acquisitions of property and equipment (25,992) (13,113) Additions to patents (1,605) (2,974) --------- -------- Net cash used by investing activities (98,836) (39,312) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Repayments of note payable -- (10,258) Payments of long-term debt (2,444) (2,445) Purchases of treasury stock (68,584) (28,800) Proceeds from put warrants 8,332 -- Issuance of common stock, stock option exercises and related tax benefits 97,329 13,791 --------- -------- Net cash from financing activities 34,633 (27,712) --------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 27,175 1,481 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 25,445 70,358 --------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 52,620 $ 71,839 ========= ========
See Notes to Condensed Consolidated Financial Statements. 6 Page 6 BIOGEN, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows of Biogen, Inc. and its subsidiaries (the "Company"). The Company's accounting policies are described in the Notes to Consolidated Financial Statements in the Company's 1998 Annual Report on Form 10-K. Interim results are not necessarily indicative of the operating results for the full year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain amounts for the six months ended June 30, 1998 have been reclassified to conform to the current period presentation. Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes certain changes in equity that are excluded from net income, such as, translation adjustments, unrealized holding gains and losses on available-for-sale marketable securities and certain derivative instruments. Comprehensive income for the three months ended June 30, 1999 and 1998 was $58 million and $26 million, respectively. Comprehensive income for the six months ended June 30, 1999 and 1998 was $107 million and $55 million, respectively. Dilutive stock options include outstanding options under the Company's stock option plans. Options to purchase 62,000 shares of common stock were outstanding at June 30, 1999 but not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price during the period. Below is a summary of the shares used in calculating basic and diluted earnings per share (in thousands):
Three Months Ended Six Months Ended June 30, June 30, --------------------- ------------------- 1999 1998 1999 1998 -------- ------- ------- ------- Weighted average number of shares of common stock outstanding 150,047 147,544 149,722 147,708 Dilutive stock options 7,528 5,984 7,831 5,910 ------- ------- ------- ------- Shares used in calculating diluted earnings per share 157,575 153,528 157,553 153,618 ======= ======= ======= =======
7 Page 7 On June 11, 1999, the Board of Directors declared a two-for-one stock split to be effected in the form of a stock dividend of one share of common stock for each share outstanding. The stock dividend was payable on June 25, 1999 to shareholders of record at the close of business on June 11, 1999. All references to the number of shares and per share amounts in the financial statements have been restated to reflect the effect of the stock split. On February 22, 1999, the Company announced that its Board of Directors had authorized the repurchase of up to 8 million shares of the Company's common stock. The repurchased stock will provide the Company with treasury shares for general corporate purposes, such as stock to be issued under employee stock option and stock purchase plans. Stock purchases are expected to occur from time to time over the next two years. The stock repurchase program may be discontinued at any time. To enhance the stock repurchase program, the Company sold put warrants to and purchased call options from independent third parties covering a large portion of the shares intended to be repurchased. The outstanding put warrants permit a net-share settlement at the Company's option. The put warrants sold in connection with the Company's stock repurchase program may have an additional dilutive effect. 2. As of June 30, 1999, the Company had $18 million outstanding under a term loan secured by a laboratory and office building in Cambridge, Massachusetts. Principal payments of $1.7 million per annum are due through 2004 with the balance due on May 8, 2005. As of June 30, 1999, the Company had $41 million outstanding under a loan agreement with a bank for financing the construction of the Company's biological manufacturing facility in North Carolina (the "Construction Loan"). The Construction Loan is secured by the facility. Payments of $805,000 are due quarterly through 2006 with the balance due on March 31, 2007. Terms of the loan agreements include various covenants, including financial covenants, which require the Company to maintain minimum net worth, cash flow and various financial ratios. 3. Inventories, which are included in other current assets, are stated at the lower of cost or market with cost determined under the first-in/first-out ("FIFO") method. Raw materials include inventory used in the production of pre-clinical and clinical products, which are expensed as research and development costs when consumed. Inventories are as follows:
(In thousands) -------------------------------- June 30, December 31, 1999 1998 --------- ------------ Raw materials $ 5,720 $ 4,878 Work in process 16,079 17,585 Finished goods 17,379 13,402 ------- ------- $39,178 $35,865 ======= =======
8 Page 8 4. On July 3, 1996, Berlex Laboratories, Inc. ("Berlex") filed suit against Biogen in the United States District Court for the District of New Jersey alleging infringement by Biogen of Berlex's "McCormick" patent in the United States in the production of Biogen's AVONEX(R)(Interferon beta-la). In November 1996, Berlex's New Jersey action was transferred to the U.S. District Court in Massachusetts and consolidated for pre-trial purposes with a related declaratory judgement action previously filed by Biogen. On August 18, 1998, Berlex filed a second suit against Biogen alleging infringement by Biogen of a patent which was issued to Berlex in August 1998 and which is related to the McCormick patent. On September 23, 1998, the cases were consolidated for pre-trial and trial purposes. Berlex seeks a judgement granting it damages, a trebling of any damages awarded and a permanent injunction restraining Biogen from the alleged infringement. An unfavorable ruling in the Berlex suit could have a material adverse effect on the Company's results of operations and financial position. The Company believes that it has meritorious defenses to Berlex claims; however, the ultimate outcome is not determinable at this time. A hearing on the parties' summary judgement motions is tentatively scheduled for November 1999 and a trial is tentatively scheduled for February 2000 but may be postponed. On October 14, 1998, the Company filed an opposition with the Opposition Division of the European Patent Office to oppose a European patent (the "Rentschler patent") issued to Dr. Rentschler Biotechnologie GmbH ("Rentschler") with certain claims regarding compositions of matter of beta interferon with specific regard to the structure of the glycosylated molecule. While Biogen believes that the patent will be revoked, if the patent were to be upheld and if Rentschler were to obtain, through legal proceedings, a determination that the Company's sale of AVONEX(R) in Europe infringes a valid Rentschler patent, such result could have a material adverse effect on the Company's results of operation and financial position. 5. Income tax expense as a percentage of pre-tax income for the quarters ended June 30, 1999 and 1998 was 33%, respectively. Income tax expense as a percentage of pre-tax income for the six months ended June 30, 1999 and 1998 was 33% and 35%, respectively. The effective tax rate varied from U.S. statutory rates in the three and six-month periods of 1999 and 1998, primarily due to increased European sales and to the utilization of research and development credits. 6. The Company operates in one segment, which is the business of developing, manufacturing and marketing drugs for human health care. The Company currently derives product revenues from sales of AVONEX(R) for the treatment of relapsing forms of multiple sclerosis. The Company also derives revenue from royalties on worldwide sales by the Company's licensees of a number of products covered under patents controlled by the Company, including alpha interferon and hepatitis B vaccines and diagnostic products. 9 Page 9 BIOGEN, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Biogen, Inc. (the "Company" or "Biogen") is a biopharmaceutical company principally engaged in the business of developing, manufacturing and marketing drugs for human health care. The Company currently derives revenues from sales of AVONEX(R) (Interferon beta-la) for the treatment of relapsing forms of multiple sclerosis ("MS") and from royalties on worldwide sales by the Company's licensees of a number of products covered under patents controlled by the Company, including alpha interferon and hepatitis B vaccines and diagnostic products. RESULTS OF OPERATIONS For the quarter ended June 30, 1999, the Company reported net income of $43 million or $0.28 per diluted share as compared to $31 million or $0.20 per diluted share for the comparable period of 1998. For the six months ended June 30, 1999, the Company reported net income of $89 million or $0.57 per diluted share as compared to $59 million or $0.39 per diluted share for the comparable period of 1998. Total revenues for the current quarter were $189 million, as compared to $129 million in the quarter ended June 30, 1998, an increase of $60 million or 47%. Total revenues for the six months ended June 30, 1999 were $361 million, as compared to $243 million for the same period of 1998, an increase of $118 million or 49%. The increase in total revenues was primarily due to increased sales of the Company's product AVONEX(R). Product sales for the current quarter were $146 million compared to $87 million for the comparable period in 1998, an increase of $59 million or 68%. Product sales for the six months ended June 30, 1999 were $277 million compared to $163 million for the comparable period in 1998, an increase of $114 million or 70%. The growth in the second quarter and six month period of 1999 was primarily due to an increase in the sales volume of AVONEX(R) in the United States and in the European Union ("EU"). AVONEX(R) sales outside of the United States were approximately $42 million in the current quarter as compared to approximately $19 million in the comparable period of 1998. AVONEX(R) sales outside of the United States were approximately $78 million in the six months ended June 30, 1999 as compared to approximately $32 million in the comparable period of 1998. Revenues from royalties for the current quarter were $43 million as compared to $42 million for the comparable period of 1998, an increase of $1 million or 2%. Revenues from royalties for the six months ended June 30, 1999 were $83 million as compared to $80 million for the comparable period of 1998, an increase of $3 million or 4%. The increases in royalties for the three and six month periods of 1999 over the comparable periods of 1998 are primarily a result of increases in royalties on sales of alpha interferon. 10 Page 10 The Company expects product sales as a percentage of total revenues to continue to increase in the near term as the Company continues to market AVONEX(R) worldwide, and expects sales from AVONEX(R) outside the United States to continue to increase as a percentage of total product sales. The Company, however, expects to face increasing competition in the MS marketplace from existing and new MS treatments that may impact sales of AVONEX(R). In the near term, the Company expects overall sales of licensee products and royalty revenues to fluctuate depending on changes in sales volumes for specific products, patent expirations, new licensing arrangements, if any, or other developments. Licensee sales levels may also fluctuate from quarter to quarter due to the timing and extent of major events such as new indication approvals or government sponsored vaccination programs. Total costs and expenses for the current quarter were $115 million as compared to $88 million in the quarter ended June 30, 1998, an increase of $27 million or 31%. Total costs and expenses for the six months ended June 30, 1999 were $225 million as compared to $166 million for the six months ended June 30, 1998, an increase of $59 million or 36%. Cost of sales in the current quarter totaled $27 million, an increase of $10 million from the quarter ended June 30, 1998. Cost of sales in the six-month period ended June 30, 1999 totaled $52 million compared to $32 million for the same period in 1998, an increase of $20 million. Cost of product sales were $23 million in the second quarter of 1999 compared to $14 million for the same quarter of 1998. Cost of product sales were $44 million and $26 million for the six months of 1999 and 1998, respectively. Gross margins on product sales remained constant at 84% for the three and six-month periods ended June 30, 1999 and 1998. Cost of royalty revenues for the current quarter increased slightly to $4 million as compared to $3 million in the comparable period of 1998. Cost of royalty revenues for the six-month period of 1999 increased to $8 million as compared to $6 million in the comparable period of 1998. Gross margins on royalty revenue declined slightly to 91% from 92% for both the three and six-month periods ended June 30, 1999, compared to the same periods in 1998. The Company expects that gross margins on royalty revenue will fluctuate in the future based on the impact of one-time royalty and milestone payments. Research and development expenses for the current quarter were $51 million, an increase of $9 million or 21% as compared to the quarter ended June 30, 1998. Research and development expenses were $102 million for the six-month period ended June 30, 1999, an increase of $23 million or 29% as compared to the same period in 1998. The increases were primarily due to increases in clinical trial costs and an increase in the Company's development efforts relating to research and development programs in its product pipeline. The Company expects that, in the long-term, research and development expenses will increase as the Company continues to expand its development efforts with respect to new products and as it conducts clinical trials of these products. Selling, general and administrative expenses for the current quarter were $37 million, an increase of $9 million or 32% as compared to the quarter ended June 30, 1998. Selling, general and administrative expenses for the six months ended June 30, 1999 were $71 million, an increase of $17 million or 31% from the same period in 1998. The increases were primarily due to higher selling and marketing 11 Page 11 expenses related to sales of AVONEX(R), and the impact of stock option compensation and related expenses. The Company expects that selling, general and administrative expenses will increase in the near and long-term as the Company continues to put in place the commercial infrastructure and sales and marketing organizations necessary to sell AVONEX(R) worldwide. Other income (expense), net consists primarily of interest income, partially offset by interest expenses and other non-operating income and expenses. The decrease in other income (expense), net for the three and six months periods ended June 30, 1999 was primarily attributable to a $15 million write-down of certain non-current marketable securities. The Company determined that the decline in fair value below cost of the marketable securities was other than temporary. Income tax expense as a percentage of pre-tax income for the quarters ended June 30, 1999 and 1998 was 33%, respectively. Income tax expense as a percentage of pre-tax income for the six months ended June 30, 1999 and 1998 was 33% and 35%, respectively. The effective tax rate varied from U.S. statutory rates in the three and six-month periods of 1999 and 1998, primarily due to increased European sales and to the utilization of research and development credits. The Company's effective tax rate is expected to continue at or near the 33% level for the remainder of 1999. FINANCIAL CONDITION At June 30, 1999, cash, cash equivalents and short-term marketable securities were $610 million compared with $517 million at December 31, 1998, an increase of $93 million. Working capital increased by $138 million to $698 million from December 31, 1998 to June 30, 1999. Net cash provided from operating activities for the six-month period ended June 30, 1999 was $91 million, compared with $69 million in the comparable period of 1998. Cash outflows for the six-months ended June 30, 1999, included investments in property and equipment and patents of $28 million. Cash inflows from financing activities included $97 million from common stock option and purchase plan activity, including tax benefits related to stock options and $8 million of proceeds from the sale of put warrants. Cash outflows from financing activities included $69 million for purchases of 1,400,000 shares of the Company's common stock under its stock repurchase program and $2 million for repayments of long term debt. On February 22, 1999, the Company announced that its Board of Directors has authorized the repurchase of up to 8 million shares of the Company's common stock. The repurchased stock will provide the Company with treasury shares for general corporate purposes, such as stock to be issued under employee stock option and stock purchase plans. Stock purchases are expected to occur from time to time over the next two years. The stock repurchase program may be discontinued at any time. To enhance the stock repurchase program, the Company sold put warrants to and purchased call options from independent third parties covering a large portion of the shares intended to be repurchased. The outstanding put warrants permit a net-share settlement at the Company's option. 12 Page 12 Several legal proceedings were pending during the current quarter, which involve the Company. See Note 4 of the Notes to the Condensed Consolidated Financial Statements. See also Item 1 - Business, "Patents and Other Proprietary Rights" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 for discussions of these legal proceedings. The Company believes that existing funds and cash generated from operations are adequate to satisfy its working capital and capital expenditure requirements in the foreseeable future. However, the Company may seek to raise additional capital to take advantage of favorable conditions in the market or in connection with the Company's development activities. Year 2000 Issues Year 2000 is the problem resulting from the use of a two-digit date field to identify the year in computer software. Consequently, computer programs may not accurately reflect the appropriate date, confusing "00" as the year 1900 rather than the year 2000. Year 2000 is a pervasive problem affecting many information technology systems and embedded technologies (e.g. microprocessors in communications systems) in all companies, in all industries. Failure by the Company or failure by third parties upon which the Company relies to effectively address Year 2000 issues could have a material adverse impact on the Company's financial position or results of operations. The Company has developed a plan to address the Year 2000 issue. The plan is segregated into four phases: 1. Information Collection - Identify all Year 2000 risk areas and assign accountability. 2. Assess Risk - Assign each item a category of risk: * Commercial Risk - Has a significant impact on sale, delivery and support of AVONEX(R) or a significant impact on the Company's financial position or results of operations. * Operational Risk - Has a significant impact on productivity but does not materially impact the Company's financial position or results of operations. * Convenience Risk - Has a minor impact on productivity. 3. Remediate - Fix or replace, test and implement changes required for Year 2000 compliance. 4. Contingency Plan - Define procedures to be implemented should a disruption due to Year 2000 occur. The Company has completed the first two phases of the project and has completed the testing and upgrading of all individual software applications and equipment that fall within the Commercial Risk category. Additionally, approximately 86% of the software applications and equipment in the Operational and Convenience Risk categories have been remediated. All of the Company's major software applications are purchased from major software vendors and the Company performs only minor customizations to those applications. The Company's major software providers have 13 Page 13 attested to Year 2000 compliance. The Company has reviewed its operations equipment for embedded technologies which may be Year 2000 susceptible and does not believe necessary modifications to be material. The Company is communicating with its significant vendors and customers to determine the progress that those vendors and customers are making in remediating their own Year 2000 issues. The Company is requiring that significant vendors and customers certify those products and services to be Year 2000 compliant and in some cases is performing on-site reviews. To date, Year 2000 costs have been immaterial and the Company believes that future costs will also be immaterial. The Company expects the remainder of the Year 2000 compliance program to be substantially complete by the third quarter of 1999. The most reasonably likely worst case scenario, if significant Year 2000 issues arise, is that the Company would execute its contingency plans to produce, package, and deliver AVONEX(R), resulting in lower productivity. These contingency plans include producing and maintaining a sufficient level of inventory of AVONEX(R) in both bulk and packaged format, developing secondary sources of packaging and delivery, providing for manual and backup processes. Customers anticipating Year 2000 concerns, could increase their inventory of AVONEX(R) prior to the end of the year causing short-term temporary volatility in sales between periods. Additionally, third parties from whom the Company receives royalty revenues could encounter difficulties in their efforts to produce and sell products which generate royalty revenue for the Company. OUTLOOK Safe Harbor Statement under Private Securities Litigation Reform Act of 1995 In addition to historical information, this quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Reference is made in particular to forward-looking statements regarding the anticipated level of future royalty revenues, product sales, expenses and profits, predictions as to the anticipated outcome of pending litigation and opposition proceedings and statements regarding the expected outcome of planned measures to deal with Year 2000 issues. These and all other forward-looking statements are made based on the Company's current belief as to the outcome and timing of such future events. Factors which could cause actual results to differ from the Company's expectations and which could negatively impact the Company's results of operations are discussed below and elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations. Dependence on AVONEX(R) Sales and Royalty Revenue The Company's ability to sustain increases in revenues and profitability will be primarily dependent on the level of revenues and profitability from AVONEX(R) sales. The Company's ability to sustain profitability from sales of AVONEX(R) will depend on a number of factors, including: continued market acceptance of AVONEX(R) 14 Page 14 worldwide; the Company's ability to maintain a high level of patient satisfaction with AVONEX(R); the nature of regulatory and pricing decisions related to AVONEX(R) worldwide and the extent to which AVONEX(R) receives and maintains reimbursement coverage; successful resolution of the lawsuit with Berlex related to the "McCormick" patents, which if decided in Berlex's favor could have a material adverse effect on the Company's financial position and results of operations; success in revoking the Rentschler patent since if the patent were to be upheld and if Rentschler were to obtain, through legal proceedings, a determination that the Company's sale of AVONEX(R) in Europe infringes a valid Rentschler patent, such result could have a material adverse effect on the Company's results of operation and financial condition; the Company's ability to sustain market share of AVONEX(R) in light of the impact of competitive products for the treatment of multiple sclerosis; the success of ongoing development work related to AVONEX(R) in expanded multiple sclerosis indications and the continued accessibility of third parties to vial, label, and distribute AVONEX(R) on acceptable terms. The Company also receives royalty revenues which contribute significantly to its overall profitability. The Company's ability to maintain the level of its royalty revenues will depend on a number of factors. For example, pricing reforms, health care reform initiatives, other legal and regulatory developments and the introduction of competitive products may have an impact on product sales by the Company's licensees. In addition, licensee sales levels may fluctuate from quarter to quarter due to the timing and extent of major events such as new indication approvals or government sponsored vaccination programs. Since the Company is not involved in the development or sale of products by licensees, the Company is unable to predict the timing or potential impact of factors which may affect licensee sales. In the long term, the Company expects its royalty revenue to be affected most significantly by patent expirations. There can be no assurance that the Company will achieve a positive outcome with respect to any of the factors discussed in this Section or that the timing and extent of the Company's success with respect to any combination of these factors will be sufficient to result in sustained increases in revenues or profitability or the sustained profitability of the Company. For a further discussion of risks regarding drug development, patent matters, including the Berlex lawsuit on the "McCormick" patents, competition in the multiple sclerosis market and regulatory matters, see the Company's Annual Report on Form 10-K for the period ended December 31, 1998 under the headings "Business - Risks Associated with Drug Development", "Business - Patents and Other Proprietary Rights", "Business - Competition and Marketing - AVONEX(R) (interferon beta-la)", "Business - Regulation", "Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Outlook." New Products AVONEX(R) is currently the only product sold by the Company. The Company's long-term viability and growth will depend on the successful development and commercialization of other products from its research activities and collaborations. The Company is continuing to expand its development efforts related to other potential products in its pipeline. The expansion of the pipeline may include increases in spending on internal projects, the acquisition of third party technologies or products or other types of investments. Product 15 Page 15 development involves a high degree of risk. Only a small number of research and development programs result in the commercialization of a product. Success in preclinical and early clinical trials does not ensure that later stage or large scale clinical trials will be successful. Many important factors affect the Company's ability to successfully develop and commercialize drugs, including the ability to obtain and maintain necessary patents and licenses, to demonstrate safety and efficacy of drug candidates at each stage of the clinical trial process, to meet applicable regulatory standards and to receive required regulatory approvals, to be capable of producing drug candidates in commercial quantities at reasonable costs, to compete successfully against other products and to market products successfully. There can be no assurance that the Company will be successful in its efforts to develop and commercialize new products. Item 4 - Submission of Matters to a Vote of Security Holders (a) The information set forth in this Item 4 relates to matters submitted to a vote at the Annual Meeting of Stockholders of Biogen, Inc. on June 11, 1999. References to the number of shares indicated below have not been restated to reflect the two-for-one stock split effected in the form of a stock dividend. (b) Not applicable. (c) A proposal to elect Thomas F. Keller, Roger H. Morley, Phillip A. Sharp and James C. Mullen as directors to serve for a three year term ending in 2002 and until their successors are duly elected and qualified was approved with the following vote: NOMINEE FOR ABSTAINS ------- --- -------- Thomas F. Keller 53,161,372 200,793 Roger H. Morley 53,156,962 205,203 Phillip A. Sharp 53,163,588 198,577 James C. Mullen 53,163,492 198,673 A proposal to ratify the selection of PricewaterhouseCoopers LLP as the Company's independent accountants for the fiscal year ending December 31, 1999 was approved with 53,260,254 affirmative votes, 13,292 negative votes, 88,619 abstentions and 0 broker non-votes. A proposal to approve an amendment to the Company's Articles of Organization to increase the number of authorized shares of the Company's Common Stock from 110,000,000 shares to 375,000,000 shares was approved with 51,945,117 affirmative votes, 1,382,064 negative votes, 34,984 abstentions and 0 broker non-votes. (d) Not applicable. 16 Page 16 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits No. 10.1 1985 Non-Qualified Stock Option Plan, as amended through June 10, 1999. No. 27 Financial Data Schedule (for EDGAR filing purposes only). (b) On April 27, 1999, the Company filed a report on Form 8-K disclosing adoption of a new Shareholder Rights Plan and the issuance of the new rights as a dividend to holders of the Company's Common Stock. 17 Page 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BIOGEN, INC. Dated: August 4, 1999 /s/ Timothy M. Kish ----------------------------- Timothy M. Kish Vice President-Finance and Chief Financial Officer EXHIBITS Index to Exhibit. No. 27 Financial Data Schedule (for EDGAR filing purposes only). EX-10.1 2 1985 NON-QUALIFIED STOCK OPTION PLAN 1 EXHIBIT 10.1 BIOGEN, INC. 1985 NON-QUALIFIED STOCK OPTION PLAN (AS AMENDED THROUGH JUNE 28, 1999 AND RESTATED) I. PURPOSE OF THE PLAN The Plan is intended to encourage ownership of shares of Common Stock of the Company by certain employees and Directors of the Company and its Affiliates and to provide an additional incentive to those employees and Directors to promote the success of the Company and its Affiliates. II. DEFINITIONS 1. "Company" means Biogen, Inc., a Massachusetts corporation. 2. "Affiliate" means a corporation in respect of which the Company owns directly or indirectly fifty percent (50%) or more of the voting shares thereof or which is otherwise controlled by the Company. 3. "Committee" means the Stock and Option Plan Administration Committee of the Board of Directors of the Company. 4. "Option" means a stock option granted under this Plan. III. SHARES SUBJECT TO THE PLAN The aggregate number of shares as to which Options may be granted from time to time shall be 40,908,000 of the shares of Common Stock of the Company (par value $.01); provided, however that such aggregate number shall be reduced by the number of shares which has been sold under, or may be sold pursuant to options granted from time to time under, the Company's 1982 Incentive Stock Option Plan (the "ISO Plan"), to the same extent as if such sales had been made or options granted pursuant to this Plan. If any option granted under this Plan or the ISO Plan ceases to be "outstanding", in whole or in part, other than by reason of the exercise of such option, the shares which were subject to such option shall be available for the granting of other Options. Any option shall be treated as "outstanding" until such option is exercised in full, terminates under the provisions of this Plan or the ISO Plan, as the case may be, or expires by reason of lapse of time. Page 1 of 9 2 The aggregate number of shares as to which Options may be granted shall be subject to change only by means of an amendment adopted in accordance with Article XI below, subject to the provisions of Article VIII. IV. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee. The membership of the Committee shall be determined, and shall be subject to change without cause and without notice from time to time, by the Board of Directors of the Company. The Committee is authorized to interpret the provisions of the Plan or of any Option and to make all rules and determinations necessary or advisable for the administration of the Plan. Subject to the provisions of the Plan, Options may be granted upon such terms and conditions as the Committee may prescribe. This Plan is intended to comply in all respects with Rule 16b-3 or its successors promulgated under the Securities Exchange Act of 1934 ("1934 Act") with respect to participants who are subject to Section 16 of the 1934 Act, and any provision in this Plan with respect to such persons contrary to Rule 16b-3 shall be deemed null and void to the extent permissible by law and deemed appropriate by the Committee. V. ELIGIBILITY FOR PARTICIPATION The Committee shall determine which employees and Directors shall be eligible to participate in the Plan. Without limiting the generality of the foregoing, Options may be awarded for reasons of performance, merit, promotion, bonus or upon new employees joining the Company or any Affiliate. The Committee may grant to one or more such employees or Directors one or more Options, and shall designate the number of shares to be optioned under each Option so granted; provided, however, that no Options shall be granted after December 31, 2002. In no event shall any employee be granted in any calendar year options to purchase or receive more than 2,400,000 shares of the Company's Common Stock pursuant to this Plan. VI. TERMS AND CONDITIONS OF OPTIONS No Option issued pursuant to this Plan shall be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. Each Option shall be set forth in writing in an Option agreement, duly executed on behalf of the Company and by the person to whom such Option is granted. No Option shall be deemed to have been granted and no purported grant of any Option shall be effective until such Option shall have been approved by the Committee. The Committee may provide that Options be granted subject to such conditions as the Committee Page 2 of 9 3 may deem appropriate, including without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto. Each such Option agreement shall be subject to at least the following terms and conditions: A. Option Price: Except as otherwise determined by the Committee, the Option price per share for Options granted under the Plan shall be equal to the fair market value per share of Common Stock on the date of grant of the Option; provided, however, that in no event shall the Option price be less than the par value per share of Common Stock. Fair market value shall be the average of the "high" and "low" sale prices as reported in the National Association of Securities Dealers Automated Quotation System ("NASDAQ") for the date of grant of the Option or, if none, for the most recent trading date thirty (30) days or less prior to the date of grant of the Option on which the Common Stock was traded. B. Term of Option: Each Option shall terminate not more than ten (10) years from the date of the grant thereof, or at such earlier or later time as the Committee shall expressly resolve. C. Date of Exercise: The Committee may prescribe the date or dates on which the Option becomes exercisable, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the attainment of stated goals. D. Cancellation and Repurchase Rights: The Committee may stipulate that any Option which becomes exercisable shall be subject to cancellation or that shares purchased upon the exercise of such Option shall be subject to repurchase rights in favor of the Company. In such event the Committee shall determine the date or dates, or event or events, upon which such cancellation or repurchase rights shall become effective or shall lapse, as the case may be. E. Medium of Payment: The Option price shall be payable upon the exercise of the Option. It shall be payable in cash, or, if permitted by the Committee, in shares or other consideration. F. Termination of Employment: An Option holder who ceases (for any reason other than death or total and permanent disability or termination of employment for cause) to be an employee or Director of the Company or of an Affiliate may exercise any Option granted to the extent that the right to purchase shares thereunder has accrued on the date of such termination. Such Option shall be exercisable only within three (3) months after such date of termination, or, if earlier, within the originally prescribed term of the Option, unless the Committee shall authorize a different period. Employment shall not be deemed terminated by reason of a transfer to another employer which is the Company or an Affiliate. An Option holder whose employment with the Company or an Affiliate is terminated by his/her employer for cause or a Director who is removed from the Board of Directors for cause shall forthwith upon such termination cease to have any right to exercise any Option. For Page 3 of 9 4 purposes of this paragraph, "cause" shall be deemed to include dishonesty with respect to the employer, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, and conduct substantially prejudicial to the business of the Company or any Affiliate. The determination of the Committee as to the existence of cause shall be conclusive. An Option holder to whom an Option has been granted under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability, or who is on a permitted leave of absence for any purpose, shall not, during the period of any such absence, be deemed by virtue of such absence alone, to have terminated his employment with the Company or with an Affiliate except as the Committee may otherwise expressly provide. G. Total and Permanent Disability: If an Option holder ceases to be an employee or Director of the Company or of an Affiliate by reason of total and permanent disability, as determined by the Committee, any Option held by him or her on the date of disability shall be exercisable as to all or any part of the shares subject to the Option, all of which shares shall be fully vested as of the date of such disability. A disabled Option holder may exercise such Option only within a period of one (1) year after the date as of which the Committee determines that he or she became disabled or within such different period as may be determined by the Committee, or, if earlier, within the originally prescribed term of the Option. H. Death: If an Option holder dies while the Option holder is an employee or Director of the Company or of an Affiliate, any Option held by him or her at the date of death shall be exercisable as to all or any part of the shares subject to the Option, all of which shares shall be fully vested as of the date of the Option holder's death. A deceased Option holder's legal representatives or one who acquires the Option by will or by the laws of descent and distribution may exercise such Option only within a period of one (1) year after the date of death or within such different period as may be determined by the Committee, or, if earlier, within the originally prescribed term of the Option. I. Exercise of Option and Issue of Shares: Options shall be exercised by giving written notice to the Company, addressed to the Company at the address specified in the Option agreement, with which the Option holder shall tender the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of shares with respect to which the Option is being exercised, and shall contain any warranty required by Article VII of the Plan. The issuance of the Option shares may be delayed by the Company if any law or regulation requires the Company to take any action with respect to the Option shares prior to the issuance thereof. Without limiting the generality of the foregoing, nothing contained herein shall be deemed to require the Company to issue any Option shares if prohibited by law or applicable regulation. The shares shall, upon issuance, be evidenced by an appropriate certificate or certificates in respect of paid-up, non-assessable shares. Page 4 of 9 5 J. Assignability and Transferability of Option: By its terms, an Option granted to an Option holder shall not be transferable by such Option holder other than (i) by will or by the laws of descent and distribution or (ii) pursuant to a qualified domestic relations order, as defined by the Code or Title 1 of the Employee Retirement Income Security Act or the rules thereunder, or (iii) as otherwise determined by the Committee and set forth in the applicable Option agreement. The designation of a beneficiary of an Option by an Option holder shall not be deemed a transfer prohibited by this paragraph. Except as provided in the preceding sentence, an Option shall be exercisable, during an Option holder's lifetime, only by the Option holder (or by his or her legal representative) and shall not be assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation, or other disposition of any Option or of any rights granted thereunder contrary to the provisions of this Paragraph, or the levy of any attachment or similar process upon an Option or other such rights, shall be null and void. K. Other Provisions: The Option agreements authorized under the Plan shall be subject to such other terms and conditions, including, without limitation, restrictions upon the exercise of the Option, as the Committee shall deem advisable. L. Non-Employee, Non-Scientific Board Directors' Options: Each Director who is not (i) an employee of the Company or any of its Affiliates, or (ii) a member of the Scientific Board of the Company, or (iii) elected pursuant to an agreement or arrangement between shareholders of the Company or between the Company and its shareholders, upon first being appointed or elected to the Board of Directors, and upon every third anniversary thereof, shall be granted an Option to purchase 30,000 shares of Common Stock. Each such Option shall have an exercise price equal to the fair market value per share of Common Stock on the date of grant, as determined under Section VI.A. above, and a term of ten (10) years, and shall be exercisable as to one-third (1/3) of the shares subject thereto upon completion of one full year of service on the Board of Directors after the date of grant, and as to an additional one-third (1/3) upon completion of each full year of service thereafter. For any such Director serving in office on December 6, 1991, the first such Option shall be granted on the date on which the most recent Option previously granted to him, the vesting of which is contingent upon continued service on the Board of Directors, becomes fully vested, and subsequent Options under this Paragraph shall be granted on every third anniversary of such date. Notwithstanding the provision of Section XI concerning amendment of the Plan, the provisions of this Section VI.L. shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act, or the rules thereunder. The grants of options under this Paragraph L are intended to be non-discretionary formula awards within the meaning of Rule 16b-3(c)(2)(ii). Paragraph F of Article VI, which cancels the Options of any Participant determined by the Committee to have been terminated for cause, shall not apply to the awards under this Paragraph L. M. Tax Withholding: In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other Page 5 of 9 6 amounts are required by applicable law or governmental regulation to be withheld from the Option holder's salary in connection with the exercise of an Option, the Option holder shall advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Option holder, the amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company's Common Stock, is authorized by the Committee (and permitted by law), provided, however, that with respect to persons subject to Section 16 of the 1934 Act, any such withholding arrangement shall be in compliance with any applicable provisions of Rule 16b-3 promulgated under Section 16 of the 1934 Act. For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner provided in Section VI.A. above, as of the most recent practicable date prior to the date of exercise. If the fair market value of the shares withheld is less than the amount of payroll withholdings required, the Option holder may be required to advance the difference in cash to the Company or the Affiliate employer. N. Reload Options: The Committee may authorize reload options ("Reload Options") to purchase for cash or shares a number of shares of Common Stock. The number of Reload Options shall equal (i) the number of shares of Common Stock used to exercise the underlying Options and (ii) to the extent authorized by the Committee, the number of shares of Common Stock used to satisfy any tax withholding requirement incident to the exercise of the underlying Options. The grant of a Reload Option will become effective upon the exercise of underlying Options through the use of shares of Common Stock held by the optionee for at least 6 months. Reload Options must be evidenced in Option agreements or amendments to those agreements. The Option price per share of Common Stock deliverable upon the exercise of a Reload Option shall be the fair market value of a share of Common Stock on the date the grant of the Reload Option becomes effective. The term of each Reload Option shall be equal to the remaining option term of the underlying Option. No additional Reload Options shall be granted to Option holders when Options and/or Reload Options are exercised pursuant to the terms of this Plan following termination of the Option holder's employment or on account of death or total and permanent disability. All other provisions of this Plan with respect to Options shall apply equally to Reload Options. O. Rights as a Shareholder: No Option holder shall have rights as a shareholder with respect to any shares covered by such Option except as to such shares as have been registered in the Company's share register in the name of such person upon the due exercise of the Option. VII. PURCHASE FOR INVESTMENT If and to the extent that the issuance of shares pursuant to the exercise of Options is deemed by the Company to be subject to the United States Securities Act of 1933, as now in force or hereafter amended ("1933 Act"), or to the securities law of any other jurisdiction, the Company shall be under no obligation to issue shares covered by such exercise unless the person or persons who exercises or who exercise such Option shall make such warranty or take such action as may be required by any applicable securities law of any applicable jurisdiction and shall, in the case of the applicability of the 1933 Act, in the absence of an effective registration Page 6 of 9 7 under such Act with respect to such shares, warrant to the Company, at the time of such exercise, that such person is or that they are acquiring the shares to be issued to such person or to them, pursuant to such exercise of the Option, for investment and not with a view to, or for sale in connection with, the distribution of any such shares; and in such events the person or persons acquiring such shares shall be bound by the provisions of a legend endorsed upon any share certificates expressing the requirements of any applicable non-United States securities law, or, in cases deemed governed by the 1933 Act, substantially the following legend, which shall be endorsed upon the certificate or certificates evidencing the shares issued by the Company pursuant to such exercise: "The shares have not been registered under the securities laws of any country, including the United States Securities Act of 1933, as amended, and the Company may refuse to permit the sale or transfer of all or any of the shares until (1) the Company has received an opinion of Counsel satisfactory to the Company that any such transfer is exempt from registration under all applicable securities laws or (2) in the case of sales or transfers to which the United States Securities Act of 1933 is applicable, unless a registration statement with respect to such shares shall be effective under such Act, as amended." Without limiting the generality of the foregoing, the Company may delay issuance of the shares until completion of any action or obtaining of any consent which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws). VIII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event that the outstanding Common Stock, $.01 par value, of the Company is changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, change in par value, stock split-up, combination of shares or dividend payable in capital stock, or the like, appropriate adjustment shall be made in the number and kind of shares for the purchase of which Options may be granted under the Plan, including Options to be granted pursuant to Article VI L hereof, and, in addition, appropriate adjustment shall be made in the number and kind of shares and in the Option price per share subject to outstanding Options so that each Option holder shall be in a position equivalent to the position the Option holder would have been in had the Option holder exercised the Options immediately prior to the applicable event. IX. DISSOLUTION OR LIQUIDATION OF THE COMPANY Upon the dissolution or liquidation of the Company other than in connection with transactions to which the preceding Article VIII is applicable, all Options granted hereunder shall terminate and become null and void; provided, however, that if the rights hereunder of an Option holder or one who acquired an Option by will or by the laws of descent and distribution have not otherwise terminated and expired, the Option holder or such person shall have the right Page 7 of 9 8 immediately prior to such dissolution or liquidation to exercise any Option granted hereunder to the extent that the right to purchase shares thereunder has accrued as of the date of exercise immediately prior to such dissolution or liquidation. Page 8 of 9 9 X. TERMINATION OF THE PLAN Unless the Committee shall decide to reduce or, subject to shareholder approval, if required under Article XI, to extend the duration of the Plan, the Plan shall terminate on December 31, 2002. Termination of the Plan shall not affect any Options granted or any Option agreements executed prior to the effective date of termination. XI. AMENDMENT OF THE PLAN The Plan may be amended by the Committee or the Board of Directors of the Company provided, however, that if the scope of any amendment is such as to require shareholder approval in order to comply with Rule 16b-3 under the 1934 Act such amendment shall require approval by the shareholders. Any amendment shall not affect any Options theretofore granted and any Option agreements theretofore executed by the Company and any Option holder unless such amendment shall expressly so provide. No amendment shall adversely affect any Option holder with respect to an outstanding Option without the written consent of such Option holder. With the consent of the Option holder affected, the Committee may amend any outstanding Option agreement in a manner not inconsistent with the Plan, including, without limitation, to accelerate the date of exercise of any installment of any Option. XII. EMPLOYMENT RELATIONSHIP Nothing herein contained shall be deemed to prevent the Company or an Affiliate from terminating the employment of any employee, nor to prevent any employee from terminating his/her employment with the Company or an Affiliate. XIII.EFFECTIVE DATE This Plan first became effective on January 2, 1985. Page 9 of 9 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 US DOLLAR 3-MOS DEC-31-1999 APR-01-1999 JUN-30-1999 1 52,620 557,616 122,061 1,642 39,178 816,577 295,030 98,556 1,055,427 119,047 54,516 0 0 1,507 865,344 1,055,427 145,852 188,929 22,896 114,901 9,270 0 1,170 64,758 21,370 43,388 0 0 0 43,388 0.29 0.28
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