<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
<TABLE>
<CAPTION>
<S> <C>
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- ------------------------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Millennium Pharmaceuticals, Inc.
...............................................................
(Name of Registrant as Specified in Its Charter)
...............................................................
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
MILLENNIUM PHARMACEUTICALS, INC.
640 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 1999
The 1999 Annual Meeting of Stockholders of Millennium Pharmaceuticals, Inc.
will be held at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts, on Wednesday, June 2, 1999 at 10:00 a.m., local time. At the
meeting, stockholders will act on the following matters:
1. Election of three Class III directors, each for a term of three years;
2. Approval of an amendment to the Company's 1996 Equity Incentive Plan
increasing the number of shares of Common Stock reserved for issuance
from 4,100,000 to 5,600,000;
3. Approval of an amendment to the Company's 1997 Equity Incentive Plan
increasing the number of shares of Common Stock reserved for issuance
from 2,000,000 to 4,000,000;
4. Approval of an amendment to the Company's 1996 Employee Stock Purchase
Plan increasing the number of shares of Common Stock reserved for
issuance from 350,000 to 650,000; and
5. Any other business as may properly come before the meeting or any
adjournment thereof.
Stockholders of record at the close of business on April 14, 1999 are
entitled to notice of and to vote at the meeting or any postponements or
adjournments. The stock transfer books of the Company will remain open.
By Order of the Board of Directors,
MARK J. LEVIN
Chairman and Chief Executive Officer
Cambridge, Massachusetts
April 23, 1999
<PAGE> 3
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PROXY STATEMENT -- 1999 ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
This Proxy Statement contains information about the 1999 Annual Meeting of
Stockholders of Millennium Pharmaceuticals, Inc., including any postponements or
adjournments of the meeting. The meeting is scheduled to be held at the offices
of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, on Wednesday, June
2, 1999 at 10:00 a.m., local time.
This Proxy Statement is furnished in connection with the solicitation of
proxies by Millennium's Board of Directors.
The Company's Annual Report for 1998 was first mailed to stockholders,
along with these proxy materials, on or about April 23, 1999.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT
FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST OF INVESTOR RELATIONS, MILLENNIUM PHARMACEUTICALS, INC., 238 MAIN
STREET, CAMBRIDGE, MASSACHUSETTS 02142, OR BY E-MAILING INVESTOR RELATIONS AT
"[email protected]".
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VOTING PROCEDURES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting, please
take the time to vote by completing and mailing the enclosed proxy card as soon
as possible. We have included a postage-prepaid envelope for your convenience.
================================================================================
WHO CAN VOTE?
In order to vote, you must have been a stockholder of record at the close
of business on April 14, 1999 (the "record date"). Stockholders whose shares are
owned of record by brokers and other nominees should follow the voting
instructions provided by their broker or other nominee.
As of the record date, there were 35,646,583 shares of Common Stock issued,
outstanding and entitled to vote. Each such share of Common Stock is entitled to
one vote on each matter to be voted upon.
HOW DO I VOTE?
Stockholders can vote by submitting proxies or by voting in person at the
meeting.
VOTING BY PROXY. Proxies will be voted in accordance with each
stockholder's instructions. Any proxy may be revoked by a stockholder at any
time before its exercise by delivery of a written revocation or a subsequently
dated proxy to the Secretary of the Company or by voting in person at the
meeting.
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<PAGE> 4
VOTING IN PERSON. If you attend the meeting, you may deliver your completed
proxy card in person or you may vote by completing a ballot which will be
available at the meeting.
WHAT CONSTITUTES A QUORUM?
In order for business to be conducted at the meeting, a quorum must be
present. A quorum consists of the holders of a majority of the shares of Common
Stock issued and outstanding as of the record date.
Shares of Common Stock present in person or represented by proxy (including
shares which abstain or do not vote with respect to one or more of the matters
to be voted upon) will be counted for purposes of determining whether a quorum
exists.
If a quorum is not present, it is expected that the meeting will be
adjourned until a quorum is obtained.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
The affirmative vote of the holders of a majority of the shares of Common
Stock voting on the matter is required to approve the matters to be voted on at
the meeting.
HOW ARE VOTES COUNTED?
Shares which (i) abstain from voting as to a particular matter or (ii) are
held in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote as to a particular matter
("broker non-votes") will not be voted in favor of such matter, and will also
not be counted as shares voting on such matter. Accordingly, abstentions and
broker non-votes will have no effect on the outcome of voting on the matters to
be voted on at the meeting.
ARE THERE OTHER MATTERS TO BE VOTED ON AT THE MEETING?
The Board of Directors does not know of any other matters which may come
before the meeting. If any other matters are properly presented to the meeting,
it is the intention of the persons named in the accompanying proxy to vote, or
otherwise act, in accordance with their judgment.
- --------------------------------------------------------------------------------
ITEM ONE -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FIRST AGENDA ITEM TO BE VOTED ON IS THE ELECTION OF THREE CLASS III
DIRECTORS. THE BOARD HAS NOMINATED THREE PEOPLE, EACH OF WHOM IS CURRENTLY
SERVING AS A CLASS III DIRECTOR OF THE COMPANY, AND RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" SUCH NOMINEES.
================================================================================
Under the Company's Restated Certificate of Incorporation and By-laws, the
Board of Directors is divided into three classes, with one class being elected
each year and members of each class holding office for three-year terms. The
Board of Directors currently consists of seven directors,
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<PAGE> 5
one of whom is a Class I Director (with a term expiring at the 2000 Annual
Meeting), three of whom are Class II Directors (with terms expiring at the 2001
Annual Meeting) and three of whom are Class III Directors (with terms expiring
at the 1999 Annual Meeting).
A vacancy exists for a Class I Director. In accordance with the Company's
Restated Certificate of Incorporation and By-laws, this vacancy may be filled
prior to the Company's Annual Meeting of Stockholders in 2000 only by a majority
vote of the remaining directors.
The persons named in the enclosed proxy will vote to elect as directors
Mark J. Levin, Joshua Boger, Ph.D. and A. Grant Heidrich, III, the three
nominees listed below, unless authority to vote for the election of any or all
of the nominees is withheld by marking the proxy to that effect. If a
stockholder returns a proxy without contrary instructions, the persons named as
proxies will vote to elect as directors Mr. Levin, Dr. Boger and Mr. Heidrich.
Messrs. Levin and Heidrich and Dr. Boger will be elected to hold office until
the 2002 Annual Meeting of Stockholders and until their successors are duly
elected and qualified. All of the nominees have indicated their willingness to
serve, if elected, but if any should be unable or unwilling to serve, proxies
may be voted for a substitute nominee designated by the Board of Directors.
There are no family relationships between or among any officers or
directors of the Company.
Set forth below are the name and age of each member of the Board of
Directors (including the nominees for election as Class III Directors), and the
positions and offices held by him, his principal occupation and business
experience during the past five years, the names of other publicly held
companies of which he serves as a director and the year of the commencement of
his term as a director of the Company. Information with respect to the number of
shares of Common Stock beneficially owned by each director, directly or
indirectly, as of January 31, 1999, appears under the heading "Stock Ownership
of Certain Beneficial Owners and Management."
- --------------------------------------------------------------------------------
NOMINEES FOR CLASS III DIRECTOR -- TERMS TO EXPIRE IN 2002
- --------------------------------------------------------------------------------
MARK J. LEVIN, age 48, has served as a director since 1993, Chairman of the
Board of Directors since March 1996 and Chief Executive Officer of the Company
since November 1994. From 1987 to 1994, Mr. Levin was a partner at Mayfield Fund
("Mayfield"), a venture capital firm, and co-director of its Life Science Group.
While employed with Mayfield, Mr. Levin was the founding Chief Executive Officer
of several biotechnology and biomedical companies, including Cell Genesys Inc.,
CytoTherapeutics Inc., Tularik Inc. and Focal, Inc. Mr. Levin holds an M.S. in
Chemical and Biomedical Engineering from Washington University. Mr. Levin also
serves on the Board of Directors of CytoTherapeutics Inc. and Focal, Inc.
JOSHUA BOGER, PH.D., age 40, has served as a director of the Company since
1995. Dr. Boger has been the President and Chief Executive Officer of Vertex
Pharmaceuticals Incorporated ("Vertex"), a biopharmaceutical company, from 1992
to the present, and served as President and Chief Scientific Officer of Vertex
from 1989 to 1992. Dr. Boger received M.A. and Ph.D. degrees in Chemistry from
Harvard University. He is also Chairman of the Board of Directors of Vertex.
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<PAGE> 6
A. GRANT HEIDRICH, III, age 46, has served as a director since 1993. Mr.
Heidrich has served as a general partner of Mayfield since 1983. Mr. Heidrich
received his M.B.A. from Columbia University Graduate School of Business. Mr.
Heidrich also serves on the Board of Directors of Vivus, Inc. and several
private companies.
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CLASS I DIRECTOR -- TERM TO EXPIRE IN 2000
- --------------------------------------------------------------------------------
WILLIAM W. HELMAN, age 40, has served as a director since 1993. Mr. Helman
has served as a general partner of Greylock, a venture capital firm, since 1987.
Mr. Helman received his M.B.A. from Harvard Business School. Mr. Helman also
serves on the Board of Directors of Vertex and several private companies.
- --------------------------------------------------------------------------------
CLASS II DIRECTOR -- TERMS TO EXPIRE IN 2001
- --------------------------------------------------------------------------------
EUGENE CORDES, PH.D., age 63, has served as a director since 1995. Dr.
Cordes has been a Professor of Pharmacy and Chemistry, University of Michigan in
Ann Arbor since September 1996. From 1988 to October 1995, Dr. Cordes served as
the Vice President of Sterling Winthrop, Inc., a pharmaceutical company, and as
President of the Pharmaceuticals Research Division.
RAJU S. KUCHERLAPATI, PH.D., age 56, has served as a director since 1993.
Dr. Kucherlapati is a founder of the Company. Since 1989, Dr. Kucherlapati has
served as the Lola and Saul Kramer Professor and Chairman of the Department of
Molecular Genetics at the Albert Einstein College of Medicine. He received his
M.S. in Biology from Andhra University (India) and his Ph.D. in Genetics from
the University of Illinois, Urbana. Dr. Kucherlapati also was a founder of, and
serves on the Board of Directors of, Cell Genesys Inc., a biotechnology company.
ERIC S. LANDER, PH.D., age 42, has served as a director since 1993. Dr.
Lander is a founder of the Company. From 1993 to the present, Dr. Lander has
served as Director of the Whitehead/MIT Center for Genome Research and as a
member of the Whitehead Institute for Biomedical Research. From 1989 to the
present, Dr. Lander has also held the positions of Associate Professor and
Professor in the Department of Biology at the Massachusetts Institute of
Technology. Dr. Lander received his Ph.D. in Mathematics from Oxford University,
which he attended as a Rhodes Scholar.
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STOCK OWNERSHIP INFORMATION
- --------------------------------------------------------------------------------
OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of January 31, 1999
or such later date as is noted, with respect to the beneficial ownership of (i)
the Company's Common Stock by each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock; and (ii)
the Company's Common Stock, the capital stock of Millennium BioTherapeutics,
Inc., a privately-held, majority-owned subsidiary of the Company ("MBio"), and
the capital stock
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<PAGE> 7
of Millennium Predictive Medicine, Inc., a privately-held, majority-owned
subsidiary of the Company ("MPMx") by (A) each director and nominee for
director; (B) each executive officer named in the Summary Compensation Table
under the heading "Executive Compensation" below and (C) all directors and
executive officers of the Company as a group.
On January 21, 1999, Millennium Information, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Company ("MInfo") was merged into MPMx,
with MPMx being the surviving corporation. In connection with such merger, each
outstanding share of capital stock of MInfo was converted into one share of
capital stock of MPMx. The information set forth in the following table is
presented on a post-merger basis.
Under the rules of the Securities and Exchange Commission (the
"Commission"), beneficial ownership includes any shares as to which the
individual has sole or shared voting or investment power and also any shares
which the individual has the right to acquire within 60 days after January 31,
1999 through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole investment and voting power (or shares such
power with his spouse) with respect to the shares set forth in the following
table. The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of those shares.
The directors and officers of the Company disclaim beneficial ownership of
the shares of capital stock of MBio and MPMx which are owned by the Company.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE SHARES OF SHARES OF
MILLENNIUM OF MBIO MPMX
COMMON MILLENNIUM CAPITAL CAPITAL
STOCK COMMON STOCK STOCK
BENEFICIALLY STOCK BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED OUTSTANDING OWNED(1) OWNED(2)
---------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Bayer AG(3)............................ 4,957,660 14.07% N/A N/A
D51368 Leverkusen
Federal Republic of Germany
T. Rowe Price Associates, Inc(4)....... 1,794,537 5.09% N/A N/A
100 E. Pratt Street
Baltimore, MD 21202
Mark J. Levin(5)....................... 1,024,301 2.9% 25,000 25,000
Joshua Boger, Ph.D.(6)................. 44,792 * 2,000 2,000
Eugene Cordes, Ph.D.(7)................ 44,792 * 2,000 4,000
A. Grant Heidrich, III(8).............. 100,611 * 2,000 2,000
William W. Helman(9)................... 46,064 * 2,000 2,000
Raju S. Kucherlapati, Ph.D.(10)........ 340,046 1.0% 2,000 19,500
Eric S. Lander, Ph.D.(11).............. 16,667 * 2,000 22,000
Steven H. Holtzman(12)................. 309,673 * 25,000 40,500
Frank D. Lee, Ph.D.(13)................ 381,253 1.1% 22,250 11,000
Michael R. Pavia, Ph.D.(14)............ 60,047 * 1,000 13,500
Kevin P. Starr(15)..................... 3,750 * 90,000 3,000
All directors and executive officers as
a group (11 persons)(16)............. 2,371,996 6.73% 175,250 144,500
</TABLE>
- ---------------
* Represents holdings of less than one percent.
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<PAGE> 8
(1) Shares of capital stock of MBio beneficially owned by the named officer or
director and by all officers and directors as a group represent shares
issuable to such officer or director within 60 days of January 31, 1999
upon exercise of outstanding stock options. As of January 31, 1999, no
director or executive officer of the Company beneficially owned more than
1% of the MBio capital stock outstanding; all directors and executive
officers as a group beneficially owned 1.5% of the total MBio capital stock
outstanding as of such date.
(2) Shares of capital stock of MPMx beneficially owned by the named officer or
director and by all officers and directors as a group represent shares
issuable to such officer or director within 60 days of January 31, 1999
upon exercise of outstanding stock options. As of January 31, 1999, no
director or executive officer of the Company beneficially owned more than
1% of the MPMx capital stock outstanding; all directors and executive
officers as a group beneficially owned 1.4% of the total MPMx capital stock
outstanding as of such date.
(3) Represents shares held by Bayer AG as reported in a Schedule 13D filed with
the Securities and Exchange Commission on November 18, 1998.
(4) Represents shares held by T. Rowe Price Associates, Inc. (i) in its
capacity as investment advisor to its clients and (ii) through any one of
the T. Rowe Price Funds, as reported in a Schedule 13G filed with the
Securities and Exchange Commission on February 12, 1999. According to such
report, T. Rowe Price Associates, Inc. holds sole voting power with respect
to 410,399 shares held and sole dispositive power with respect to all
shares held.
(5) Includes 79,979 shares of Common Stock of the Company issuable to Mr. Levin
within 60 days of January 31, 1999 upon exercise of stock options.
(6) The shares of capital stock shown for each of MBio and MPMx represent
shares of capital stock of the applicable company issuable to Dr. Boger
within 60 days of January 31, 1999 upon exercise of stock options granted
to him by the applicable company.
(7) Represents shares of Common Stock of the Company, and shares of capital
stock of MBio and MPMx, respectively.
(8) Shares of Millennium Common Stock beneficially owned includes 68,912 shares
beneficially owned by the A. Grant Heidrich and Jeanette Yvonne Heidrich
Trust and 14,167 shares issuable to Mr. Heidrich within 60 days of January
31, 1999 upon exercise of stock options granted to him by the Company.
Shares of MPMx capital stock beneficially owned by Mr. Heidrich represent
shares issuable to Mr. Heidrich within 60 days of January 31, 1999 upon
exercise of stock options granted to him by MPMx.
(9) Shares of Millennium Common Stock beneficially owned includes 14,167 shares
issuable to Mr. Helman within 60 days of January 31, 1999 upon exercise of
stock options granted to him by the Company. Shares of MBio and MPMx
capital stock beneficially owned by Mr. Helman represent shares issuable to
Mr. Helman within 60 days of January 31, 1999 upon exercise of stock
options granted to him by MBio or MPMx, as the case may be.
(10) Shares of Millennium Common Stock beneficially owned includes 115,834
shares issuable to Dr. Kucherlapati within 60 days of January 31, 1999 upon
exercise of stock options granted to him by the Company. Shares of MBio and
MPMx capital stock beneficially owned by Dr. Kucherlapati represent shares
issuable to Dr. Kucherlapati within 60 days of January 31, 1999 upon
exercise of stock options granted to him by MBio or MPMx, as the case may
be.
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<PAGE> 9
(11) Shares of Millennium Common Stock beneficially owned represents 14,167
shares issuable to Dr. Lander within 60 days of January 31, 1999 upon
exercise of stock options granted to him by the Company and 2,500 shares
beneficially owned by the Lander Family Charitable Trust for which Dr.
Lander disclaims beneficial ownership. Shares of MBio and MPMx capital
stock beneficially owned by Dr. Lander represent shares issuable to Dr.
Lander within 60 days of January 31, 1999 upon exercise of stock options
granted to him by MBio or MPMx, as the case may be.
(12) Shares of Millennium Common Stock beneficially owned includes 62,923 shares
of Common Stock of the Company issuable to Mr. Holtzman within 60 days of
January 31, 1999 upon exercise of stock options.
(13) Shares of Millennium Common Stock beneficially owned includes 44,653 shares
of Common Stock of the Company issuable to Dr. Lee within 60 days of
January 31, 1999 upon exercise of stock options.
(14) Shares of Millennium Common Stock beneficially owned includes 60,047 shares
of Common Stock of the Company issuable to Dr. Pavia within 60 days of
January 31, 1999 upon exercise of stock options.
(15) Shares of Millennium Common Stock beneficially owned includes 3,750 shares
of Common Stock of the Company issuable to Mr. Starr within 60 days of
January 31, 1999 upon exercise of stock options.
(16) Shares of Common Stock of Millennium owned by all directors and executive
officers as a group includes 499,109 shares issuable upon exercise of stock
options granted by the Company to all directors and executive officers as a
group which are exercisable within 60 days of January 31, 1999. Shares of
capital stock of MBio and MPMx owned by all directors and executive
officers as a group includes 8,000 shares and 47,500 shares, respectively,
issuable upon exercise of stock options granted by MBio or MPMx, as the
case may be, to all directors and executive officers as a group which are
exercisable within 60 days of January 31, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Such persons are required by the SEC regulations to furnish the Company with
copies of all Section 16(a) forms filed by such person with respect to the
Company.
Based solely on its review of copies of reports filed by reporting persons
pursuant to Section 16(a) of the Exchange Act or written representations from
certain reporting persons that no Form 5 filing was required for such persons,
the Company believes that during fiscal 1998 all filings required to be made by
reporting persons were timely made in accordance with the requirements of the
Exchange Act, other than a filing by Mr. Holtzman disclosing the grant of a
stock option, a filing by Dr. Lee disclosing the grant of a stock option and a
filing by Dr. Pavia disclosing the grant of a stock option.
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<PAGE> 10
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CORPORATE GOVERNANCE
- --------------------------------------------------------------------------------
BOARD COMMITTEES
AUDIT COMMITTEE. The Company has a standing Audit Committee of the Board
of Directors, which provides the opportunity for direct contact between the
Company's independent auditors and the Board. The Audit Committee has
responsibility for recommending the appointment of the Company's independent
auditors, reviewing the scope and results of audits and reviewing the Company's
internal accounting control policies and procedures. The Audit Committee held
two meetings in 1998. The members of the Audit Committee are Mr. Helman and Dr.
Lander.
COMPENSATION COMMITTEE. The Company also has a standing Compensation
Committee of the Board of Directors, which makes recommendations concerning
salaries and incentive compensation for employees of and consultants to the
Company, establishes and approves salaries and incentive compensation for
certain senior officers and employees and administers and grants stock options
pursuant to the Company's stock option plans. The Compensation Committee held
four meetings during 1998. The members of the Compensation Committee are Mr.
Heidrich, and Drs. Kucherlapati and Boger. See "Report of the Compensation
Committee" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. No member of
the Compensation Committee was at any time during 1998, or formerly, an officer
or employee of the Company or any subsidiary of the Company. No executive
officer of the Company has served as a director or member of the Compensation
Committee (or other committee serving an equivalent function) of any other
entity, one of whose executive officers served as a director of or member of the
Compensation Committee of the Company.
Dr. Kucherlapati serves as a consultant to the Company under the terms of
an agreement with the Company, and pursuant to such agreement is entitled to
receive compensation equal to $23,750 per quarter, based upon two days per month
of service. Pursuant to the agreement, Dr. Kucherlapati received $95,000 from
the Company in 1998.
Mr. Levin, the Chief Executive Officer and Chairman of the Board of
Directors of the Company, serves as a member of the Compensation Committee of
MBio and MPMx.
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Board of
Directors.
BOARD MEETINGS AND ATTENDANCE
The Board of Directors held eleven meetings during 1998. Each director
attended at least 75% of the total number of meetings of the Board of Directors
and all committees of the Board on which he served.
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DIRECTOR COMPENSATION
- --------------------------------------------------------------------------------
The Company's non-employee directors (i) receive an annual retainer of
$10,000 for serving on the Board of Directors, (ii) receive $1,500 plus
reasonable travel and out-of-pocket expenses for attendance at meetings of the
Board of Directors and (iii) are entitled to participate in the Company's 1996
Director Option Plan (the "Director Plan"), as further described below.
Under the terms of the Director Plan (i) options to purchase 20,000 shares
of the Company's Common Stock were granted to each non-employee director serving
as a director as of the closing of the Company's initial public offering on May
10, 1996 (the "Existing Director Options"), except directors who received stock
option grants in the 12 months preceding the closing of the offering (the
"Pre-Offering Director Options") and (ii) options to purchase 30,000 shares of
the Company's Common Stock (the "New Director Options") are granted to each
person who first becomes an eligible non-employee director after May 10, 1996,
the closing date of the Company's initial public offering, effective as of the
date of election to the Board of Directors. The Existing Director Options and
New Director Options vest on a monthly basis in 48 equal installments,
commencing on the 30th day after the date of grant. Each Existing Director
Option and New Director Option terminates on the earlier of (i) ten years after
the date of grant or (ii) the date 60 days after the optionee ceases to serve as
a director (or 180 days, if service ends due to death or disability). Each
eligible director will be granted an additional option to purchase 20,000 shares
of the Company's Common Stock as of the date that such director's Existing
Director Options, Pre-Offering Director Options, or New Director Options have
fully vested, and on each four-year anniversary thereof. The exercisability of
these options will be accelerated upon the occurrence of a change in control (as
defined in the Director Plan). A total of 250,000 shares of the Company's Common
Stock may be issued upon the exercise of stock options granted under the
Director Plan. The exercise price of options granted under the Director Plan is
equal to the closing price of the Company's Common Stock on the Nasdaq National
Market on the date of grant.
On April 6, 1998, the Board of Directors of MInfo made the following grants
of options to purchase shares of Class B Common Stock of MInfo: Dr.
Lander -- 20,000 and 2,000 shares; and Drs. Boger, Cordes and Kucherlapati and
Messrs. Helman and Heidrich -- 2,000 shares each. Such options were exercisable
at a price of $0.05 per share, being the fair market value of the common stock
of MInfo, as determined by its Board of Directors on the date of grant of the
options. The options vest with respect to one forty-eighth (1/48) of the total
number of shares subject to the option at the end of each month after the date
of grant, subject to each individual's continued relationship with MPMx. In
connection with the merger of MInfo into MPMx on January 21, 1999, all options
to purchase shares of common stock of MInfo, except for those granted to Dr.
Cordes, were terminated and an equivalent option was substituted therefor to
purchase that number of shares of common stock of MPMx as is equal to the number
of shares of common stock of MInfo that had been subject to such cancelled
options. Dr. Cordes had exercised his options prior to the consummation of the
merger of MInfo into MPMx, and his 2,000 shares of the Class B Common Stock of
MInfo were accordingly exchanged and converted into 2,000 shares of the Class B
Common Stock of MPMx.
10
<PAGE> 12
- --------------------------------------------------------------------------------
COMPENSATION OF EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation for the last three fiscal years of the
Company's Chief Executive Officer and the Company's four other executive
officers whose total annual salary and bonus for 1998 exceeded $100,000
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------- -------------------
SECURITIES
UNDERLYING OPTIONS ALL OTHER
NAME AND SALARY OTHER ANNUAL NO. OF SHARES AND COMPENSATION
PRINCIPAL POSITION YEAR ($) COMPENSATION($) COMPANY(#)(1) ($)
------------------ ---- -------- --------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Mark J. Levin............. 1998 $400,265 $83,018(2) 100,000 MPI(3) $5,943(4)
Chief Executive Officer 25,000 MInfo
1997 364,864 83,018(2) 25,000 MBio 7,354(5)
25,000 MPMx
1996 324,354 83,018(2) 100,000 MPI 870(6)
Steven H. Holtzman........ 1998 $312,965 -- 29,880 MPI $4,476(7)
Chief Business Officer 15,500 MInfo
1997 277,025 -- 40,500 MPI 4,081(8)
25,000 MBio
25,000 MPMx
1996 264,333 -- 105,475 MPI 975(6)
Frank D. Lee.............. 1998 $281,692 -- 15,640 MPI $4,082(9)
Chief Technology 3,500 MBio
Officer 8,000 MInfo
1997 264,252 -- 27,000 MPI 4,752(10)
18,750 MBio
3,000 MPMx
1996 245,498 -- 44,600 MPI 1,622(6)
Michael R. Pavia(11)...... 1998 $230,291 -- 14,020 MPI $3,925(12)
Chief Technology 10,500 MInfo
Officer 1997 74,728 -- 150,000 MPI 272(6)
1,000 MBio
3,000 MPMx
Kevin P. Starr(13)........ 1998 160,258 -- 60,000 MPI 2,869(14)
Chief Financial Officer 90,000 MBio
</TABLE>
- ------------------------
(1) In addition to receiving options to purchase shares of Common Stock of the
Company (designated in the table as MPI), the Named Executive Officers were
granted options in 1998 to purchase shares of common stock of MBio, MPMx
and/or MInfo as part of each
11
<PAGE> 13
subsidiary's stock option program. In connection with the merger of MInfo
and MPMx on January 21, 1999, all options to purchase shares of common
stock of MInfo were terminated and an equivalent option was substituted for
the same number of shares of common stock of MPMx.
(2) Represents amounts attributable to the forgiveness of a loan.
(3) In January 1998, the Board of Directors of the Company granted to Mr. Levin
an option to purchase 100,000 shares of Common Stock of the Company in
consideration of his fiscal 1997 performance as Chief Executive Officer.
(4) Of which (i) $2,613 represents term life insurance premiums paid by the
Company on behalf of the Named Executive Officer and (ii) $3,330 represents
the dollar value of shares of the Company's Common Stock contributed by the
Company on behalf of the Named Executive Officer pursuant to the Company's
401(k) Plan.
(5) Of which (i) $1,566 represents term life insurance premiums paid by the
Company on behalf of the Named Executive Officer, (ii) $3,186 represents
the dollar value of shares of the Company's Common Stock contributed by the
Company on behalf of the Named Executive Officer pursuant to the Company's
401(k) Plan and (iii) $2,602 represents the amount of compensation
attributable to the gain on the same-day sale of shares of the Company's
Common Stock by the Named Executive Officer pursuant to the Company's 1996
Employee Stock Purchase Plan.
(6) Consists of term-life insurance premiums paid by the Company on behalf of
the Named Executive Officer.
(7) Of which $1,134 represents term life insurance premiums paid by the Company
on behalf of the Named Executive Officer and $3,342 represents the dollar
value of shares of the Company's Common Stock contributed by the Company to
the Named Executive Officer pursuant to the Company's 401(k) Plan.
(8) Of which $918 represents term life insurance premiums paid by the Company
on behalf of the Named Executive Officer and $3,163 represents the dollar
value of shares of the Company's Common Stock contributed by the Company to
the Named Executive Officer pursuant to the Company's 401(k) Plan.
(9) Of which $1,812 represents term life insurance premiums paid by the Company
on behalf of the Named Executive Officer and $2,270 represents the dollar
value of shares of the Company's Common Stock contributed by the Company to
the Named Executive Officer pursuant to the Company's 401(k) Plan.
(10) Of which $1,566 represents term life insurance premiums paid by the Company
on behalf of the Named Executive Officer and $3,186 represents the dollar
value of shares of the Company's Common Stock contributed by the Company to
the Named Executive Officer pursuant to the Company's 401(k) Plan.
(11) Dr. Pavia joined the Company in July 1997.
(12) Of which $846 represents term life insurance premiums paid by the Company
on behalf of the Named Executive Officer and $3,079 represents the dollar
value of shares of the Company's
12
<PAGE> 14
Common Stock contributed by the Company to the Named Executive Officer
pursuant to the Company's 401(k) Plan.
(13) Mr. Starr joined MBio as its Vice President, Finance in March 1998 and
became Chief Financial Officer of the Company in December 1998.
(14) Of which $319 represents term life insurance premiums paid by the Company
on behalf of the Named Executive Officer and $2,550 represents the dollar
value of shares of the Company's Common Stock contributed by the Company to
the Named Executive Officer pursuant to the Company's 401(k) Plan.
OPTION GRANTS, EXERCISES AND YEAR-END VALUES
The following table sets forth certain information regarding options
granted during the year ended December 31, 1998 by the Company, MBio, MPMx
and/or MInfo to the Named Executive Officers.
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED(1)(#) YEAR ($/SH) DATE 5%($) 10%($)
---- ------------- ----------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark J. Levin........ 100,000 MPI(3) 5.4% $19.625 1/21/08 $1,234,206 $3,127,720
25,000 MInfo(4) 4.2% $0.05 4/06/08 786 1,992
Steven H. Holtzman... 29,880 MPI(3) 1.6% $18.875 4/22/08 $354,687 $898,847
15,500 MInfo(4) 2.6% $0.05 4/06/08 487 1,235
Frank D. Lee......... 15,640 MPI(3) * $18.875 4/22/08 $185,653 $470,481
3,500 MBio(4) * $0.90 5/21/08 1,981 5,020
8,000 MInfo(4) 1.4% $0.05 6/11/08 252 637
Michael R. Pavia..... 14,020 MPI(3) * $18.875 4/22/08 $166,423 $421,748
10,500 MInfo(4) 1.8% $ 0.05 4/06/08 330 837
Kevin P. Starr....... 60,000 MPI(3) 3.2% $22.00 12/17/08 $830,141 $2,103,740
90,000 MBio(4) 11.6% $0.90 3/17/08 50,940 129,093
</TABLE>
- ------------------------
* Represents less than one percent of total options granted to employees in
fiscal year.
(1) Options have been granted during the fiscal year to the Named Executive
Officers to purchase Common Stock of the Company (designated in the table as
MPI), as well as common stock of MBio, MPMx and/or MInfo. In connection with
the merger of MInfo into MPMx on January 21, 1999, all options to purchase
shares of common stock of MInfo were terminated and an equivalent option was
substituted for the same number of shares of common stock of MPMx.
13
<PAGE> 15
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. This table does not take into account any
appreciation in the price of the Common Stock to date. Actual gains, if any,
on stock option exercises will depend on the future performance of the
Common Stock and the date at which the options are exercised.
(3) One forty-eighth of the total number of shares subject to each option are
exercisable at the end of the first month after the date of grant and an
additional one forty-eighth of the total number of shares subject to each
option will be exercisable at the end of each month thereafter until all of
such shares are exercisable.
(4) One forty-eighth of the total number of shares subject to the option are
exercisable at the end of the first month after the date of grant and an
additional one forty-eighth of the total number of shares subject to the
option will be exercisable at the end of each month thereafter until all of
such shares are exercisable; provided, however, that at the election of the
Named Executive Officer, all of such shares may be immediately exercisable,
in which event the portion of the shares of Common Stock issued upon
exercise corresponding to the vesting schedule for the original option shall
be subject to repurchase by the Company.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information regarding stock options
of the Company, MBio, MPMx and MInfo which were exercised during the year ended
December 31, 1998 and stock options of the Company, MBio, MPMx and MInfo which
were held as of December 31, 1998 by the Named Executive Officers.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
SHARES UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-
ACQUIRED AT FISCAL YEAR-END THE-MONEY OPTIONS AT
ON VALUE (#) FISCAL YEAR-END($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME COMPANY (1) (2) UNEXERCISABLE UNEXERCISABLE(2)(3)
---- ------- -------- -------- --------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Mark J. Levin......... MPI -- $-- 68,644/131,356 $585,275/ $977,225
MBio 25,000 0 0/ 0 0/ 0
MPMx -- -- 25,000/ 0 0/ 0
MInfo -- -- 25,000/ 0 0/ 0
Steven H. Holtzman.... MPI -- $-- 54,776/ 66,454 $747,677/ $717,154
MBio 25,000 0 0/ 0 0/ 0
MPMx 25,000 0 0/ 0 0/ 0
MInfo 15,500 0 0/ 0 0/ 0
Frank D. Lee.......... MPI -- $-- 38,928/ 47,462 $393,746/ $456,828
MBio 22,250 0 0/ 0 0/ 0
MPMx 3,000 0 0/ 0 0/ 0
MInfo 8,000 0 0/ 0 0/ 0
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
SHARES UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-
ACQUIRED AT FISCAL YEAR-END THE-MONEY OPTIONS AT
ON VALUE (#) FISCAL YEAR-END($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME COMPANY (1) (2) UNEXERCISABLE UNEXERCISABLE(2)(3)
---- ------- -------- -------- --------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Michael R. Pavia...... MPI -- $-- 49,504/114,516 $592,622/$1,343,018
MBio 1,000 0 0/ 0 0/ 0
MPMx 3,000 0 0/ 0 0/ 0
MInfo 10,500 0 0/ 0 0/ 0
Kevin P. Starr........ MPI -- $-- 0/ 60,000 $ 0/$ 232,500
MBio 90,000 0 0/ 0 0/ 0
</TABLE>
- ---------------
(1) Shares of capital stock acquired upon exercise of stock options of MBio,
MPMx and MInfo represent shares of restricted stock acquired upon exercise
of stock options of the respective company which are subject to repurchase
by such company.
(2) No public market exists for the shares of MBio, MPMx or MInfo capital stock.
Accordingly, no value in excess of the exercise price has been attributed to
these options.
(3) Value of unexercised in-the-money options to purchase shares of MPI Common
Stock is based on the closing sales price of the Company's Common Stock on
December 31, 1998 ($25.58), the last trading day of the Company's 1998
fiscal year, less the applicable option exercise price.
EMPLOYMENT AGREEMENTS
In November 1994, the Company entered into an employment agreement with Mr.
Levin, the Chief Executive Officer of the Company. The agreement provides for an
initial annual salary of $300,000. In addition, Mr. Levin was granted an option
to purchase 533,364 shares of the Company's Common Stock at an exercise price of
$0.30 per share. The option was exercised in November 1995. The shares issued
upon exercise of the option are subject to repurchase by the Company and are
released from such repurchase option at a rate of one forty-eighth of such
shares per month. In connection with the grant of the option, the Company agreed
to loan Mr. Levin up to $266,681, the net after tax purchase price for the
options. The loan bears interest at a rate of 7% per annum and is secured by a
pledge of the shares of Common Stock issued upon exercise of the option. The
Company has agreed to forgive one forty-eighth of the principal plus accrued
interest of the loan monthly beginning on December 31, 1995, subject to Mr.
Levin's continued employment. In the event of Mr. Levin's termination either
voluntarily or by the Company without cause, the unforgiven principal of the
loan will be due on the first to occur of (i) the first anniversary of such
termination, (ii) the first date upon which the fair market value of freely
tradeable securities held by Mr. Levin exceeds $1,000,000 or (iii) the date upon
which Mr. Levin receives cash or freely tradeable securities having a value of
at least $1,000,000 in an acquisition of the Company.
In April 1994, the Company entered into an employment agreement with Mr.
Holtzman, the Chief Business Officer of the Company. Mr. Holtzman's employment
with the Company is at-will and may be terminated by the Company at any time
with or without cause. In the event his employment is terminated without
Justifiable Cause (as defined) then, subject to certain conditions,
15
<PAGE> 17
the Company will be obligated to pay Mr. Holtzman a severance payment equal to
twelve months' salary.
In June 1994, the Company entered into an employment agreement with Dr.
Lee, the Chief Research Technology Officer of the Company. Dr. Lee's employment
with the Company is at-will and may be terminated by the Company at any time
with or without cause. In the event his employment is terminated without
Justifiable Cause (as defined) then, subject to certain conditions, the Company
will be obligated to pay Dr. Lee a severance payment equal to twelve months'
salary.
In July 1997, the Company entered into an employment agreement with Dr.
Pavia, the Chief Technology Officer of the Company. Dr. Pavia's employment with
the Company is at-will and may be terminated by the Company at any time with or
without cause. In the event his employment is terminated without Justifiable
Cause (as defined) then, subject to certain conditions, the Company will be
obligated to pay Dr. Pavia a severance payment equal to twelve months' salary.
- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
In January 1993, the Company entered into an agreement for consulting
services with Dr. Lander, a director of the Company. Pursuant to the agreement,
Dr. Lander is compensated at the rate of $2,375 (plus travel and other
appropriate expenses) per day of consulting services, not to exceed the
equivalent of 40 full days per year. Pursuant to this agreement, Dr. Lander
received $95,000 in 1998.
In April 1997, the Company entered into a corporate consortium to fund a
five-year research program in functional genomics at the Whitehead Institute for
Biomedical Research ("Whitehead"). Dr. Lander, a director of the Company, is a
Research Program Director of Whitehead. In 1998, the Company paid $2,500,000 to
Whitehead in connection with this consortium.
In September 1998, the Company formed a strategic alliance with Bayer AG.
Pursuant to the terms of the strategic alliance agreement, in November 1998,
Bayer made an equity investment of $96.6 million in exchange for 4,957,660
shares of Common Stock of the Company. In addition, Bayer paid the Company $33.4
million as an up-front license fee. Future payments provided for under the
strategic alliance agreement include $219 million of ongoing license and
research program funding as well as up to $116 million of performance payments,
assuming certain milestones are achieved.
In May 1998, MBio loaned $80,910 to Kevin Starr to purchase 90,000 shares
of Common Stock of MBio pursuant to the early exercise program under MBio's 1997
Equity Incentive plan. The largest amount of indebtedness outstanding under the
loan was $80,910, and as of February 28, 1999, the indebtedness outstanding
under the loan was $80,910. This loan is evidenced by a promissory note which
bears interest at the rate of 7.3% per annum and is secured by a security
interest in the 90,000 shares of MBio Common Stock purchased by Mr. Starr.
For a description of the consulting agreement between the Company and Dr.
Kucherlapati, a director of the Company, see "Compensation Committee Interlocks
and Insider Participation."
16
<PAGE> 18
For a description of certain indebtedness to the Company of Mr. Levin,
Chief Executive Officer and Chairman of the Board of Directors of the Company,
see "Employment Agreements."
- --------------------------------------------------------------------------------
STOCK PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The Company's Common Stock has been listed for trading on the Nasdaq
National Market under the symbol MLNM since May 6, 1996.
The following graph compares the cumulative stockholder return on the
Common Stock of the Company for the period from May 6, 1996, the date of the
Company's initial public offering, through December 31, 1998 with the cumulative
total return on (i) the Total Return Index for the Nasdaq Stock Market (U.S.
Companies) (the "Nasdaq Total Return Index") and (ii) the Nasdaq Pharmaceutical
Stock Index (the "Nasdaq Pharmaceutical Index").
This graph assumes the investment of $100 on May 6, 1996 in the Company's
Common Stock (at the initial public offering price) and each of the indices
listed above, and assumes dividends are reinvested. Measurement points are on
May 6, 1996 and the last trading days of the years ended December 31, 1996,
December 31, 1997 and December 31, 1998.
<TABLE>
<CAPTION>
MILLENNIUM NASDAQ PHARMACEUTICAL
PHARMACEUTICALS, INC. NASDAQ TOTAL RETURN INDEX STOCK INDEX
--------------------- ------------------------- ---------------------
<S> <C> <C> <C>
5/6/96 100.00 100.00 100.00
12/31/96 144.79 108.81 93.99
12/31/97 158.33 133.50 97.05
12/31/98 215.63 187.66 124.24
</TABLE>
17
<PAGE> 19
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The Compensation Committee of the Company is currently comprised of three
non-employee directors, Mr. Heidrich and Drs. Kucherlapati and Boger. The
Compensation Committee:
- approves the Company's rewards strategy and programs;
- makes recommendations concerning salaries and incentive compensation for
employees of and consultants to the Company;
- establishes and approves salaries and incentive compensation for certain
senior officers and employees; and
- administers and grants stock options pursuant to the Company's stock
option plans.
In addition, the Boards of Directors (and/or Compensation Committees of the
Boards of Directors) of MBio, MPMx and MInfo have granted stock options to
employees of the Company pursuant to their respective stock option plans.
The Company's executive compensation program is designed to provide
incentives to the Company's executive officers and, thereby, to promote
achievement of the Company's business goals and shareholder returns. Executive
compensation consists of a combination of base salary, stock incentives and
employee benefits. The Compensation Committee considers stock incentives to be a
critical component of an executive's compensation package in order to help align
executive interests with stockholder interests.
COMPENSATION PHILOSOPHY
The objectives of the executive compensation program are to align
compensation with business objectives and individual performance, and to enable
the Company to attract, retain and reward executive officers who are expected to
contribute to the long-term success of the Company. The Company's executive
compensation philosophy is based on the principles of competitive and fair
compensation and sustained performance.
- COMPETITIVE AND FAIR COMPENSATION
The Company is committed to providing an executive compensation program
that helps attract and retain highly qualified executives. To ensure that
compensation is competitive, the Compensation Committee compares the
Company's compensation practices with those of other companies in the
industry and sets the Company's compensation guidelines based on this
review. The Compensation Committee believes compensation for the Company's
executive officers is within the range of compensation paid to executives
with comparable qualifications, experience and responsibilities who are
with companies that are in the same or similar business and of comparable
size and success as the Company. The Compensation Committee also strives to
achieve equitable relationships both among the compensation of individual
officers and between the compensation of officers and other employees
throughout the Company.
18
<PAGE> 20
- SUSTAINED PERFORMANCE
Executive officers are rewarded based upon corporate performance and
individual performance. Corporate performance is evaluated by reviewing the
extent to which strategic scientific and business plan goals are met,
including such factors as timely delivery of validated targets to partners
for screening, effective development of new programs for future alliances,
continued innovation in the development of the Company's technologies,
formation of new business alliances, and meeting stated financial
objectives. Individual performance is evaluated by reviewing attainment of
specified individual objectives and the degree to which teamwork and
Company values are fostered.
In evaluating each executive officer's performance, the Compensation
Committee generally conforms to the following process:
- Company and individual goals and objectives generally are set at the
beginning of the performance cycle.
- At the end of the performance cycle, the accomplishment of the
executive's goals and objectives and his or her contributions to the
Company are evaluated.
- The executive's performance is then compared with peers within the
Company and the results are communicated to the executive.
- The comparative results, combined with comparative compensation practices
of other companies in the industry, are then used to determine salary and
stock compensation levels.
Annual compensation for the Company's executives generally consists of two
elements--salary and stock options.
The salary for executives is generally set by reviewing compensation for
competitive positions in the market and the historical compensation levels of
the executives. Increases in annual salaries are based on actual corporate and
individual performance against targeted performance and various subjective
performance criteria. Targeted performance criteria vary for each executive
based on his area of responsibility. Subjective performance criteria include an
executive's ability to motivate others, develop the skills necessary to mature
with the Company, recognize and pursue new business opportunities and initiate
programs to enhance the Company's growth and success. The Compensation Committee
does not use a specific formula based on these targeted performance and
subjective criteria, but instead makes an evaluation of each executive officer's
contributions in light of all such criteria.
Compensation at the executive officer level also includes the long-term
incentives afforded by stock options. The Company's stock option program is
designed to promote the identity of long-term interests between the Company's
employees and its shareholders and assist in the retention of executives. In
addition, the Board of Directors of MBio and MPMx have adopted a stock option
program which will provide for the grant of stock options to, among others, the
executive officers of the Company. The Compensation Committee of the Board of
Directors believes that the award of stock options by subsidiaries of the
Company will, among other things, create incentives for executive officers of
the Company to contribute to the success of the entire organization through the
ownership of equity.
19
<PAGE> 21
The size of option grants is generally intended to reflect the executive's
position with the Company and his or her contributions to the Company, including
his or her success in achieving the individual performance criteria described
above. The Company's option program generally uses a four-year vesting period to
encourage key employees to continue in the employ of the Company. All stock
options granted to executive officers in 1998 under the Company's stock option
plans, as well as the stock option plans of MBio, MPMx and MInfo, were granted
at fair market value on the date of grant. During 1998, all current executive
officers received options to purchase
- an aggregate of 219,540 shares of Common Stock of the Company, at a
weighted average exercise price of $20.071 per share;
- an aggregate of 93,500 shares of common stock of MBio, at a weighted
average exercise price of $0.90 per share; and
- an aggregate of 59,000 shares of common stock of MInfo, at a weighted
average exercise price of $0.05 per share.
In connection with the merger of MInfo into MPMx on January 21, 1999, all
options to purchase shares of common stock of MInfo were terminated and an
equivalent option was substituted for the same number of shares of common stock
of MPMx.
Executive officers are also eligible to participate in the Company's 1996
Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan is
available to virtually all employees of the Company and generally permits
participants to purchase shares at a discount of approximately 15% from the fair
market value at the beginning or end of the applicable purchase period.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of
the Internal Revenue Code, of 1986, as amended (the "Code"), generally disallows
a tax deduction to public companies for compensation over $1.0 million paid to
the corporation's Chief Executive Officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. The Company
generally intends to structure the stock options granted to its executive
officers in a manner that complies with the statute to mitigate any disallowance
of deductions under Section 162(m). However, the Compensation Committee reserves
the right to use its judgment to authorize compensation payments which may be in
excess of the limit when the Compensation Committee believes such payment is
appropriate, after taking into consideration changing business conditions or the
officer's performance, and is in the best interests of the stockholders.
MR. LEVIN'S 1998 COMPENSATION
Mr. Levin is eligible to participate in the same executive compensation
plans available to the other executive officers of the Company. The Compensation
Committee believes that Mr. Levin's annual compensation, including the portion
of his compensation based upon the Company's merit-based stock option program,
has been set at a level competitive with other companies in the industry.
Mr. Levin's salary for 1998 increased to $400,265 from $364,864 in 1997. In
January, 1998, Mr. Levin was granted a stock option to purchase 100,000 shares
of the Company's Common Stock
20
<PAGE> 22
at an exercise price of $19.625 per share (the closing price of a share of the
Company's Common Stock on the Nasdaq National Market on the date of grant) for
services performed during the 1997 fiscal year.
In determining Mr. Levin's 1998 compensation, including whether to grant
stock options of the Company to Mr. Levin, the Compensation Committee considered
Mr. Levin's overall compensation package relative to that of other chief
executives in the Company's industry and past option grants as well as the
effectiveness of Mr. Levin's leadership of the Company and the resulting success
of the Company in the attainment of its goals. In addition, in 1998 Mr. Levin
was granted stock options to purchase an aggregate of 25,000 shares of MInfo
common stock at an exercise price of $0.05 per share (each of which represented
the fair market value of the common stock of the respective company granting
such option on the date of the grant). In connection with the merger of MInfo
into MPMX on January 21, 1999, Mr. Levin's option to purchase 25,000 shares of
MInfo common stock was terminated.
COMPENSATION COMMITTEE
A. Grant Heidrich, III
Raju S. Kucherlapati, Ph.D.
Joshua Boger, Ph.D.
- --------------------------------------------------------------------------------
ITEM TWO -- AMENDMENT OF 1996 EQUITY INCENTIVE PLAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE SECOND AGENDA ITEM TO BE VOTED ON IS THE AMENDMENT OF THE COMPANY'S 1996
EQUITY INCENTIVE PLAN. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT.
================================================================================
The 1996 Equity Incentive Plan of the Company (the "1996 Incentive Plan")
provides for the grant of incentive stock options, nonstatutory stock options
and awards of restricted stock ("Awards"). The 1996 Incentive Plan covers
4,100,000 shares of Common Stock of the Company.
In March 1999, the Board of Directors adopted, subject to stockholder
approval, an amendment to the 1996 Incentive Plan that would increase the number
of shares of Common Stock of the Company available for Awards under the 1996
Incentive Plan from 4,100,000 to 5,600,000. The Board believe this increase is
necessary in order to enable the Company to continue to attract and retain
qualified employees and provide further incentives to employees as a result of
their equity interest in the Company.
SUMMARY OF THE 1996 INCENTIVE PLAN
The principal provisions of the 1996 Incentive Plan are summarized below.
This summary is qualified in its entirety by reference to the 1996 Incentive
Plan, a copy of which is attached to the electronic copy of this Proxy Statement
filed with the SEC and may be accessed from the SEC's
21
<PAGE> 23
home page (www.sec.gov). In addition, a copy of the 1996 Incentive Plan may be
obtained by making a written request to the Secretary of the Company.
DESCRIPTION OF AWARDS UNDER THE 1996 INCENTIVE PLAN. Optionees receive the
right to purchase a specified number of shares of Common Stock at an option
price and subject to such terms and conditions as are specified at the time of
the grant. Incentive stock options and stock options intended to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the Common Stock
on the date of grant (or less than 110% of the fair market value in the case of
incentive stock options granted to optionees holding 10% or more of the voting
stock of the Company). All other options may be granted at an exercise price
that may be less than, equal to or greater than the fair market value of the
Common Stock on the date of grant.
Restricted stock awards entitle recipients to acquire shares of Common
Stock, subject to the right of the Company to repurchase all or part of such
shares at their purchase price from the recipient in the event that the
conditions specified in the applicable stock award are not satisfied prior to
the end of the applicable restriction period established for such award. The
Company may also grant (or sell at a purchase price not less than 85% of the
fair market value on the date of such sale) to participants shares of Common
Stock free of any restrictions under the 1996 Incentive Plan.
ELIGIBILITY TO RECEIVE AWARDS. All of the employees, officers, directors,
consultants and advisors of the Company and its subsidiaries who are expected to
contribute to the Company's future growth and success are eligible to
participate in the 1996 Incentive Plan. Incentive stock options, however, may
only be granted to persons eligible to receive incentive stock options under the
Code. The 1996 Incentive Plan provides that the maximum number of shares of
Common Stock with respect to which options may be granted to any employee may
not exceed 300,000 during any calendar year of the 1996 Incentive Plan.
As of January 31, 1999, an aggregate of approximately 725 employees of the
Company were eligible to receive Awards under the 1996 Incentive Plan. The
granting of Awards under the 1996 Incentive Plan is discretionary, and the
Company cannot now determine the number or type of Awards to be granted in the
future to any particular person or group. From the initial adoption of the 1996
Incentive Plan through January 31, 1999: options to purchase an aggregate of
200,000 shares thereunder had been granted to Mark J. Levin, Chairman of the
Board, Chief Executive Officer of the Company and a director nominee; options to
purchase an aggregate of 120,380 shares thereunder had been granted to Steven H.
Holtzman, Chief Business Officer of the Company; options to purchase an
aggregate of 86,390 shares thereunder had been granted to Frank D. Lee, Chief
Research Technology Officer of the Company; options to purchase an aggregate of
164,020 shares thereunder had been granted to Michael R. Pavia, Chief Technology
Officer of the Company; no options to purchase shares thereunder had been
granted to Kevin P. Starr, Chief Financial Officer of the Company; no options to
purchase shares thereunder had been granted to Joshua Boger, Ph.D. or A. Grant
Heidrich, III, director nominees of the Company; options to purchase an
aggregate of 570,790 shares thereunder had been granted to all current executive
officers of the Company as a group; no options to purchase shares thereunder had
been granted to current directors who are not executive officers of the Company
as a group; no options to purchase shares thereunder had been granted to any
associate of any director, executive officer or nominee for director of the
Company;
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<PAGE> 24
and options to purchase an aggregate of 3,753,388 shares thereunder had been
granted to all employees of the Company who are not executive officers.
On March 31, 1999, the last reported sale price of the Company's Common
Stock on the Nasdaq National Market was $31.25.
ADMINISTRATION. The 1996 Incentive Plan is administered by the Board of
Directors of the Company and the Compensation Committee of the Board of
Directors. The Board has the authority to adopt, amend and repeal the
administrative rules, guidelines and practices relating to the 1996 Incentive
Plan, to interpret the provisions of the 1996 Incentive Plan and to terminate
the 1996 Incentive Plan. The Board also has the authority to grant Awards under
the 1996 Incentive Plan and to accelerate, waive or amend certain provisions of
outstanding Awards. The 1996 Incentive Plan contains provisions relating to the
disposition of Awards in the event of certain mergers, acquisitions and other
extraordinary corporate transactions involving the Company. Pursuant to the
terms of the 1996 Incentive Plan, the Board has appointed the Compensation
Committee to administer certain aspects of the 1996 Incentive Plan.
AMENDMENT AND TERMINATION. No Award may be made under the 1996 Incentive
Plan after March 28, 2006, but Awards previously granted may extend beyond that
date. No amendment to the 1996 Incentive Plan may be made without stockholder
approval if such approval is necessary to comply with any applicable tax or
regulatory requirement.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1996 Incentive Plan and with respect to the sale of Common Stock acquired under
the 1996 Incentive Plan.
INCENTIVE STOCK OPTIONS. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of Common Stock acquired through the exercise of the
option ("ISO Stock"). The exercise of an incentive stock option, however, may
subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
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<PAGE> 25
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the Common Stock acquired through the exercise of the option ("NSO
Stock") on the Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
NSO Stock for more than one year prior to the date of the sale.
RESTRICTED STOCK. A participant will not recognize taxable income upon the
grant of a restricted stock Award unless the participant makes an election under
Section 83(b) of the Code (a "Section 83(b) Election"). If the participant makes
a Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the Award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the Award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin just after the date on which
the forfeiture provisions or restrictions lapse if a Section 83(b) Election is
not made, or just after the Award is granted if a Section 83(b) Election is
made.
TAX CONSEQUENCES TO THE COMPANY. The grant of an Award under the 1996
Incentive Plan will have no tax consequences to the Company. Moreover, in
general, neither the exercise of an incentive stock option nor the sale of any
Common Stock acquired under the 1996 Incentive Plan will have any tax
consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 1996 Incentive Plan, including in
connection with a restricted stock Award or
24
<PAGE> 26
as a result of the exercise of a nonstatutory stock option or a Disqualifying
Disposition. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
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ITEM THREE -- AMENDMENT OF 1997 EQUITY INCENTIVE PLAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE THIRD AGENDA ITEM TO BE VOTED ON IS THE AMENDMENT OF THE COMPANY'S 1997
EQUITY INCENTIVE PLAN. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT.
================================================================================
The 1997 Equity Incentive Plan of the Company (the "1997 Incentive Plan")
provides for the grant of incentive stock options, nonstatutory stock options
and awards of restricted stock ("Awards"). The 1997 Incentive Plan covers
2,000,000 shares of Common Stock of the Company.
In March 1999, the Board of Directors adopted an amendment to the 1997
Incentive Plan that would increase the number of shares of Common Stock of the
Company available for Awards under the 1997 Incentive Plan from 2,000,000 to
4,000,000. The Board believe this increase is necessary in order to enable the
Company to continue to attract and retain qualified employees and provide
further incentives to employees as a result of their equity interest in the
Company.
The Company is seeking shareholder approval of the amendment to the 1997
Incentive Plan in order for options granted under the 1997 Incentive Plan to be
treated as incentive stock options to the extent so designated by the Board of
Directors at the time of grant. Whether or not the Company receives shareholder
approval of the 1997 Incentive Plan, the Company plans to continue to make
Awards under the 1997 Incentive Plan and all options previously granted by the
Board of Directors will remain outstanding. If the Shareholders do not approve
the amendment to the 1997 Incentive Plan, options granted subsequent to the
amendment will constitute nonstatutory options for purposes of the Code.
SUMMARY OF THE 1997 INCENTIVE PLAN
The principal provisions of the 1997 Incentive Plan are summarized below.
This summary is qualified in its entirety by reference to the 1997 Incentive
Plan, a copy of which is attached to the electronic copy of this Proxy Statement
filed with the SEC and may be accessed from the SEC's home page (www.sec.gov).
In addition, a copy of the 1997 Incentive Plan may be obtained by making a
written request to the Secretary of the Company.
DESCRIPTION OF AWARDS UNDER THE 1997 INCENTIVE PLAN. Optionees receive the
right to purchase a specified number of shares of Common Stock at an option
price and subject to such terms and conditions as are specified at the time of
the grant. Incentive stock options may not be granted at an exercise price less
than the fair market value of the Common Stock on the date of grant (or less
than 110% of the fair market value in the case of incentive stock options
granted to optionees holding 10% or more of the voting stock of the Company).
All other options may be granted at an exercise price that may be less than,
equal to or greater than the fair market value of the Common Stock on the date
of grant.
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<PAGE> 27
Restricted stock awards entitle recipients to acquire shares of Common
Stock, subject to the right of the Company to repurchase all or part of such
shares at their purchase price from the recipient in the event that the
conditions specified in the applicable stock award are not satisfied prior to
the end of the applicable restriction period established for such award. The
Company may also grant (or sell at a purchase price not less than 85% of the
fair market value on the date of such sale) to participants shares of Common
Stock free of any restrictions under the Incentive Plan.
ELIGIBILITY TO RECEIVE AWARDS. All of the employees (except executive
officers and employees who serve as directors) of the Company and its
subsidiaries who are expected to contribute to the Company's future growth and
success are eligible to participate in the 1997 Incentive Plan. Incentive stock
options, however, may only be granted to persons eligible to receive incentive
stock options under the Code. The 1997 Incentive Plan provides that the maximum
number of shares of Common Stock with respect to which options may be granted to
any employee may not exceed 300,000 during any calendar year of the 1997
Incentive Plan.
As of January 31, 1999, an aggregate of approximately 725 employees of the
Company were eligible to receive Awards under the 1997 Incentive Plan. The
granting of Awards under the 1997 Incentive Plan is discretionary, and the
Company cannot now determine the number or type of Awards to be granted in the
future to any particular person or group.
ADMINISTRATION. The 1997 Incentive Plan is administered by the Board of
Directors of the Company and the Compensation Committee of the Board of
Directors. The Board has the authority to adopt, amend and repeal the
administrative rules, guidelines and practices relating to the 1997 Incentive
Plan, to interpret the provisions of the 1997 Incentive Plan and to terminate
the 1997 Incentive Plan. The Board also has the authority to grant Awards under
the 1997 Incentive Plan and to accelerate, waive or amend certain provisions of
outstanding Awards. The 1997 Incentive Plan contains provisions relating to the
disposition of Awards in the event of certain mergers, acquisitions and other
extraordinary corporate transactions involving the Company. Pursuant to the
terms of the 1997 Incentive Plan, the Board has appointed the Compensation
Committee to administer certain aspects of the 1997 Incentive Plan. From the
initial adoption of the 1997 Incentive Plan through January 31, 1999, an
aggregate of 1,898,702 shares thereunder has been granted to employees of the
Company who are not executive officers or directors.
AMENDMENT AND TERMINATION. No Award may be made under the 1997 Incentive
Plan after March 13, 2007, but Awards previously granted may extend beyond that
date. No amendment to the 1997 Incentive Plan may be made without stockholder
approval if such approval is necessary to comply with any applicable tax or
regulatory requirement.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1997 Incentive Plan and with respect to the sale of Common Stock acquired under
the 1997 Incentive Plan.
INCENTIVE STOCK OPTIONS. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of Common Stock acquired through the
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<PAGE> 28
exercise of the option ("ISO Stock"). The exercise of an incentive stock option,
however, may subject the participant to the alternative minimum tax. Generally,
the tax consequences of selling ISO Stock will vary with the length of time that
the participant has owned the ISO Stock at the time it is sold. If the
participant sells ISO Stock after having owned it for at least two years from
the date the option was granted (the "Grant Date") and one year from the date
the option was exercised (the "Exercise Date"), then the participant will
recognize long-term capital gain in an amount equal to the excess of the sale
price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the Common Stock acquired through the exercise of the option ("NSO
Stock") on the Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
NSO Stock for more than one year prior to the date of the sale.
RESTRICTED STOCK. A participant will not recognize taxable income upon the
grant of a restricted stock Award unless the participant makes an election under
Section 83(b) of the Code (a "Section 83(b) Election"). If the participant makes
a Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the Award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the Award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
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<PAGE> 29
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin just after the date on which
the forfeiture provisions or restrictions lapse if a Section 83(b) Election is
not made, or just after the Award is granted if a Section 83(b) Election is
made.
TAX CONSEQUENCES TO THE COMPANY. The grant of an Award under the 1997
Incentive Plan will have no tax consequences to the Company. Moreover, in
general, neither the exercise of an incentive stock option nor the sale of any
Common Stock acquired under the 1997 Incentive Plan will have any tax
consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 1997 Incentive Plan, including in
connection with a restricted stock Award or as a result of the exercise of a
nonstatutory stock option or a Disqualifying Disposition. Any such deduction
will be subject to the limitations of Section 162(m) of the Code.
- --------------------------------------------------------------------------------
ITEM FOUR -- APPROVAL OF AN AMENDMENT TO THE
1996 EMPLOYEE STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOURTH AGENDA ITEM TO BE VOTED ON IS THE APPROVAL OF AN AMENDMENT TO THE
COMPANY'S 1996 EMPLOYEE STOCK PURCHASE PLAN. THE BOARD RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN.
================================================================================
The purpose of the 1996 Employee Stock Purchase Plan of the Company (the
"Purchase Plan") is to provide eligible employees of the Company and certain of
its subsidiaries with opportunities to purchase shares of the Company's Common
Stock. The Purchase Plan covers 350,000 shares of the Company's Common Stock.
In March 1999, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Purchase Plan to increase the number of shares of
the Company's Common Stock reserved for issuance under the Purchase Plan from
350,000 shares to 650,000 shares. The Board believes this amendment will help
the Company to attract and retain qualified employees and provide further
incentives to employees as a result of their equity interest in the Company.
SUMMARY OF THE PURCHASE PLAN
The principal provisions of the Purchase Plan are summarized below. This
summary is qualified in its entirety by reference to the Purchase Plan, a copy
of which is attached to the electronic copy of this Proxy Statement filed with
the SEC and may be accessed from the SEC's home page (www.sec.gov). In addition,
a copy of the Purchase Plan may be obtained by making a written request to the
Secretary of the Company.
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<PAGE> 30
ELIGIBILITY. Subject to certain restrictions described below, all
employees (i) who are employees of the Company or a designated subsidiary on the
date that an offering commences, (ii) who are regularly employed for more than
20 hours a week and for more than five months in a calendar year by the Company
or a designated subsidiary and (iii) who have been employed by the Company or a
designated subsidiary of the Company for at least three months prior to
enrolling in the Purchase Plan are eligible to participate in the Purchase Plan.
No person will be eligible to participate in the Purchase Plan if he or she
would possess five percent or more of the voting power of the Company's or any
subsidiary's Common Stock immediately after the grant of an option under the
Purchase Plan.
As of January 31, 1999, approximately 668 persons were eligible to
participate in the Purchase Plan.
OFFERINGS. The Company may make one or more offerings to employees to
purchase Common Stock under the Purchase Plan, as determined by the Board of
Directors. Currently, the Purchase Plan consists of two consecutive offerings,
the first of which commences on April 1 and expires on September 30, and the
second of which commences on October 1 and expires on March 31.
NUMBER OF SHARES. Currently, a total of up to 350,000 shares may be
purchased in all offerings under the Purchase Plan. If the Company receives
requests from employees to purchase more than the number of shares available
during any offering, the available shares will be allocated on a pro rata basis
to subscribing employees.
PURCHASE LIMITATIONS. An employee may elect to have up to 10% of his or
her salary deducted for the purpose of purchasing stock under the Purchase Plan.
In no event may an employee's rights to purchase Common Stock under the Purchase
Plan accrue at a rate which exceeds $25,000 of the fair market value of such
Common Stock per year (determined at the commencement date of each offering).
PURCHASE PRICE. The price at which the employee may purchase the stock is
85% of the lower of (i) the last reported sale price of the Common Stock on the
day the offering period commences, and (ii) the last reported sale price of the
Common Stock on the day the offering period ends.
NEW PLAN BENEFITS. Because participation in the Purchase Plans is
voluntary and participants may withdraw from the Purchase Plans at any time
during an offering period without penalty, the benefits to be received by any
particular person or group are not determinable by the Company at this time.
AMENDMENTS AND ADMINISTRATION. The Board of Directors of the Company may
at any time terminate or amend the Purchase Plan. However, the Board of
Directors may not amend the Purchase Plan without approval of the stockholders
of the Company if approval of such amendment is required by Section 423 of the
Code or by Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). No amendment may be made to the Purchase Plan if the amendment
would cause the Purchase Plan to fail to comply with Section 423 of the Code or
with Section 16 of the Exchange Act.
The Purchase Plan will be administered by the Compensation Committee, which
is authorized to make rules and regulations for the administration and
interpretation of the plans.
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<PAGE> 31
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
Purchase Plan and with respect to the sale of Common Stock acquired under the
Purchase Plan.
TAX CONSEQUENCES TO PARTICIPANTS. In general, a participant will not
recognize taxable income upon enrolling in the Purchase Plan or upon purchasing
shares of Common Stock at the end of an offering. Instead, if a participant
sells Common Stock acquired under the Purchase Plan at a sale price that exceeds
the price at which the participant purchased the Common Stock, then the
participant will recognize taxable income in an amount equal to the excess of
the sale price of the Common Stock over the price at which the participant
purchased the Common Stock. A portion of that taxable income will be ordinary
income, and a portion may be capital gain.
If the participant sells the Common Stock more than one year after
acquiring it and more than two years after the date on which the offering
commenced (the "Grant Date"), then the participant will be taxed as follows:
If the sale price of the Common Stock is higher than the price at which the
participant purchased the Common Stock, then the participant will recognize
ordinary compensation income in an amount equal to the lesser of:
(i) fifteen percent of the fair market value of the Common Stock on the
Grant Date; and
(ii) the excess of the sale price of the Common Stock over the price at
which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
If the participant sells the Common Stock within one year after acquiring
it or within two years after the Grant Date (a "Disqualifying Disposition"),
then the participant will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the Common Stock on the date
that it was purchased over the price at which the participant purchased the
Common Stock. The participant will also recognize capital gain in an amount
equal to the excess of the sale price of the Common Stock over the fair market
value of the Common Stock on the date that it was purchased, or capital loss in
an amount equal to the excess of the fair market value of the Common Stock on
the date that it was purchased over the sale price of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the participant
has held the Common Stock for more than one year prior to the date of the sale
and will be a short-term capital gain or loss if the participant has held the
Common Stock for a shorter period.
TAX CONSEQUENCES TO THE COMPANY. The offering of Common Stock under the
Purchase Plan will have no tax consequences to the Company. Moreover, in
general, neither the purchase nor the sale of Common Stock acquired under the
Purchase Plan will have any tax consequences to the Company except that the
Company will be entitled to a business-expense deduction with respect to
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<PAGE> 32
any ordinary compensation income recognized by a participant upon making a
Disqualifying Disposition. Any such deduction will be subject to the limitations
of Section 162(m) of the Code.
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INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of Ernst & Young LLP as the Company's independent auditors for
the current fiscal year. Ernst & Young LLP has served as the Company's
independent auditors since the Company's inception.
Representatives of Ernst & Young LLP are expected to be present at the
meeting and will have the opportunity to make a statement if they desire to do
so and will also be available to respond to appropriate questions from
stockholders.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
All costs of solicitation of proxies will be paid by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional pay, may solicit proxies by telephone, or personal
meetings. Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the owners of stock held in their names, and, as required
by law, the Company will reimburse them for their out-of-pocket expenses in this
regard.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Secretary of the Company at the
principal office of the Company not later than December 19, 1999 for inclusion
in the proxy statement for the 2000 Annual Meeting.
If a stockholder of the Company wishes to present a proposal before the
2000 Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy card, such stockholder must
also give written notice to the Secretary of the Company at the address noted
above. The Secretary must receive such notice not less than 60 days nor more
than 90 days prior to the 2000 Annual Meeting; provided that, in the event that
less than 70 days' notice or prior public disclosure of the date of the 2000
Annual Meeting is given or made, notice by the stockholder must be received not
later than the close of business on the 10th day following the date on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever occurs first. If a stockholder fails to provide timely notice of
a proposal to be presented at the 2000 Annual Meeting, the proxies designated by
the Board of Directors of the Company will have discretionary authority to vote
on any such proposal.
By Order of the Board of Directors
MARK J. LEVIN
Chairman and Chief Executive Officer
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<PAGE> 33
MLNCM-PS-98
<PAGE> 34
MILLENNIUM PHARMACEUTICALS, INC.
1996 EQUITY INCENTIVE PLAN
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for Millennium
Pharmaceuticals, Inc. (the "Company") and its shareholders the benefits arising
from capital stock ownership by employees(1) officers and directors of, and
consultants or advisors to, the Company and its parent and subsidiary
corporations who are expected to contribute to the Company's future growth and
success. Except where the context otherwise requires, the term "Company" shall
include the parent and all present and future subsidiaries of the Company as
defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as
amended or replaced from time to time (the "Code").
2. Type of Options and Awards; Administration.
------------------------------------------
(a) TYPES OF OPTIONS AND AWARDS. Options granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company (or a
Committee designated by the Board of Directors) and may be either incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Code or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code. Awards granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company (or a
Committee designated by the Board of Directors) and shall meet the requirements
of Section 13 of the Plan.
(b) ADMINISTRATION. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
m its sole discretion (i) grant options to purchase shares of the Company's
Common Stock (as defined in Section 4 of the Plan), and issue shares upon
exercise of such options as provided in the Plan and (ii) make awards for the
purchase of shares of Common Stock pursuant to Section 13 of the Plan. The Board
shall have authority, subject to the express provisions of the Plan, to construe
the respective option agreements, awards and the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option agreements and awards, which need not be
identical, and to make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The Board
of Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement or award in the manner and
to the extent it shall deem expedient to carry the Plan into effect and it shall
be the sole and final judge of such expediency. No director or person acting
pursuant to authority delegated by the Board of Directors shall be liable for
any action or determination made in good faith.
<PAGE> 35
The Board of Directors may, to the full extent permitted by or consistent with
applicable laws or regulations (including, without limitation, applicable state
law and Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), or any successor rule ("Rule 16b-3")), delegate any or all of
its powers under the Plan to a committee (the "Committee") appointed by the
Board of Directors, and if the Committee is so appointed all references to the
Board of Directors in the Plan shall mean and relate to such Committee to the
extent authority is so delegated to such Committee.
(c) APPLICABILITY OF RULE 16b-3. Those provisions of the Plan which make
express reference to Rule 16b-3 shall apply only to such persons as are required
to file reports under Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
-----------
(a) GENERAL. Options and awards may be granted or made to persons who are,
at the time of grant, employees, officers or directors (so long as such officers
and directors are also employees) of, or consultants or advisors to, the
Company; PROVIDED, that the class of individuals to whom Incentive Stock Options
may be granted shall be limited to all employees of the Company; and PROVIDED
FURTHER that non-employee directors of the Company are not eligible to receive
options or awards of restricted stock under the Plan. A person who has been
granted an option or award may, if he or she is otherwise eligible, be granted
additional options or awards if the Board of Directors shall so determine.
Subject to adjustment as provided in Section 16 below, the maximum number of
shares with respect to which options or restricted stock awards may be granted
to any person under the Plan shall not exceed 300,000 shares of Common Stock
during any calendar year during the term of the Plan. For the purpose of
calculating such maximum number, (a) an option or award shall continue to be
treated as outstanding notwithstanding its repricing, cancellation or expiration
and (b) the repricing of an outstanding option or award or the issuance of a new
option or award in substitution for a cancelled option or award shall be deemed
to constitute the grant of a new additional option or award, as the case may be,
separate from the original grant that is repriced or cancelled.
(b) GRANT OF OPTIONS TO DIRECTORS AND OFFICERS. The selection of a
director or an officer (as the terms "director" and "officer" are defined for
purposes of Rule 16b-3) as a participant, the timing of the option grant or
award, the exercise price of the option or the sale price of the award and the
number of shares for which an option or award may be granted to such director or
officer shall be determined either (i) by the Board of Directors, of which all
members shall be "disinterested persons" (as hereinafter defined), or (ii) by a
committee of two or more directors having full authority to act in the matter,
of which all members shall be "disinterested persons." For the purposes of the
Plan, a director shall be deemed to be
2
<PAGE> 36
"disinterested" only if such person qualifies as a "disinterested person" within
the meaning of Rule 16b-3, as such term is interpreted from time to time.
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 16 below, the total number of
shares which may be issued and sold under the Plan is 2,100,000 shares of Common
Stock, $.001 par value per share ("Common Stock"). If an option granted under
the Plan shall expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject to such option shall again be available
for subsequent option grants or awards under the Plan.
5. Forms of Option Agreements.
--------------------------
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.
6. Purchase Price Upon Exercise of Options.
---------------------------------------
(a) GENERAL. The purchase price per share of Common Stock deliverable upon
the exercise of an option shall be determined by the Board of Directors,
PROVIDED, HOWEVER, that in the case of an Incentive Stock Option, the exercise
price shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, (ii) by any other means (including without limitation
by delivery of a promissory note of the optionee payable on such terms as are
specified by the Board of Directors) which the Board of Directors determines are
consistent with the purpose of the Plan and with applicable laws and regulations
(including, without limitation, the provisions of Rule 16b-3 and Regulation T
promulgated by the Federal Reserve Board) or (iii) by any combination of such
methods of payment. The fair market value of any shares of the Company's Common
Stock or other non-cash consideration which may be delivered upon exercise of an
option shall be determined in such manner as may be prescribed by the Board of
Directors.
3
<PAGE> 37
7. Option Period.
-------------
Each option and all rights thereunder shall expire on such date as shall be
set forth in the applicable option agreement, except that such date, in the case
of an Incentive Stock Option, shall in no case be later than ten years after the
date on which the option is granted.
8. Exercise of Options.
-------------------
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. Nontransferability of Options.
-----------------------------
Incentive Stock Options, and all options granted to Reporting Persons,
shall not be assignable or transferable by the person to whom it is granted,
either voluntarily or by operation of law, except by will or the laws of descent
and distribution, and, during the life of the optionee, shall be exercisable
only by the optionee; provided, however, that non-statutory options granted to
Reporting Persons may be transferred pursuant to a qualified domestic relations
order (as defined in Rule 16b-3).
10. Effect of Termination of Employment or Other Relationship.
---------------------------------------------------------
The Board of Directors shall determine the period of time during which an
optionee may exercise an option following (i) the termination of the optionee's
employment or other relationship with the Company or (ii) the death or
disability of the optionee. Such periods shall be set forth in the agreement
evidencing such option.
11. Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership
4
<PAGE> 38
rules of Section 424(d) of the Code), then the following special provisions
shall be applicable to the Incentive Stock Option granted to such individual:
(i) The purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the fair market
value of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years from
the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) TERMINATION OF EMPLOYMENT DEATH OR DISABILITY. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period
of three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), PROVIDED, that the agreement with respect to such option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-statutory
option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised, by the person to whom it is
transferred by will or the laws of descent and distribution, within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while in
the employ of the Company, the Incentive Stock Option may be exercised
within the period of one year after the date the optionee ceases to be such
an employee because of such disability (or within such lesser period as may
be specified in the applicable option agreement).
5
<PAGE> 39
For all purposes of the Plan and any option or award granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
Notwithstanding the foregoing provisions, no stock option may be exercised after
its expiration date.
12. Additional Provisions.
---------------------
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in any option granted under the Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or such other
provisions as shall be determined by the Board of Directors; PROVIDED THAT such
additional provisions shall not be inconsistent with any other term or condition
of the Plan.
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all or any particular option or options granted under the
Plan may be exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3.
13. Awards.
------
A restricted stock award (an "award") shall consist of the sale and
issuance by the Company of shares of Common Stock, and the purchase by the
recipient of such shares, subject to the terms, conditions and restrictions
described in the document evidencing the award and in this Section 13 and
elsewhere in the Plan.
(a) EXECUTION OF RESTRICTED STOCK AWARD AGREEMENT. As a condition to an
award under the Plan, each recipient of an award shall execute an agreement in
such form, which may differ among recipients, as shall be specified by the Board
of Directors at the time of such award.
(b) PRICE. The Board of Directors shall determine the price at which
shares of Common Stock shall be sold to recipients of awards under the Plan. The
Board of Directors may, in its discretion, issue shares pursuant to awards
without the payment of any cash purchase price by the recipients or issue shares
pursuant to awards at a purchase price below the then fair market value of the
Common Stock. If a purchase price is required to be paid, it shall be paid in
cash or by check payable to the order of the Company at the time that the award
is accepted by the recipient, or by such other means as may be approved by the
Board of Directors.
6
<PAGE> 40
(c) NUMBER OF SHARES. The award shall specify the number of shares of
Common Stock granted thereunder.
(d) RESTRICTIONS ON TRANSFER. In addition to such other terms, conditions
and restrictions upon awards as shall be imposed by the Board of Directors, all
shares issued pursuant to an award shall be subject to the following
restrictions:
(1) All shares of Common Stock subject to an award (including any
shares issued pursuant to paragraph (e) of this Section) shall be subject
to certain restrictions on disposition and obligations of resale to the
Company as provided in subparagraph (2) below for the period specified in
the document evidencing the award, and shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until such
restrictions lapse. The period during which such restrictions are
applicable is referred to as the "Restricted Period."
(2) In the event that a recipient's employment with the Company (or
consultancy or advisory relationship, as the case may be) is terminated
within the Restricted Period, whether such termination is voluntary or
involuntary, with or without cause, or because of the death or disability
of the recipient, the Company shall have the right and option for a period
of three months following such termination to buy for cash that number of
the shares of Common Stock purchased under the award as to which the
restrictions on transfer and the forfeiture provisions contained in the
award have not then lapsed, at a price equal to the price per share
originally paid by the recipient. If such termination occurs within the
last three months of the applicable restrictions, the restrictions and
repurchase rights of the Company shall continue to apply until the
expiration of the Company's three month option period.
(3) Notwithstanding subparagraphs (1) and (2) above, the Board of
Directors may, in its discretion, either at the time that an award is made
or at any time thereafter, waive its right to repurchase shares of Common
Stock upon the occurrence of any of the events described in this paragraph
(d) or remove or modify any part or all of the restrictions. In addition,
the Board of Directors may, in its discretion, impose upon the recipient of
an award at the time of such award such other restrictions on any shares of
Common Stock issued pursuant to such award as the Board of Directors may
deem advisable.
(e) ADDITIONAL SHARES. Any shares received by a recipient of an award as a
stock dividend on, or as a result of stock splits, combinations, exchanges of
shares, reorganizations, mergers, consolidations or otherwise with respect to,
shares of Common Stock received pursuant to such award shall have the same
status and shall
7
<PAGE> 41
bear the same restrictions, all on a proportionate basis, as the shares
initially purchased pursuant to such award.
(f) TRANSFERS IN BREACH OF AWARD. II any transfer of shares purchased
pursuant to an award is made or attempted contrary to the terms of the Plan and
of such award, the Board of Directors shall have the right to purchase for the
account of the Company those shares from the owner thereof or his or her
transferee at any time before or after the transfer at the price paid for such
shares by the person to whom they were awarded under the Plan. In addition to
any other legal or equitable remedies which it may have, the Company may enforce
its rights by specific performance to the extent permitted by law. The Company
may refuse for any purpose to recognize as a shareholder of the Company any
transferee who receives any shares contrary to the provisions of the Plan and
the applicable award or any recipient of an award who breaches his or her
obligation to resell shares as required by the provisions of the Plan and the
applicable award, and the Company may retain and/or recover all dividends on
such shares which were paid or payable subsequent to the date on which the
prohibited transfer or breach was made or attempted.
(g) ADDITIONAL AWARD PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in any award granted under the Plan,
including without limitation commitments to pay cash bonuses, make, arrange for
or guarantee loans or transfer other property to recipients upon the grant of
awards, or such other provisions as shall be determined by the Board of
Directors.
14. General Restrictions.
--------------------
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an option or award is granted, as a condition of exercising such option or
purchasing the shares subject to the award, to give written assurances in
substance and form satisfactory to the Company to the effect that such person is
acquiring the Common Stock subject to the option or award for his or her own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option and award shall be
subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such option or award upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
or that the disclosure of non-public information or the satisfaction of any
other condition is necessary as a condition of, or in connection with, the
issuance or purchase of shares thereunder, such option or award may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval, or satisfaction of such
8
<PAGE> 42
condition shall have been effected or obtained on conditions acceptable to the
Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification(1) or to
satisfy such condition.
15. Rights as a Shareholder.
-----------------------
The holder of an option or recipient of an award shall have no rights as a
shareholder with respect to any shares covered by the option or award
(including, without limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
16. Adjustment Provisions for Recapitalizations and Related Transactions.
--------------------------------------------------------------------
(a) GENERAL. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split(1) reverse stock
split or other similar transaction(1) (i) the outstanding shares of Common Stock
are increased or decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment shall be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan or repurchase rights of the Company, without changing the
aggregate purchase price as to which such options remain exercisable, provided
that no adjustment shall be made pursuant to this Section 16 if such adjustment
would cause the Plan to fail to comply with Section 422 of the Code or with Rule
16b-3.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this
Section 16 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
17. Merger Consolidation, Asset Sale, Liquidation etc.
-------------------------------------------------
(a) GENERAL. In the event of a consolidation or merger in which
outstanding shares of Common Stock are exchanged for securities, cash or other
property of any other corporation or business entity or in the event of a
liquidation of the Company or sale of all or substantially all of the assets of
the Company, the Board of Directors
9
<PAGE> 43
of the Company, or the board of directors of any corporation assuming the
obligations of the Company, may, in its discretion, take any one or more of the
following actions, as to outstanding options and awards: (i) provide that such
options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof), PROVIDED that any
such options substituted for Incentive Stock Options shall meet the requirements
of Section 424(a) of the Code, (ii) upon written notice to the optionees,
provide that all unexercised options will terminate immediately prior to the
consummation of such transaction unless exercised by the optionee within a
specified period following the date of such notice, (iii) in the event of a
merger under the terms of which holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the merger (the "Merger Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Merger Price times the number
of shares of Common Stock subject to such outstanding options (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding options in exchange for the
termination of such options, and (iv) provide that all or any outstanding
options shall become exercisable in full, any restrictions on exercising
outstanding options issued pursuant to the Plan prior to any given date shall
terminate and any restrictions on and rights of the Company to repurchase shares
covered by outstanding awards issued pursuant to the Plan shall terminate.
(b) SUBSTITUTE OPTIONS. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
18. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option or award shall confer upon
any recipient of an award or optionee any right with respect to the continuation
of his or her employment by the Company or interfere in any way with the right
of the Company at any time to terminate such employment or to increase or
decrease the compensation of the optionee.
19. Other Employee Benefits.
-----------------------
Except as to plans which by their terms include such amounts as
compensation, neither the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon
10
<PAGE> 44
such exercise nor the value of an award granted to an employee will constitute
compensation with respect to which any other employee benefits of such employee
are determined, including, without limitation, benefits under any bonus,
pension, profit-sharing, life insurance or salary continuation plan, except as
otherwise specifically determined by the Board of Directors.
20. Amendment of the Plan.
---------------------
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
shareholders of the Company is required as to such modification or amendment
under Section 422 of the Code or any successor provision with respect to
Incentive Stock Options or under Rule 16b-3 with respect to options held by or
awards made to Reporting Persons, the Board of Directors may not effect such
modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of an optionee or recipient of an award, affect his or
her rights under an option or award previously granted to him or her. With the
consent of the optionee or recipient of the award affected, the Board of
Directors may amend outstanding option agreements or awards in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option or award to the extent necessary to
ensure the qualification of the Plan under Rule 16b-3 or any successor rule.
21. Withholding.
-----------
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee or recipient of an award any federal, state or
local taxes of any kind required by law to be withheld with respect to any
shares issued upon exercise of options under the Plan or the purchase of shares
subject to the award. Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the optionee or recipient of an
award may elect to satisfy such obligations, in whole or in part, (i) by causing
the Company to withhold shares of Common Stock otherwise issuable pursuant to
the exercise of an option or the purchase of shares subject to an award or (ii)
by delivering to the Company shares of Common Stock already owned by the
optionee or award recipient. The shares so delivered or withheld shall have a
fair market value equal to such withholding obligation. The fair market value of
the shares used to satisfy such
11
<PAGE> 45
withholding obligation shall be determined by the Company as of the date that
the amount of tax to be withheld is to be determined. An optionee or award
recipient who has made an election pursuant to this Section 21(a) may only
satisfy his or her withholding obligation with shares of Common Stock which are
not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3.
(c) If the recipient of an award under the Plan elects, in accordance with
Section 83(b) of the Code, to recognize ordinary income in the year of
acquisition of any shares awarded under the Plan, the Company will require at
the time of such election an additional payment for withholding tax purposes
based on the difference, if any, between the purchase price of such shares and
the fair market value of such shares as of the date immediately preceding the
date of the award.
22. Cancellation and New Grant of Options Etc.
-----------------------------------------
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
23. Effective Date and Duration of the Plan.
---------------------------------------
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no Incentive Stock Options shall be granted thereafter. Amendments to the
Plan not requiring shareholder approval shall become effective when adopted by
the Board of Directors; amendments requiring shareholder approval (as provided
in Section 20) shall become effective when adopted by the Board of Directors,
but no Incentive Stock Option issued after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such
12
<PAGE> 46
amendment shall have been approved by the Company s shareholders. If such
shareholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Incentive Stock Options granted on or after the
date of such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a particular
optionee. Subject to this limitation, options and awards may be granted under
the Plan at any time after the effective date and before the date fixed for
termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 17,
the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors, or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of options or the final vesting
of awards granted under the Plan. Unless sooner terminated in accordance with
Section 17, the Plan shall terminate with respect to options which are not
Incentive Stock Options and awards on the date specified in (ii) above. If the
date of termination is determined under (i) above, then options outstanding on
such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such options.
24. Provision for Foreign Participants.
----------------------------------
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
Adopted by the Board of Directors on
March 14, 1996
13
<PAGE> 47
AMENDMENT TO
1996 EQUITY INCENTIVE PLAN
OF
MILLENNIUM PHARMACEUTICALS, INC.
The 1996 Equity Incentive Plan (the "Plan") be and hereby is amended as
follows:
1. The number 2,100,000 in the second line of Section 4 of the Plan shall
be deleted and the number 4,100,000 shall be inserted in lieu thereof.
Approved by the Board of Directors on March 13, 1997
Approved by the Stockholders on May 21, 1997
14
<PAGE> 48
AMENDMENT TO
1996 EQUITY INCENTIVE PLAN
OF
MILLENNIUM PHARMACEUTICALS, INC.
The Millennium Pharmaceuticals, Inc. 1996 Equity Incentive Plan (the
"Plan"), is hereby amended as set forth below:
1. Section 4 of the Plan is hereby amended by deleting the first sentence
thereof and substituting the following therefor:
"Subject to adjustment as provided in Section 16 below, the total
number of shares which may be issued and sold under the Plan is
5,600,000 shares of Common Stock, $.001 par value per share ("Common
Stock")."
2. In all other respects, the Plan shall remain in full force and effect.
Adopted by the
Board of Directors
on March 3, 1999
Presented to the
Stockholders for their
approval on June 2, 1999
<PAGE> 49
MILLENNIUM PHARMACEUTICALS, INC.
1997 EQUITY INCENTIVE PLAN
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for Millennium
Pharmaceuticals, Inc. (the "Company") and its shareholders the benefits arising
from capital stock ownership by employees (excluding executive officers and
employees who serve as directors) of, and consultants or advisors to, the
Company and its parent and subsidiary corporations who are expected to
contribute to the Company's future growth and success. Except where the context
otherwise requires, the term "Company" shall include the parent and all present
and future subsidiaries of the Company as defined in Sections 424(e) and 424(f)
of the Internal Revenue Code of 1986, as amended or replaced from time to time
(the "Code").
2. Type of Options and Awards: Administration.
------------------------------------------
(a) TYPES OF OPTIONS AND AWARDS. Options granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company (or a
Committee designated by the Board of Directors) and may be either incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Code or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code. Awards granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company (or a
Committee designated by the Board of Directors) and shall meet the requirements
of Section 13 of the Plan.
(b) ADMINISTRATION. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion (i) grant options to purchase shares of the Company's
Common Stock (as defined in Section 4 of the Plan), and issue shares upon
exercise of such options as provided in the Plan and (ii) make awards for the
purchase of shares of Common Stock pursuant to Section 13 of the Plan. The Board
shall have authority, subject to the express provisions of the Plan, to construe
the respective option agreements, awards and the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option agreements and awards, which need not be
identical, and to make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The Board
of Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement or award in the manner and
to the extent it shall deem expedient to carry the Plan into effect and it shall
be the sole and final judge of such expediency. No director or person acting
pursuant to authority delegated by the Board of Directors shall be liable for
any action or determination made in good faith.
<PAGE> 50
The Board of Directors may, to the full extent permitted by or consistent with
applicable laws or regulations (including, without limitation, applicable state
law), delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee to the extent authority is so delegated to such
Committee.
3. ELIGIBILITY. Options and awards may be granted or made to persons who are,
at the time of grant, employees (excluding executive officers and employees who
serve as directors) of, or consultants or advisors to, the Company; PROVIDED,
that the class of individuals to whom Incentive Stock Options may be granted
shall be limited to all employees (excluding executive officers and employees
who serve as directors) of the Company. A person who has been granted an option
or award may, if he or she is otherwise eligible, be granted additional options
or awards if the Board of Directors shall so determine. Subject to adjustment as
provided in Section 16 below, the maximum number of shares with respect to which
options or restricted stock awards may be granted to any person under the Plan
shall not exceed 300,000 shares of Common Stock during any calendar year during
the term of the Plan. For the purpose of calculating such maximum number, (a) an
option or award shall continue to be treated as outstanding notwithstanding its
repricing, cancellation or expiration and (b) the repricing of an outstanding
option or award or the issuance of a new option or award in substitution for a
cancelled option or award shall be deemed to constitute the grant of a new
additional option or award, as the case may be, separate from the original grant
that is repriced or cancelled.
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 16 below, the total number of
shares which may be issued and sold under the Plan is 2,000,000 shares of Common
Stock, $.001 par value per share ("Common Stock"). If an option granted under
the Plan shall expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject to such option shall again be available
for subsequent option grants or awards under the Plan.
5. Forms of Option Agreements.
--------------------------
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.
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<PAGE> 51
6. Purchase Price Upon Exercise of Options.
---------------------------------------
(a) GENERAL. The purchase price per share of Common Stock deliverable upon
the exercise of an option shall be determined by the Board of Directors,
PROVIDED, HOWEVER, that in the case of an Incentive Stock Option, the exercise
price shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, (i) by
delivery to the Company of shares of Common Stock of the Company already owned
by the optionee having a fair market value equal in amount to the exercise price
of the options being exercised, (ii) by any other means (including without
limitation by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Regulation T
promulgated by the Federal Reserve Board) or (iii) by any combination of such
methods of payment. The fair market value of any shares of the Company's Common
Stock or other non-cash consideration which may be delivered upon exercise of an
option shall be determined in such manner as may be prescribed by the Board of
Directors.
7. Option Period.
-------------
Each option and all rights thereunder shall expire on such date as shall be
set forth in the applicable option agreement, except that such date, in the case
of an Incentive Stock Option, shall in no case be later than ten years after the
date on which the option is granted.
8. Exercise of Options.
-------------------
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. Nontransferability of Options.
-----------------------------
Incentive Stock Options shall not be assignable or transferable by the
person to whom it is granted, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the life of the
optionee, shall be exercisable only by the optionee.
-3-
<PAGE> 52
10. Effect of Termination of Employment or Other Relationship.
---------------------------------------------------------
The Board of Directors shall determine the period of time during which an
optionee may exercise an option following (i) the termination of the optionee's
employment or other relationship with the Company or (ii) the death or
disability of the optionee. Such periods shall be set forth in the agreement
evidencing such option.
11. Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the fair market
value of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years from
the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) TERMINATION OF EMPLOYMENT DEATH OR DISABILITY. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has
-4-
<PAGE> 53
been continuously since the date of grant of his or her option, employed by the
Company, except that:
(i) an Incentive Stock Option may be exercised within the period
of three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), PROVIDED, that the agreement with respect to such option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-statutory
option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised, by the person to whom it is
transferred by will or the laws of descent and distribution, within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while in
the employ of the Company, the Incentive Stock Option may be exercised
within the period of one year after the date the optionee ceases to be such
an employee because of such disability (or within such lesser period as may
be specified in the applicable option agreement).
For all purposes of the Plan and any option or award granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
Notwithstanding the foregoing provisions, no stock option may be exercised after
its expiration date.
12. Additional Provisions.
---------------------
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in any option granted under the Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or such other
provisions as shall be determined by the Board of Directors; PROVIDED THAT such
additional provisions shall not be inconsistent with any other term or condition
of the Plan.
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during
-5-
<PAGE> 54
which all or any particular option or options granted under the Plan may be
exercised; provided, however, that no such extension shall be permitted if it
would cause the Plan to fail to comply with Section 422 of the Code.
13. Awards.
------
A restricted stock award (an "award") shall consist of the sale and
issuance by the Company of shares of Common Stock, and the purchase by the
recipient of such shares, subject to the terms, conditions and restrictions
described in the document evidencing the award and in this Section 13 and
elsewhere in the Plan.
(a) EXECUTION OF RESTRICTED STOCK AWARD AGREEMENT. As a condition to an
award under the Plan, each recipient of an award shall execute an agreement in
such form, which may differ among recipients, as shall be specified by the Board
of Directors at the time of such award.
(b) PRICE. The Board of Directors shall determine the price at which
shares of Common Stock shall be sold to recipients of awards under the Plan. The
Board of Directors may, in its discretion, issue shares pursuant to awards
without the payment of any cash purchase price by the recipients or issue shares
pursuant to awards at a purchase price below the then fair market value of the
Common Stock. If a purchase price is required to be paid, it shall be paid in
cash or by check payable to the order of the Company at the time that the award
is accepted by the recipient, or by such other means as may be approved by the
Board of Directors.
(c) NUMBER OF SHARES. The award shall specify the number of shares of
Common Stock granted thereunder.
(d) RESTRICTIONS ON TRANSFER. In addition to such other terms, conditions
and restrictions upon awards as shall be imposed by the Board of Directors, all
shares issued pursuant to an award shall be subject to the following
restrictions:
(1) All shares of Common Stock subject to an award (including
any shares issued pursuant to paragraph (e) of this Section) shall be
subject to certain restrictions on disposition and obligations of resale to
the Company as provided in subparagraph (2) below for the period specified
in the document evidencing the award, and shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until such
restrictions lapse. The period during which such restrictions are
applicable is referred to as the "Restricted Period."
(2) In the event that a recipient's employment with the Company
(or consultancy or advisory relationship, as the case may be) is terminated
within
-6-
<PAGE> 55
the Restricted Period, whether such termination is voluntary or
involuntary, with or without cause, or because of the death or disability
of the recipient, the Company shall have the right and option for a period
of three months following such termination to buy for cash that number of
the shares of Common Stock purchased under the award as to which the
restrictions on transfer and the forfeiture provisions contained in the
award have not then lapsed, at a price equal to the price per share
originally paid by the recipient. If such termination occurs within the
last three months of the applicable restrictions, the restrictions and
repurchase rights of the Company shall continue to apply until the
expiration of the Company's three month option period.
(3) Notwithstanding subparagraphs (1) and (2) above, the Board
of Directors may, in its discretion, either at the time that an award is
made or at any time thereafter, waive its right to repurchase shares of
Common Stock upon the occurrence of any of the events described in this
paragraph (d) or remove or modify any part or all of the restrictions. In
addition, the Board of Directors may, in its discretion, impose upon the
recipient of an award at the time of such award such other restrictions on
any shares of Common Stock issued pursuant to such award as the Board of
Directors may deem advisable.
(e) ADDITIONAL SHARES. Any shares received by a recipient of an award as a
stock dividend on, or as a result of stock splits, combinations, exchanges of
shares, reorganizations, mergers, consolidations or otherwise with respect to,
shares of Common Stock received pursuant to such award shall have the same
status and shall bear the same restrictions, all on a proportionate basis, as
the shares initially purchased pursuant to such award.
(f) TRANSFERS IN BREACH OF AWARD. If any transfer of shares purchased
pursuant to an award is made or attempted contrary to the terms of the Plan and
of such award, the Board of Directors shall have the right to purchase for the
account of the Company those shares from the owner thereof or his or her
transferee at any time before or after the transfer at the price paid for such
shares by the person to whom they were awarded under the Plan. In addition to
any other legal or equitable remedies which it may have, the Company may enforce
its rights by specific performance to the extent permitted by law. The Company
may refuse for any purpose to recognize as a shareholder of the Company any
transferee who receives any shares contrary to the provisions of the Plan and
the applicable award or any recipient of an award who breaches his or her
obligation to resell shares as required by the provisions of the Plan and the
applicable award, and the Company may retain and/or recover all dividends on
such shares which were paid or payable subsequent to the date on which the
prohibited transfer or breach was made or attempted.
-7-
<PAGE> 56
(g) ADDITIONAL AWARD PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in any award granted under the Plan,
including without limitation commitments to pay cash bonuses, make, arrange for
or guarantee loans or transfer other property to recipients upon the grant of
awards, or such other provisions as shall be determined by the Board of
Directors.
14. General Restrictions.
--------------------
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an option or award is granted, as a condition of exercising such option or
purchasing the shares subject to the award, to give written assurances in
substance and form satisfactory to the Company to the effect that such person is
acquiring the Common Stock subject to the option or award for his or her own
account for investment and not with any present mention of selling or otherwise
distributing the same, and to such other effects as the Company deems necessary
or appropriate in order to comply with federal and applicable state securities
laws.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option and award shall be
subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such option or award upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
or that the disclosure of non-public information or the satisfaction of any
other condition is necessary as a condition of, or in connection with, the
issuance or purchase of shares thereunder, such option or award may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval, or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board of Directors.
Nothing herein shall be deemed to require the Company to apply for or to obtain
such listing, registration or qualification, or to satisfy such condition.
15. Rights as a Shareholder.
-----------------------
The holder of an option or recipient of an award shall have no rights as a
shareholder with respect to any shares covered by the option or award
(including, without limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
16. Adjustment Provisions for Recapitalizations and Related Transactions.
--------------------------------------------------------------------
(a) GENERAL. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar
-8-
<PAGE> 57
transaction, (i) the outstanding shares of Common Stock are increased or
decreased or are exchanged for a different number or kind of shares or other
securities of the Company, or (ii) additional shares or new or different shares
or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (x) the maximum number and kind of
shares reserved for issuance under the Plan, (y) the number and kind of shares
or other securities subject to then outstanding options under the Plan, and (z)
the price for each share subject to any then outstanding options under the Plan
or repurchase rights of the Company, without changing the aggregate purchase
price as to which such options remain exercisable, provided that no adjustment
shall be made pursuant to this Section 16 if such adjustment would cause the
Plan to fail to comply with Section 422 of the Code.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this
Section 16 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
17. Merger Consolidation Asset Sale, Liquidation etc.
------------------------------------------------
(a) GENERAL. In the event of a consolidation or merger m which outstanding
shares of Common Stock are exchanged for securities, cash or other property of
any other corporation or business entity or in the event of a liquidation of the
Company or sale of all or substantially all of the assets of the Company, the
Board of Directors of the Company, or the board of directors of any corporation
assuming the obligations of the Company, may, in its discretion, take any one or
more of the following actions, as to outstanding options and awards: (i) provide
that such options shall be assumed, or equivalent options shall be substituted,
by the acquiring or succeeding corporation (or an affiliate thereof), PROVIDED
that any such options substituted for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, (ii) upon written notice to the
optionees, provide that all unexercised options will terminate immediately prior
to the consummation of such transaction unless exercised by the optionee within
a specified period following the date of such notice, (iii) in the event of a
merger under the terms of which holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the merger (the "Merger Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Merger Price times the number
of shares of Common Stock subject to such outstanding options (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding options in exchange for the
termination of such options, and (iv) provide that all or any outstanding
options shall become exercisable in full, any restrictions on exercising
outstanding options issued pursuant to the Plan prior to any given date shall
terminate and any restrictions on
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<PAGE> 58
and rights of the Company to repurchase shares covered by outstanding awards
issued pursuant to the Plan shall terminate.
(b) SUBSTITUTE OPTIONS. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
18. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option or award shall confer upon
any recipient of an award or optionee any right with respect to the continuation
of his or her employment by the Company or interfere in any way with the right
of the Company at any time to terminate such employment or to increase or
decrease the compensation of the optionee.
19. Other Employee Benefits.
-----------------------
Except as to plans which by their terms include such amounts as
compensation, neither the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise nor the value of an award granted to an employee will
constitute compensation with respect to which any other employee benefits of
such employee are determined, including, without limitation, benefits under any
bonus, pension, profit-sharing, life insurance or salary continuation plan,
except as otherwise specifically determined by the Board of Directors.
20. Amendment of the Plan.
---------------------
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
shareholders of the Company is required as to such modification or amendment
under Section 422 of the Code or any successor provision with respect to
Incentive Stock Options, the Board of Directors may not effect such modification
or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of an optionee or recipient of an award, affect his or
her rights under an option or award previously granted to him or her. With the
consent of the optionee or recipient of the award affected, the Board of
Directors may amend
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<PAGE> 59
outstanding option agreements or awards in a manner not inconsistent with the
Plan. The Board of Directors shall have the right to amend or modify the terms
and provisions of the Plan and of any outstanding Incentive Stock Options
granted under the Plan to the extent necessary to qualify any or all such
options for such favorable federal income tax treatment (including deferral of
taxation upon exercise) as may be afforded incentive stock options under Section
422 of the Code.
21. Withholding.
-----------
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee or recipient of an award any federal, state or
local taxes of any kind required by law to be withheld with respect to any
shares issued upon exercise of options under the Plan or the purchase of shares
subject to the award. Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the optionee or recipient of an
award may elect to satisfy such obligations, in whole or in part, (i) by causing
the Company to withhold shares of Common Stock otherwise issuable pursuant to
the exercise of an option or the purchase of shares subject to an award or (ii)
by delivering to the Company shares of Common Stock already owned by the
optionee or award recipient. The shares so delivered or withheld shall have a
fair market value equal to such withholding obligation. The fair market value of
the shares used to satisfy such withholding obligation shall be determined by
the Company as of the date that the amount of tax to be withheld is to be
determined. An optionee or award recipient who has made an election pursuant to
this Section 21(a) may only satisfy his or her withholding obligation with
shares of Common Stock which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(b) If the recipient of an award under the Plan elects, in accordance with
Section 83(b) of the Code, to recognize ordinary income in the year of
acquisition of any shares awarded under the Plan, the Company will require at
the time of such election an additional payment for withholding tax purposes
based on the difference, if any, between the purchase price of such shares and
the fair market value of such shares as of the date immediately preceding the
date of the award.
22. Cancellation and New Grant of Options Etc.
-----------------------------------------
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise
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<PAGE> 60
price per share which is higher or lower than the then-current exercise price
per share of such outstanding options.
23. Effective Date and Duration of the Plan.
---------------------------------------
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no Incentive Stock Options shall be granted thereafter. Amendments to the
Plan not requiring shareholder approval shall become effective when adopted by
the Board of Directors; amendments requiring shareholder approval (as provided
in Section 20) shall become effective when adopted by the Board of Directors,
but no Incentive Stock Option issued after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to this limitation, options
and awards may be granted under the Plan at any time after the effective date
and before the date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 17,
the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors, or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of options or the final vesting
of awards granted under the Plan. Unless sooner terminated in accordance with
Section 17, the Plan shall terminate with respect to options which are not
Incentive Stock Options and awards on the date specified in (ii) above. If the
date of termination is determined under (i) above, then options outstanding on
such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such options.
24. Provision for Foreign Participants.
----------------------------------
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such
-12-
<PAGE> 61
foreign jurisdictions with respect to tax, securities, currency, employee
benefit or other matters.
Adopted by the Board of Directors on
March 13, 1997
-13-
<PAGE> 62
AMENDMENT TO
1997 EQUITY INCENTIVE PLAN
OF
MILLENNIUM PHARMACEUTICALS, INC.
The Millennium Pharmaceuticals, Inc. 1997 Equity Incentive Plan (the
"Plan"), is hereby amended as set forth below:
1. Section 4 of the Plan is hereby amended by deleting the first sentence
thereof and substituting the following therefor:
"Subject to adjustment as provided in Section 16 below, the total
number of shares which may be issued and sold under the Plan is
4,000,000 shares of Common Stock, $.001 par value per share ("Common
Stock")."
2. In all other respects, the Plan shall remain in full force and
effect.
Adopted by the
Board of Directors
on March 3, 1999
Presented to the
Stockholders for their
approval on June 2, 1999
<PAGE> 63
MILLENNIUM PHARMACEUTICALS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Millennium
Pharmaceuticals, Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's Common Stock (the "Common
Stock"). Three Hundred and Fifty Thousand (350,000) shares of Common Stock in
the aggregate have been approved for this purpose.
1. ADMINISTRATION. The Plan will be administered by the Company's Board
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. ELIGIBILITY. Participation in the Plan will neither be permitted nor
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined below) to purchase Common Stock under the Plan, provided
that:
(a) they are regularly employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least three months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
<PAGE> 64
3. OFFERING. The Company will make one or more offerings ("Offerings") to
employees to purchase Common Stock under this Plan. The Board or the Committee
shall determine the commencement dates of each of the Offerings (the "Offering
Commencement Dates"). Each Offering Commencement Date will begin a period (a
"Plan Period") during which payroll deductions will be made and held for the
purchase of Common Stock at the end of the Plan Period. The Board or the
Committee shall choose a Plan Period of twelve (12) months or less for each of
the Offerings and may, at its discretion, choose a different Plan Period for
each Offering.
4. PARTICIPATION. An employee eligible on the Offering Commencement Date
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the Controller of the Company at least
14 days prior to the applicable Offering Commencement Date. The form will
authorize a regular payroll deduction from the Compensation received by the
employee during the Plan Period. Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable on the employee's
Federal Income Tax Withholding Statement, excluding overtime, shift premium,
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation allowances for travel expenses, income or gains on the exercise of
Company stock options or stock appreciation rights, and similar items, whether
or not shown on the employee's Federal Income Tax Withholding Statement, but
including, in the case of salespersons, sales commissions to the extent
determined by the Board or the Committee.
5. Deductions.
----------
(a) The Company will maintain payroll deduction accounts for all
participating employees. With respect to any Offering made under this Plan, an
employee may authorize a payroll deduction in any dollar amount up to a maximum
of 10% of the Compensation he or she receives during the Plan Period or such
shorter period during which deductions from payroll are made. Payroll deductions
may be at the rate of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% of Compensation.
(b) No employee may be granted an Option which permits his rights to
purchase Common Stock under this Plan and any other stock purchase plan of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the Offering Commencement
Date of the Plan Period) for each calendar year in which the Option is
outstanding at any time.
6. DEDUCTION CHANGES. An employee may decrease or discontinue his payroll
deduction once during any Plan Period by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8
<PAGE> 65
hereof, funds deducted prior to his election to discontinue will be applied to
the purchase of Common Stock on the Exercise Date (as defined below).
7. INTEREST. Interest will not be paid on any employee payroll deduction
accounts, except to the extent that the Board or its Committee, in its sole
discretion, elects to credit such accounts with interest at such per annum rate
as it may from time to time determine.
8. WITHDRAWAL OF FUNDS. An employee may on any one occasion during a Plan
Period and for any reason withdraw all or part of the balance accumulated in the
employee's payroll deduction account. Any such withdrawal must be effected prior
to the close of business on the last day of the Plan Period. If the employee
withdraws all of such balance, the employee shall thereby withdraw from
participation in the Offering and may not begin participation again during the
remainder of the Plan Period. Any employee withdrawing all or part of such
balance may participate in any subsequent Offering in accordance with terms and
conditions established by the Board or the Committee, except that, unless
otherwise permitted under Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules promulgated thereunder, any employee
who is also a director and/or officer of the Company within the meaning of
Section 16 of the Exchange Act may not (a) withdraw less than all of the balance
accumulated in such employee's payroll deduction account or (b) participate
again for a period of at least six months as provided in Rule 16b-3(d)(2)(i) or
any successor provision under the Exchange Act.
9. Purchase of Shares.
------------------
(a) On the Offering Commencement Date of each Plan Period, the Company
will grant to each eligible employee who is then a participant in the Plan an
option (an "Option") to purchase on the last business day of such Plan Period
(the "Exercise Date"), at the Option Price hereinafter provided for, such number
of whole shares of Common Stock of the Company reserved for the purposes of the
Plan as does not exceed the number of shares determined by dividing 15% of such
employee's annualized Compensation for the immediately prior six-month period by
the price determined in accordance with the formula set forth in the following
paragraph but using the closing price on the Offering Commencement Date of such
Plan Period.
(b) The Option Price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (A) the closing price of the Common Stock on any national
securities exchange on which the Common Stock is listed, or (B) the closing
price of the Common Stock on the Nasdaq National Market ("Nasdaq") or (C) the
average of the closing bid and asked prices in the over-the-counter market,
whichever is applicable, as published in THE WALL STREET JOURNAL. If no sales of
Common Stock were made on such a day, the price
<PAGE> 66
of the Common Stock for purposes of clauses (A) and (B) above shall be the
reported price for the next preceding day on which sales were made.
(c) Each employee who continues to be a participant in the Plan on the
Exercise Date shall be deemed to have exercised his Option at the Option Price
on such date and shall be deemed to have purchased from the Company the number
of full shares of Common Stock reserved for the purpose of the Plan that his
accumulated payroll deductions on such date will pay for pursuant to the formula
set forth above (but not in excess of the maximum number determined in the
manner set forth above).
(d) Any balance remaining in an employee's payroll deduction account at
the end of a Plan Period will be automatically refunded to the employee, except
that any balance which is less than the purchase price of one share of Common
Stock will be carried forward into the employee's payroll deduction account for
the following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. ISSUANCE OF CERTIFICATES. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the street
name of a brokerage firm, bank or other nominee holder designated by the
employee.
11. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period (whether as a result of the employee's voluntary
or involuntary termination, retirement, death or otherwise), no payroll
deduction shall be taken from any pay due and owing to the employee and the
balance in the employee's payroll deduction account shall be paid to the
employee or, in the event of the employee's death, (a) to a beneficiary
previously designated in a revocable notice signed by the employee (with any
spousal consent required under state law) or (b) in the absence of such a
designated beneficiary, to the executor or administrator of the employee's
estate or (c) if no such executor or administrator has been appointed to the
knowledge of the Company, to such other person(s) as the Company may, in its
discretion, designate. If, prior to the last business day of the Plan Period,
the Designated Subsidiary by which an employee is employed shall cease to be a
subsidiary of the Company, or if the employee is transferred to a subsidiary of
the Company that is not a Designated Subsidiary, the employee shall be deemed to
have terminated employment for the purposes of this Plan.
12. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
<PAGE> 67
13. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not transferable
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. APPLICATION OF FUNDS. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event of
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. MERGER.
(a) If the Company shall at any time merge or consolidate with another
corporation and the holders of the capital stock of the Company immediately
prior to such merger or consolidation continue to hold at least 80% by voting
power of the capital stock of the surviving corporation ("Continuity of
Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Board or the Committee shall take such
steps in connection with such merger as the Board or the Committee shall deem
necessary to assure that the provisions of Section 15 shall thereafter be
applicable, as nearly as reasonably may be, in relation to the said securities
or property as to which such holder of such Option might thereafter be entitled
to receive thereunder.
(b) In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (i) subject to the provisions of
clauses (ii) and (iii), after the effective date of such transaction, each
holder of an outstanding Option shall be entitled, upon exercise of such Option,
to receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (ii) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (iii) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each
<PAGE> 68
holder of an Option shall have the right to exercise such Option in full based
on payroll deductions then credited to his account as of a date determined by
the Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
17. AMENDMENT OF THE PLAN. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be
effected without such approval, and (b) in no event may any amendment be made
which would cause the Plan to fail to comply with Section 16 of the Exchange Act
and the rules promulgated thereunder, as in effect from time to time, or Section
423 of the Code.
18. INSUFFICIENT SHARES. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. TERMINATION OF THE PLAN. This Plan may be terminated at any time by
the Board. Upon termination of this Plan all amounts in the payroll deduction
accounts of participating employees shall be promptly refunded.
20. GOVERNMENTAL REGULATIONS.
(a) The Company's obligation to sell and deliver Common Stock under this
Plan is subject to listing on a national stock exchange or quotation on Nasdaq
and the approval of all governmental authorities required in connection with the
authorization, issuance or sale of such stock.
(b) The Plan shall be governed by the laws of the State of Delaware except
to the extent that such law is preempted by federal law.
(c) The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Exchange Act. Any provision inconsistent with such Rule
shall to that extent be inoperative and shall not affect the validity of the
Plan.
21. ISSUANCE OF SHARES. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by entering
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
<PAGE> 69
23. EFFECTIVE DATE AND APPROVAL OF STOCKHOLDERS. The Plan shall take
effect upon the closing of the Company's initial public offering of Common Stock
pursuant to an effective registration statement under the Securities Act of
1933, as amended, subject to approval by the stockholders of the Company as
required by Rule 16b-3 under the Exchange Act and by Section 423 of the Code,
which approval must occur within twelve months of the adoption of the Plan by
the Board.
Adopted by the Board of Directors on
March 14, 1996
<PAGE> 70
AMENDMENT TO THE
MILLENNIUM PHARMACEUTICALS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The Millennium Pharmaceuticals, Inc. 1996 Employee Stock Purchase Plan (the
"Plan"), is hereby amended as set forth below:
1. The introductory paragraph of the Plan is hereby amended by deleting
the last sentence thereof and substituting the following therefor:
"Six Hundred Fifty Thousand (650,000) shares of Common Stock in
the aggregate have been approved for this purpose."
2. In all other respects, the Plan shall remain in full force and effect.
Adopted by the
Board of Directors
on March 3, 1999
Presented to the
Stockholders for their
approval on June 2, 1999
<PAGE> 71
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- --------------------------------------------------------------------------------
MILLENIUM PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
Mark box at right if an address change or comment has been noted on [ ]
the reverse side of this card.
CONTROL NUMBER:
RECORD DATE SHARES:
-------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------
- -----Stockholder sign here----------------------------Co-owner sign here-------
A VOTE FOR THE DIRECTOR NOMINEES AND FOR PROPOSAL NUMBERS 2, 3, 4 AND 5 IS
RECOMMENDED BY THE BOARD OF DIRECTORS.
1. Election of Class III Directors. Nominees: FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
MARK J. LEVIN
JOSHUA BOGER, PH.D. [ ] [ ] [ ]
A. GRANT HELDRICH, III
NOTE: IF you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the nominee(s) name(s). Your
shares will be voted "For" the remaining nominee(s).
FOR AGAINST ABSTAIN
2. Approval of an amendment to the Company's 1996
Equity Incentive Plan increasing the number of [ ] [ ] [ ]
shares of Common Stock reserved for issuance
from 4,100,000 to 5,600,000.
FOR AGAINST ABSTAIN
3. Approval of an amendment to the Company's 1997
Equity Incentive Plan increasing the number of [ ] [ ] [ ]
shares of Common Stock reserved for issuance
from 2,000,000 to 4,000,000.
FOR AGAINST ABSTAIN
4. Approval of an amendment to the Company's 1996
Employee Stock Purchase Plan increasing the [ ] [ ] [ ]
number of shares of Common Stock reserved for
issuance from 350,000 to 650,000.
FOR AGAINST ABSTAIN
5. To transact such other business as may properly
come before the meeting or any adjournment [ ] [ ] [ ]
thereof.
DETACH CARD DETACH CARD
MILLENIUM PHARMACEUTICALS, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the management and operation of your Company
that require your immediate attention and approval. These are discussed in
detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders to be
held on June 2, 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Millenium Pharmaceuticals, Inc.
<PAGE> 72
MILLENIUM PHARMACEUTICALS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - JUNE 2, 1999
Those signing on the reverse side, revoking any prior proxies, hereby appoint(s)
Mark J. Levin, Steven H. Holtzman and Steven D. Singer or each or any of them
with full power of substitution, as proxies for those signing on the reverse
side to act and vote at the 1999 Annual Meeting of Stockholders of Millenium
Pharmaceuticals, Inc. and at any adjournments thereof as indicated upon all
matters referred to on the reverse side and described in the Proxy Statement for
the Meeting, and, in their discretion, upon any other matters which may properly
come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL
VOTE "FOR" PROPOSAL NUMBERS 1, 2, 3, 4 AND 5.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign this proxy exactly as your name(s) appear(s) hereon. Joint owners
should each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign. If a corporation or partnership, this signature
should be that of an authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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